Hardware industry leaders deliver COVID-19 update
AHJ recently touched base with several hardware industry leaders from the Independent Hardware Group (IHG), Hardware & Building Traders (HBT), Australian Industrial Supplies (AIS) and Construction Supply Specialists (CSS) to discuss the impact COVID-19 has had on hardware independents to date, and also source specific plans for the future.
Despite the hardware industry experiencing good sales in April and May during the COVID-19 crisis, HBT Chief Executive Officer, Greg Benstead said he has advised his team to be aware that sales could also remain volatile throughout the crisis. Many stores are doing well and others are struggling and there are a lot of people out there who are going through a tough time – none of us know what will happen in the future, he said.
While the Australian media is reporting the building industry will experience a drop in productivity soon, Mr Benstead pointed out that these reports are still just predictions.
“The problem is the more people comment on the expected lull in the market, the more it ends up becoming a herd mentality and we all believe that this is the case. I am in no position to comment other than to relay what I have heard so far. From my perspective, we have had meetings with all of our preferred suppliers in the last six weeks and all of them are trading well, or far better than anyone predicted, and many achieved record numbers in April and May,” he said.
“I believe those companies who took the attitude, during this crisis, to do the maximum that they could do, are the ones that have done pretty well. In business, you need to try and grow your sales as much as you can, but in these times, you need to do it safely and make sure your teams are looked after – while still chasing business,” Mr Benstead said.
When COVID-19 restrictions were first implemented, HBT’s priority was to ensure members were working with the correct information because there was so much rumour and conjecture as to what retailers could and could not do, Mr Benstead said.
“Initially it was important for members to locate the information from the government and not be directed by social media. In the beginning, a vast majority of stores changed their trading patterns by making changes such as placing a table at the entrance to the stores so customers were served at the entrance, or placing tables around the registers so social distancing could be implemented until they could have Perspex screens installed.”
“Members also changed their delivery systems. If members were dealing with tradies, they would have the product waiting in the car park for their customers so they could just drive in, pick it up, and take the invoice with them. HBT members showed a lot of ingenuity of being able to work around this, and it was important to share ideas as well,” Mr Benstead said.
Then of course came the unexpected growth in DIY sales throughout the HBT group as customers began working from home and wanted to complete DIY jobs including deck repairs, painting, renovating the house, or over hauling the garden. However, it seems this is not the only segment that experienced growth during the pandemic, according to Mr Benstead.
“Generally, many HBT stores deal with the rural sector so we are finding some good growth off the back of the drought coming to an end. We have also had good growth from bushfire reconstruction in some areas and this is still continuing.”
“A lot of home builders have also ensured growth within the group because the government allowed them to work pretty much around the clock if they needed to. They have actually sped up their work so we have picked up quite a few sales as tradies began building their pipeline. The question is what does this pipeline look like? If tradies have just pulled work forward during this time, then we will see a lull later on. We had some members say that they saw their pipeline get a lot smaller during the initial stages of COVID-19, but in recent times this has grown out again as builders have got back into it,” Mr Benstead said.
When looking at the housing market in general, Mr Benstead said it is important to not believe everything in the media on face value, particularly with reports that NSW and Victoria could see a significant drop in house prices, which is a lot of scaremongering.
“Various real estate agents that I have spoken with have indicated the market is difficult to read as there is a lot of demand, but no supply. I was speaking to one real estate agent who said he had only sold ten percent of their average sales of properties in April, but this is mainly because there is limited stock on the market. Everyone has pulled back waiting for COVID-19 to pass. Until the market gets back to some normality it is very hard to predict,” he said.
When asked if the crisis has become a wakeup call for members to ensure they have backup savings in the future, Mr Benstead said he believes almost every small business would love to have more capital reserve and equity.
“It does not matter if the economy is great or not great, everyone would love to have more liquidity. I think in this circumstance, yes, maybe people are now saying they need to put more away for a rainy day, however, we are very fortunate to be in the industry we are in at this point in time,” he said.
“The government has done a pretty good job implementing the JobKeeper package for keeping employees on board and this is a similar story with some of the grants and delayed payments that are around. I am confident that this crisis will make people think twice about the cash reserve their business can access,” Mr. Benstead said.
