Diversity and agility drive dealers
With construction recently closing down for two weeks in Melbourne and reduced activity in sites throughout New South Wales, the industrial and trade tool space has been forced to remain diverse and agile during these trying times. Although independent groups have again had to pivot to ensure their businesses stay afloat throughout the pandemic, it seems sales have not wavered despite the uncertainty.
One such group is HBT, which also has the ITT (Industrial & Tool Traders) arm of the business. HBT General Manager – Buying, Jody Vella said despite the economic turbulence, HBT’s diversity has allowed the group to remain relatively unscathed in a time that has tested so many businesses.
“With HBT’s membership now at over 870 members, our diversity means that while some segments are down, other segments will be up during lockdowns. The diversity of the group does protect it somewhat.”
“To give you a rough indication of how HBT is going, our members achieved a record number of purchases through the group from the 01 April – 30 June 2021 period. We have also achieved double digit growth compared to the same period last year, on top of further double-digit sales growth for the same quarter in 2020 versus 2019. This demonstrates that HBT’s sales momentum is extremely strong,” Mr Vella said.
The group’s ITT division is also seeing strong growth with some categories growing anywhere between five and 10 per cent, while others are growing at 30 per cent plus, according to Mr Vella.
“The lockdowns in recent weeks have impacted members and supplies in the ITT division, especially those located in greater Melbourne and in Sydney’s LGAs that are under strict lockdown. There is also some impact to distribution centres that have restricted their capacity to have people on-site to pick, pack and distribute orders,” he said.
“In saying this, current lockdowns within the construction industry will only drive demand even more when restrictions lift, as paused projects will only cause pent up demand and put more pressure on supply chains and logistics, as well delaying deliveries to sites.”
“It is unprecedented to shut construction down, and both suppliers and retailers are impacted when there is a shut down. Despite the lockdowns, independents always find a way to trade by remaining innovative and creative. On numerous occasions locked down stores have demonstrated their ability to transition from being fully open, to moving to an online or Click n’ Collect model. These retailers implement models where customers can easily pick up orders from outside the front of the store while others have orders delivered to them,” Mr Vella said.
New customer numbers have also increased throughout the group, as locals frequent their independent hardware store over the Big Box during the pandemic. Mr Vella said while in the past a local may have driven past a hardware independent to go to the Big Box, now they prefer to use their local hardware store because it is easier to source products during lockdowns.
“They realise they can source products at the same price or better with us, and they are also recognised by staff once they visit the store regularly. If you need help, want advice and you want someone to demonstrate what a product does, customers know they are so much better off if they go to an independent,” he said.
E-commerce is another area of business that has grown substantially during lockdowns with a number of HBT members reaping the benefits from building a strong online presence.
“We are passionate about the online space and a lot of our members have embraced this far quicker than others because this is the way of the future. Setting up an online presence is not a simple task. It requires the business owner to have knowledge in the e-commerce space, as well as having the ability to implement ongoing maintenance. If a website is done right and set up correctly it will add a huge competitive advantage to businesses and improve the longevity and performance as well,” he said.
When it comes to new products, Mr Vella said there are new lines coming from many suppliers, with new product development (NPD) contributing to category growth in all areas of the business.
“The HBT Buying Team continually engage with our supplier partners about their NPD schedule and launch plans. It is crucial that independents continue to have access to NPD. Every supplier takes great learnings from NPD which in turn spawn new or better versions of products. It all comes back to category growth and product reinvestment which then sees all aspects of the industry grow,” he said.
Mr Vella also believes it is imperative to implement innovative products in-store as well as stock entry level products.
“I have always said that there needs to be an in-store product hierarchy of good, better, best. Entry level products play a key role in getting new customers into a category for what is generally a small financial outlay. This entry into the category then, in a lot of instances, leads to a customer trading up to a better product within the same category, which increases a member’s basket size and ultimately leads to category growth.”
