Fasteners Going back to basics in a downturn
There is no shortage of alarming topics in the business press at the moment, from housing downturns to retail recessions and trade wars. In this context, writes John Power, tried and true retail principles like stocking large product ranges are more vital than ever.
There is no doubt that current economic conditions are unusual, with record low interest rates clashing with tighter bank lending policies, and international trade tariffs having direct and indirect impacts on wages growth and spending.
But it is not all doom and gloom in the retail hardware sector. Mature companies like Bremick Fasteners are performing in a “solid and consistent” manner despite market fluctuations, according to Rod Bran, Bremick’s National Retail Sales Manager.
“Yes, the market itself is suffering from two key circumstances at the moment: obviously the economy – the squeeze on lending has probably been the big one – and the drought’s really starting to bite badly in all the regional areas in particular. It has not really improved, it has gotten worse over the last year,” Rod said.
“But we are performing consistently, we always have.”
So, what is the secret to steady business performance during such volatile times?
To begin with, Rod says broad statistical overviews are often “simplistic”, potentially cloaking a more complex spread of strong and poor market opportunities.
“We have seen talk of the retail recession but I am not sure that is the case everywhere. If you look at the state of the economy – and the best indicator I like to use is CommSec’s State of the States – then NSW is interesting because lending is down but [building] starts are up against the decade average. So, I think we are in a bit of a two-speed economy: you have got NSW, Victoria, and Tasmania doing well, and then you have Queensland, South Australia and Western Australia struggling.”
National businesses, of course, can gain stability through diversification over a broad cross-section of customer bases, but Rod says there are additional steps that can be taken to bolster long-term security.
“You need to increase your market share, and you need to improve your product range, and we have been expanding our product range and holding or increasing market share. If you remain static when the market’s depressed, then you start to go backwards.”
These kinds of ‘back to basics’ policies are often derided as old-fashioned or out of step with the digital age, but Rod says a combination of factors have all aligned to make Bremick’s approach both feasible and successful. To begin with, the company has been fortunate to engage with predominantly independent retailers, which attract a crucial market sector comprising mostly trade and serious DIY customers. It goes without saying that independent retailers are extremely knowledgeable retail partners with loyal, fixed customer bases.
Furthermore, regional independent stores are often generously laid out with plenty of space to accommodate large product ranges; specialised proprietors are generally willing and able to embrace new product lines quickly in a no-nonsense fashion based on clear market directions.
But wait, there’s more
Even with the benefit of long-term relationships with loyal independent retailers, companies like Bremick still have to ‘go the extra yards’ to enhance sales.
“There are three things: you have got to have good competent people (if you are not calling on customers in the regional areas, you will not get the business); you have got to have fast service (you have to get stock to them quickly); and you have to have good-quality products and a broad range,” Rod explained.
While these doctrines may sound reminiscent of retail policies dating back to the 1980s, they are in fact highly progressive.
A ‘broad product range’ of fasteners today is very different to ranges of yesteryear, regardless of how unchanged the packaging and branding formats might be.
Both technological advances and user preferences have altered the fasteners market in recent years, paving the way for fresh applications using newly developed products. A good example of a newly released product range, Rod says, is Bremick’s FixConn range of construction-grade screws, which have been embraced by customers without cannibalising older lines of favourites.
“That whole range has been reflective of a change in how builders and construction companies are building – they are using bigger screws, they are using stronger screws, and the technology means you can get large screws now that do what used to be done with a coach screw or bolt. So, the technology and the market have shifted, and that new range very much fits into that and it has been very successful.”
The trend for independent retailers to drift towards trade clients has created its own types of marketing systems, which are somewhat different from those employed by typical DIY-centric metropolitan franchises. Based on the relative stability of customer bases, substantial brand loyalty, and perhaps older demographics, independent retailers in regional areas are finding that a more traditional, personal engagement with customers is the way to go – but with a modern twist.
Bremick’s upcoming spring campaign, for instance, will invite customers to use their own social media accounts to showcase projects that use Bremick products. The best projects nationally will be rewarded with a share of $6,000 in vouchers, to be spent in the store where products were purchased in the first place.
“So, the program actually rewards the customer who wins, and it also rewards the store,” Rod said.
Whereas more sophisticated online promotional activity is entering metropolitan hardware retail markets, much of it underpinned by a growing emphasis on online sales, smaller independents continue to favour in-store sales and phone/fax orders.
Whether by good luck or good management, this conservative approach has allowed independent retailers to play an increasingly important role in personally showcasing, recommending, and selling trade-based products to customers.
Future market directions
Increased diversification across all levels of business is bound to be a hallmark of successful fastener companies in coming years. This ‘drive to diversify’ is already manifesting itself in expanded ranges of fastener accessories, ancillary products, and even non-fastener ranges. For example, Bremick is about to launch a new range of window packers.
“They are little bits of plastic that a builder uses to fill spaces, and there are squillions of the things sold each year,” Rod said. “We have developed, designed and lodged all the patents for it, so it is quite a new and exciting product, which we are launching in the middle of September. There are more things coming (I cannot announce them at the moment), but they all fit into the basket of ‘what we do’.”
As for economic trends heading into spring and summer, the jury is out on likely eventualities and how they will affect fastener markets. Climate forecasters are pointing to great conditions in southeastern Australia’s agricultural heartlands, which may well stimulate some building activity. On the other hand, uncertainty about US-China trade tensions, unpredictable bank lending policies, and low construction starts all point to little joy – except, perhaps, for a rise in renovation markets.
“But it is just cycles,” Rod said calmly. “We tend not to concentrate too much on the broad economy, we just go out and do what we do best. We are fortunate in that we have several different divisions in this business. That means we are quite resilient and immune to economic factors. Our focus is always on growth and how we grow our business – our competitors are secondary and the economy is a tertiary consideration.”
This kind of calm, far-sighted approach is refreshing in a world that is fixated on obstacles to retail success, and an important reminder that we create our own market directions.