“After our conference was postponed, we reached out to our suppliers to see if they were interested in still running the conference specials, as we thought there may be an opportunity to source some extra sales during this stage. A vast majority of our suppliers did that and it has been extremely successful, all held online.”
“The conference is now scheduled for October but we have made the decision, internally, that we will make the final decision in July, so this gives us a three-month window to organise the conference. As the world continues to change daily in regards to what you can and cannot do, it is really hard to make any decisions now which is why we will make the final call in July,” Mr Benstead said.
For now, the HBT team will continue to share relevant information with its members from government and industry websites that will continue to assist the group.
“We have upgraded our portal so HBT members can view a COVID-19 section where they can have a look at the latest information, grants, and JobKeeper packages. We also hold a member executive meeting on a regular basis and we are listening to what members are saying and taking on board ideas about how we trade during this period. We will also continue to talk to suppliers about the same thing and give them information that can assist them to grow their business,” he said.
IHG supports local communities during pandemic
IHG General Manager of Marketing, Karen Fahey, said IHG members have remained incredibly responsible during the COVID-19 crisis, on the back of hardware stores being allowed to remain open to support communities during the pandemic.
When restrictions first took hold in March, Ms Fahey said store owners were initially hungry for information on how they could safely cater to their customers and team, and also sought guidance on cash protection measures from the predicted economic fallout.
“Members took their duty of care very seriously and the IHG support team were swift to supply them with the necessary signage, protocol and legislative information required for them to continue trading,” Ms Fahey said.
“Stores put up ample signs indicating 1.5 metre spacings and encouraged good hygiene habits with sanitiser available as customers entered the store. Many stores installed Perspex screens, floor decals and bollards were erected around wait zones, such as front counters, paint centres and trade desks, to socially distance customers and staff. Also pleasing was the majority of stores taking the initiative to add to their services, such as contactless pick-up, phone orders and local deliveries to ensure customers had continued access to necessary supplies.” she said.
While safety measures were the focus in store, a groundswell of support was building within communities to ensure local hardware stores were permitted to continue trading, according to Ms Fahey.
“Most of our hardware stores are regionally based and, in many ways, are the lifeblood of their townships. They supply goods well beyond traditional hardware and in a pandemic their services were relied on more than ever. For example, supplying essential PPE to local organisations, livestock supplies to the farmers who are producing our food, and being distributors of LPG and oxygen canisters to hospitals. And, of course, we are the supermarket for the hundreds of thousands of builders and trades who rely on hardware for business continuity, said Ms Fahey.
During the peak of lock down in March and April, stores experienced volume increases in DIY sales and while owners were very grateful for the buoyant trading, many team members reported feeling weary, according to Ms Fahey.
“It has been a busy couple of months for DIY with so much of the population having more time at home. But despite all of the challenges, above all stores were invigorated to see new customers enter their businesses and to see so many Australians embracing ‘home projects’ during lockdown. Consumer demand for paint, garden care and green-life categories for example, have been very strong, and for many stores who have faced difficult years in drought, bush fires or cyclones, this unexpected boom has been a real blessing,” she said.
Another positive to have come out of the pandemic, says Ms Fahey, is the noticeable shift in consumer momentum to ‘support local’.
“Stores are seeing customers they have not seen in years or, in many cases, entirely new shoppers. It seems consumers have rediscovered their local family-run businesses and they have been welcomed back with open arms,” she said.
The outlook for the trade segment, meanwhile, remains a key talking point for the industry, Ms Fahey said.
“The focus for us is on supporting our members and capturing the opportunities that arise. In saying this, independents are very good at reacting to the swings and roundabouts of the building cycle. A good independent is very agile and aware of the levers in their business to assist cash flow and ensure they come out the other end,” Ms Fahey said.
“As the pandemic goes on, we are communicating regularly with our members, we meet with our National Advisory Council monthly, and our field team are hosting video conferences with members to provide a forum to share learnings. We continue to direct members to the various stimulus packages available should they require it and, with our NAC as guidance, we are helping them monitor their cost base as we want every single member to remain viable in 2021 and beyond. Margin management will be key and our store dashboard assists with this. Whatever analytics tool or technology we have, we will use it to help our members navigate the year ahead,” she said.
“Lastly we are very thankful for the support and leadership of our suppliers during this time. They have worked closely with our inventory teams to quickly move product into DCs to service our network. Continuity of supply to members remains a top priority,” Ms Fahey said.