While stock availability is still a major concern, some larger suppliers are slowly returning to a better in-stock position, according to Mr Vella who said this is despite products still being held up due to shipping delays and international freight hold ups.
“Suppliers have recently advised our team that some shipping companies are by-passing Melbourne now because it is too difficult to book a berthing slot and are shipping into Sydney. Stock is then sent to Melbourne which can incur additional costs of around $2000. There really are cost pressures coming from all angles and this could potentially continue for another 12 months,” he said.
COVID border closures will also see HBT’s National Conference rescheduled from November this year to May next year, to ensure all members will have the ability to attend the Queensland event.
“While the group would have loved to run the much-needed conference this year, ultimately our two largest states – in regards to the team and member numbers – are Victoria and New South Wales so it would have been quite the reduced conference without these members.”
“In saying this, we at HBT are so grateful to be in an industry that has not experienced the chaos or downturn that other industries have experienced. The business continues to go from strength-to-strength which is a testament to our members and our supplier partner’s resilience and flexibility. We continue to be proud of the partnership we have developed amongst all of our stakeholders,” Mr Vella said.
Upon reviewing HBT’s success, in the past 18 months particularly, Chief Executive Officer Greg Benstead said HBT has a philosophy that guides all of its decisions and focuses specifically on improved pricing and rebates for members, as well as more sales for suppliers.
“This simple mantra has guaranteed that all of HBT’s plans and strategies meet this criteria. In addition, we are constantly ensuring that we are adding value to both member’s and supplier’s businesses. Free catalogue programs, monthly promotions, webinars, a member specific portal that has the latest price lists and any deals that are available, along with a credible member service team with years of experience in independent business has resulted in value to our members.”
“Our suppliers have business plans and reviews to analyse opportunities and new business is also available via HBT communications. These areas have continued to drive business. All of HBT’s energy remains directed towards maintaining a low cost model and delivering more value to our members and supplier partners,” Mr Benstead said.
CSS grows despite construction uncertainty
As the pandemic rolls on, the general construction and manufacturing sectors continue to hold up the building industry, particularly in Victoria and New South Wales where hard lockdowns have been ongoing. Construction Supply Specialists (CSS) Managing Director Jeff Wellard says surprisingly all of its members, along with the commercial part of the building industry are doing very well despite the economic uncertainty.
“When COVID first started, CSS had a quantifiable increase in DIYers coming into the stores because they were tackling slightly bigger projects and looking for more technical information and support. More recently though, it has been the general construction and manufacturing industry that has picked up. You only have to look around to see there is a lot of activity including cranes in the sky and construction continuing throughout the suburbs.”
“This ongoing activity is underpinned by the amount of civil works and infrastructure that is going on, but there is also still a lot of private commercial work being undertaken despite the lockdowns, including a lot of units and factory units being built. The industry is holding up very well,” Mr Wellard said.
Although CSS members are primarily known as industrial supply houses, members do carry an exceptionally wide range of stock and cater to a variety of trades including building, plumbing, electrical, manufacturing, as well as products for the mining sector, which all require some sort of delivery or store pick up facility.
“The industries we service have always required excellent service – either with in store pick up or deliveries direct to site which means ensuring the delivery services are in place and the stock is in the system. There is no doubt more end users are getting used to ordering products through various electronic facilities, but this also means enabling customers to have great service at store level where goods are ready for collection, or delivered to sites on time,” Mr Wellard said.
With talk of industrial and hardware companies, such as the UK’s Screwfix delivering to site within 60 minutes, Mr Wellard said that many independent industrial supply house operations in Australia also have excellent delivery systems in place. He also stated there is an increasing need for improved ordering and delivery services and this is why CSS members, like Independent Fastening Systems in Melbourne, are ramping up their online, integrated ordering/delivery systems to stay in touch.
“While many provide and promote a 24-hour service to site, a more realistic snapshot has a lot of its members advocating that if a customer rings by 10am they will generally have their delivery by early afternoon,” he said.
