Review/Preview

What an exciting year it has been in the hardware industry. The industry in general is thriving, an indication not only of buoyant economic conditions in Australia, but also of a healthy industry that looks set to continue growing. The residential housing and construction boom that has been happening across the country over the last few years has undoubtedly fuelled demand. Demand has not only been driven by trade, but by a huge surge in consumer interest in building, renovation and DIY projects. According to the Hardware & Building Supplies Survey compiled by Geoff Dart, in 2004 the market grew by 2% in sales value ($) over the previous year, to a level of $25 billion, with the trade market representing 63% of all expenditure on hardware and building products. The additions and renovations sector of the market is also at record levels and is indicative of the ‘nesting’ trend, particularly amongst older Australians including the Baby-Boomers (45-60 year olds). The industry can also thank lifestyle TV programs and other media for generating the public’s passion for renovation and DIY.

The increase in the level of interest by female DIYers has also proven to be a key element in the marketing strategies of major retailers. According to Geoff Dart, the increase in discerning female customers, and greater emphasis on fashion and lifestyle across a range of categories, is a trend that is set to continue. “DIY clinics need to be targeted accordingly with specific product and brand offers to ensure that retailers move with the trends and fill the consumer’s needs,” said Geoff. Despite the increase in DIY activities, over the past year it is the ‘trade’ related categories that have shown better growth than those more dependent on the DIYer – ie timber, building materials, power tools, plumbing, electrical fittings and locks/door hardware. The relatively high levels of housing activity accounts for that, as does the growth of the DIFM (Do It For Me) segment of the market, where tradespeople have undertaken a higher proportion of projects than in the past (eg gardening and other household services). The increase in DIY activity is a trend that is set to continue into 2005, buoyed by economic prosperity, high levels of employment and high levels of disposable income.

Another trend that will continue to increase is the use of new technology by suppliers in order to make the use and application of products easier for DIYers to use and to increase their availability through the retail hardware store network. Another trend identified by Geoff Dart is the growing phenomenon of retailers becoming suppliers. The major retailing groups have established in-house sourcing arrangements especially for products that are not brand sensitive and/or to meet entry point pricing targets in particular categories such as power tools and hand tools. Increased familiarity with, and utilization of new technology, by retailers is something that will continue to have a huge impact on the way people do business. Said Geoff Dart: “The majority of retailers do not have the information systems in place to accommodate for their future needs and to maximize their profitability. This has lead of relatively poor stock turns, inventory control and higher than necessary out of stocks. A major problem which will be rectified to a large extent with the implementation of IT systems, is the industry’s reliance on outdated processes such as vendor refill.”

You can read what sort of year 2004 has been for some of the hardware industry’s major players and get a sneak preview of what they have in store for 2005 in the December issue of the Hardware Journal.