AIS trades well throughout crisis
Australian Industrial Supplies (AIS), Group General Manager Stephen Wallace, said AIS members were lucky to enjoy some excellent trading over the last two months, on the back of a very cautious February when the virus really took hold.
“We are also very thankful to be part of an industry that was able to continue to trade. Our members used a number of different strategies in remaining open, whilst maintaining the safe distancing and sanitisation controls. They bounced a lot of ideas off each other through our communications platform which also assisted in them continuing to trade safely,” Mr Wallace said.
“Their continued focus on remaining open has assisted sales growth. We understand some other competitors took a stricter approach to the virus lockdown and as such, many of our members were able to take advantage of that,” he said.
While not all members were in this same growth pattern, AIS was able to offer a number of support strategies to its members which enabled them to keep trading, pay their staff and also their supplier partners, Mr Wallace said.
“We assessed the risk with our members to allow us to strategize this and any future support we need to offer. The forecast from most members and other industry players is a slowing during the June period and I believe there will be a lot of caution over the next 18 months.”
“Somehow, we are going to need to pay back the money that the government used to support those in need during this time. They certainly were not approaching this pandemic with rose tinted glasses,” he said.
In conclusion, Mr Wallace said at this stage it is a wait and see approach to these next two months results, but for the most part the AIS group has been trading well.
Positive sales for CSS
From the outset of COVID-19, the priority for all CSS members was the health and well-being of its employees and the people they interact with daily. CSS Managing Director, Jeff Wellard said making this a priority then resulted in the restructuring of operational guidelines to ensure social distancing requirements were initiated and maintained, while a solid (and as normal as possible) business structure also continued.
“We also understand that every store is different and as such ‘specific requirements’ to comply with social distancing regulations varies a little between each one. Certainly, the number of people in showrooms was limited, hygiene stations were set up, proximity lines marked out on floors and COVID-19 information signs became the norm across the membership. The genuinely great piece of feedback we have had from our members during this time is the way their customers have accepted the changes and worked with them to make ‘things as easy as possible’ on everyone,” Mr Wellard said.
While most CSS stores are trade focussed, the majority of stores have also reported an increase in DIY activity which is continuing into June, according to Mr Wellard.
“Reported sales across the group have been extremely positive over the past few months and this has been a confidence boost for many. While the future is not clear, there is an expectation that the building industry will slow down as many proposed projects are deferred or cancelled, but the consensus is, much will depend on how soon and how well managed the ‘unlocking’ process is,” he said.
When discussing the predicted lull in the building industry, Mr Wellard advised that there is a real need for companies to take a close look at all financial and operational activities, as well as systems within the business.
“Improved staff training, sales, marketing initiatives and functions will be even more important in the post COVID-19 period. It is for this reason that we will be developing support systems and game plays along these lines to help members adapt and be relevant. Although the timing of the downturn in the residential and commercial building industry is unknown at this stage, the most influential factors here will be the speed at which restrictions are relaxed and whether or not we have a ‘second wave of the virus,” he said.
For now, the COVID-19 virus remains a massive wake up call for all business owners to have contingency plans.
“I did read somewhere that, ‘a smooth sea never made a skilled sailor’ and I believe this to be a poignant quote at this time. Sure, no one could have really expected this, but the nature of business is one of crests and troughs, with varying distances in between, and smart operators always have ‘a safety net/stash’ for those unexpected deeper troughs.”
“I think this is a wake-up call for the governments across Australia to take a good hard look at how they can assist in developing small business manufacturing ventures. This is another story entirely though. It is hard to determine what, if any, of the new introduced protocols will remain in place permanently, but the consensus is hygiene stations will be part of the mix for a good time to come,” he said.
Looking into the future, CSS intends to continually advise and educate members in dealing with COVID-19 by providing information and education bulletins on a regular basis and keeping up communication at all levels.
“CSS is the group behind 60 plus independently owned, small businesses, run by professional operators, competing in a competitive marketplace. A key priority for us is to gather information, sift it, sort it, evaluate its worth and then effectively communicate it to the members to keep them informed and up to date.”
“Independently owned and operated industrial and construction supply houses are a vital link in the supply chain right across the country. They are part of the small business ‘package’ that means so much to the overall economy and will play a big role in the post COVID-19 recovery period,” he said.