“Most of our members are successful because they base their business around providing excellent service. The building industry is notoriously bad at preparing for the next day’s work because companies like ours have made it so easy for them to access product when they need it. A contractor can have a $1000 an hour crane come on site and they may have forgotten to order the propping bolts to hold up a 42-tonne panel – the store gets the call and needs to be there quick. This level of service has always been a part of the operational activity of independent industrial supply house operation.”
“They do business differently in the UK because none of the suppliers go direct to site, but some still do here. However, this is starting to cut back due to the cost of running sales people etc. so they use the distribution network for it. I believe that the true independent industrial supply house always prioritises getting the product out to customers quickly because it is such an important part of business,” Mr Wellard said.
While online shopping is continuing to grow in the industrial space, according to Mr Wellard, CSS customers still prefer to either pick a product up in-store or have a product delivered to site, so they can also seek technical support and service if the need to.
“Mind you, once upon a time members would put in coffee machines so customers could come in and have a chat which was great for building relationships. Although things have changed and the coffee machines are not there anymore, customers are still loyal to the businesses. I think building those relationships beforehand has certainly helped maintain close ties in the current environment.”
“Unfortunately, some of the long-term relationship’s tradies have with independents are starting to be bred out as the next generation comes through and takes over the family business, and are more attuned to using the phone to order, so it is important to keep up the pace with changing buyer behavior and our competitors for this reason too,” he said.
When questioned on some of the best business decisions members had made while evolving their businesses, Mr Wellard said he believes CSS members would say joining the group was one of the best decisions they have made so far, because they have all derived some sort of benefit from working with likeminded business owners.
While it is easy to make good business decisions when store owners are surrounded by people similar to themselves, Mr Wellard pointed out some business decisions – that seemed like a good idea at the time – have not worked out due to lack of due diligence in the first place.
“I have seen members get over excited about a new product that has been introduced onto the American market and when you bring it back here, it does not work. This over excitement can cause problems.”
“In saying this, we did bring a product back from America which was a concrete dissolver, and it was one of the first of its kind in Australia. We did exceptionally well with it because it was a new product that dissolved cement off machinery. Within six months every man and his dog had a similar product and we had overestimated returns – so you do not make as much money off it as you initially thought,” he said.
When it comes to supply, Mr Wellard said while the power tool guys have had their fair share of problems, and still are, generally the industry has stood up really well throughout the pandemic.
“One problem we do have currently is that we cannot buy pallets because of the timber shortage. One of our biggest issues, however, is the amount of price increases coming through from suppliers because anybody who is importing at the moment is dealing with huge shipping cost increases. The price of a 40-foot container at the start of the year was under $3,000 and is now at $11,000. We are hearing this price could be at $13,000 by Christmas. This averages out to a 12.5 per cent price increase (before material increase) when importing around $60,000 worth of stock at cost per shipment and its increasing. Then freight is also held up because there is a scarcity of shipping containers.”
“Every day there is a host of new price increases that have come through from suppliers. So much so some power tool companies are saying it will be difficult to do catalogue runs with specials in it. Our next catalogue run may or may not have prices on power tools because nobody knows how much the price will be in three months’ time,” he said.
One of the positives to come out of the shipping crisis is that Australian manufacturers have become more appealing, according to Mr Wellard.
“Our own Impact-A range of products is around 45 per cent local now, including all of our chemicals manufactured here in Australia. A lot of our customers are business owners and to them brand quality and origin are very important. Price generally only comes into it when there are some really big volumes around and it seems quality builders are always happy to purchase quality products.”
TradeTools launches two-hour delivery service
TradeTools has continued to evolve with changing consumer demands over the last 20 months, particularly in the online and Click ‘n’ Deliver space with the recent launch of a delivery solution that has not yet been seen within the Queensland industry.
TradeTools Marketing Manager, Rachel Ford, says the group’s new two-hour delivery solution has encouraged customers to utilise the TradeTools’ online offering so they can stay working on the job instead of wasting time sourcing supplies.
