WHY AUSTRALIANS WILL SPEND MORE ON DIY HOME IMPROVEMENTS
As spring arrives in Australia and many of the house-proud throw out their old paint brushes, dig out the old paint tin labels and head to the hardware store, Woolworths makes a timely announcement to partner with Lowes, the world’s second largest home improvement retailer after US retailer Home Depot.
The move by Woolworths to partner with Lowes has been met with significant support on both sides of the Pacific. In the US the Wall Street Journal and stockholders have viewed the partnership as evidence that Lowes is taking a considered move into international markets. Importantly, it is making this international move with Woolworths, a respected retail partner in a sensible $24 billion – and growing – market which shows many similarities to that of the US and its shoppers.
In Australia the Australian Financial Review and shareholders have viewed the partnership as evidence that Woolworths has found a clever way to partner with a retailing giant to create big-box retail space in an area of Australian retail that can benefit from further improvements in shopper experience. At present, almost 60 per cent – or $15 billion – of annual sales still come from small-format independent stores.
Let’s look at those two points separately.
Lowes does a very good job of retailing home improvement products in a big-box format in the US. It returns strong profits alongside the market leader, Home Depot. Both of these retailing formats and models differs to provide a unique shopper experience relevant to what their particular shoppers want and expect.
Importantly, as with all retailers, Lowes doesn’t compete head to head with Home Depot. Lowes leadership team doesn’t get out of bed each morning and say “what can I copy from Home Depot?” What they do say is “what do I need to do to give my shoppers, in my stores, a great home improvement shopping experience?”
A Lowes shopper is not a Home Depot shopper. By thinking about their shoppers needs each retailer improves the shopper experience and their shoppers keep coming back.
What Lowes and Home Depot have managed to do is to grow the whole market for home improvements. The whole market grows, because the whole process of understanding and buying the right tools and materials is facilitated by knowledgeable staff in large, airy, bright and inviting shopping environments. It gives “me the professional tradie” or “me the weekend tradie” confidence that I can talk to experts, plan the job, buy the right gear and get the job done well. It also saves me time because everything is in the same place and I can back my own (or rented) ute up to the back door.
Whilst some decry the rise of the big-box retail brands, if this environment doesn’t exist, we simply put off doing the home improvement we know we need to do, and would like to do if only somebody would helps us. Not convinced? How often did your Dad or Mum redecorate and improve the home when you were a kid? Once every five years? Only when the paint or paper was peeling? And sorry to say, but Mum did way less home decorating on her own because it was just too hard. She was creative, understood colours and was a great and proud homemaker, but when she got to a hardware store it wasn’t inviting and it was way too blokey. If you walk into big-box home improvements stores around the world today, the male/female split is much more even.
In Australia historically we have always had an almost pathologically high incidence of home ownership. We aspire to owning rather than renting, and we love to be in our homes with family and friends. It’s probably not a surprise that the concept of “cocooning,” staying home and entertaining ourselves, family and friends has risen. In fact a recent survey by one Australia’s largest corporations reported that over 70 per cent of Australian’s agreed with the statement “I like to spend more time at home.” This emotional state of the nation has created the opportunity and the retailing models we have seen flourish in the home entertainment, home furnishing and home improvement sectors.
The move by Woolworths to enter this space is inspired. Wesfarmers, with the Bunnings brand, have done an incredible job of taking our Australian and New Zealand “hardware shopping experience” from very average, at best, to a pleasure in a very short period of time. This has grown the amount of money both populations spend on and in our homes. But we still have more to spend. By buying Danks and partnering with Lowes, Woolworths will deliver a much improved shopper experience in almost 750 stores of differing formats in the next five years.
How? Now please take this the right way. By adopting a consistent business model with consistent branding and consistence delivery of a great shopper experience, Woolworths and Lowes will increase sales through these newly formatted stores.
They will not migrate shoppers from Bunnings any more than Coles has migrated shoppers from Woolworths or IGA or ALDI over the past year – just look at the growth in revenue and profit of all our retailers during the reporting season. Instead they will grow the market by making our shopper experience better in more home improvement stores, so Australians and New Zealanders will feel happier spending more time and money on our homes.
My own company has significant expertise within the home improvement retailing space working with suppliers and big-box retailers across the US, Canada, Mexico, Australia and New Zealand. We have thousands of staff working in these stores every day to deliver executional excellence so that when the shopper is in store, they get the shopper experience that they expected before they walked in.
It is only through the application of capital, harnessed by intelligent retailers and suppliers, that a great shopper experience can be created on a national scale. There is always room for good and innovative independent retailers, but there gets a point where you need significant investment in IT, staff training and inventory to deliver that best shopper experience consistently and nationally.
So in this watershed year in Australian retailing, we have another move to keep us entertained and spending in store, this time on our homes.