“We are now one of the only retailers in the local industry who offer two-hour deliveries. This offer has not only made it easier for customers to source product, but also improve our online space while the pandemic continues. While we have only trialed the service in Queensland so far, it is something we could potentially roll out into other states in the future,” Ms Ford said.
“There is definitely a portion of customers who have used this solution to get them out of difficult situations. Our aim now is to shorten this time period as much as possible, but because we have such a wide reach in Queensland this is not an easy task, particularly when we only have one web depot that is servicing the two-hour delivery service currently. All orders come from this one depot and this is also where the delivery driver sources the product and then delivers it to the customer,” she said.
The TradeTools depot is conveniently located between Brisbane and the Gold Coast so it may easily service both areas, including Ipswich, within the two-hour time frame, but anything outside of metro cannot be serviced for now.
“As soon as the order comes through online, we assign our own delivery driver to deliver the product as this is the only way we can guarantee the order will be delivered within the two-hour time frame. It really is for customers who have no other option but to have the product delivered to site,” she said.
“So far feedback has come primarily from trades and business people who often work on high rise development sites. For example, a plumber may have been contracted to do some works in a high rise building and easily found a car park nearby in the early morning. He needs supplies but does not want to leave because he will lose his convenient car park, so it is easier for him to have parts delivered. Or he may be working alone one day if a colleague has called in sick and he cannot take two hours or more off to source tools and consumables – it is times like these when they will also use the service,” she said.
The new TradeTools solution also has a GPS tracker so trades can completely plan their day right up until when the delivery driver arrives on the ground floor.
“TradeTools released an extensive marketing campaign when the service was first launched. Because we were first to market on this, we also wanted to make sure there was an educational piece as part of the marketing,” Ms Ford said.
Utilising the online space has put a substantial emphasis on the TradeTools business currently with the group continuing to grow and innovate within this space.
“We have also found that consumers in lockdown in states outside Queensland would prefer to use a Click ‘n’ Collect facility, particularly because Australia Post, and couriers in general, can often have extensive delays,” she said.
This year TradeTools also launched a new website which has already grown significantly, according to Ms Ford who said providing user friendly websites to the end user is essential, particularly throughout the pandemic.
“While we were a little late to the digital marketing landscape – I think we were one of the last to even develop a Facebook page – but since coming to this space it has been really big for our business,” she said.
New product releases have also continued to grow the TradeTools business particularly with the release of Milwaukee’s new laser range which is set to fire up the new product space, according to Ms Ford.
“Milwaukee have just released an entire new range of lasers which we are so excited about because they have never really been in the laser game. The range includes two rechargeable M12 lasers and three battery operated lasers. While it is early days, we think they will go well because Milwaukee only ever releases new products once they are very well manufactured.”
“Our exclusive in-house Renegade range also continues to evolve with the recent update of several existing lines, including our welders which have just had a big revamp and all of our tool storage has also been re-done. Outdoor power equipment has also accelerated significantly during this time as people spend more time in their gardens,” she said.
When it comes to supply of product, while there are hold ups throughout the industry due to the pandemic, Ms Ford said TradeTools continues to fare well because it prides itself on having massive stock holdings.
“We have a lot of trucks that go between stores every day so we can easily distribute product between stores. We probably fared a lot better than other tool companies because of this. We also have a massive in-house imports program and I think we have got it down to a fine art of being able to provide quality and a good price point within the Renegade range.”
“We will no doubt continue to see products improve exponentially as suppliers reinvent products so they are 20 per cent faster and up to 20 per cent more efficient. I always say the tool industry is decades ahead of any other industry when it comes to cordless tools. There is always a huge demand for further innovation because trade and business people are relying on tools to get all of this essential work done. While the last few years has been a speed bump for innovation in the industry, as soon as things pick up there will be plenty of innovation back on the market,” Ms Ford concluded.