HBT group grows in a slowing market
In this exclusive interview with HBT’s (Hardware & Building Traders) Chief Executive Officer, Greg Benstead, it was obvious to AHJ that not only had the group continued to grow to record member numbers, with over 700 members at the time of the interview, but this was also the most rapid member growth the group had experienced in a 12-month period.
The numbers are encouraging, according to Mr Benstead, particularly with many stores in the pipeline and considering last year’s sales figures also showed an impressive growth.
“Looking at the industry by state, for Q4 2018, when compared with the same quarter for 2017, HBT still tracked strongly up on last year, so it was not soft as many have reported. Stores who are directly in the timber/building supplies business did show slightly softer numbers. However, this is not broadly across the country and those stores are only marginally down at this stage. It appears good independents that consistently look after the customer, can find sales in tough times.” Mr Benstead said.
Although there is some slowing in the Australian building industry, Mr Benstead said, “there are still so many mixed messages on how much the building industry will slow. This all depends on the industry and where a particular member is located”.
“HBT is probably very fortunate because we are one of the most diversified groups in the hardware industry. This also means if one part of the industry is slowing, then the other part is growing. This is because if people are not building, they are most likely to be renovating. If one category is softening, then surely there is one that is growing,” he said.
The independent fight
As the ‘correction’ in the building industry continues, Mr Benstead highlighted several positives for independent hardware retailers during this time, including consumers favouring the bespoke smaller business type concepts, a trend which is not working in favour of the Big Box.
“We have currently have a store in western NSW, where the local council is looking at a proposal to build a Bunnings in town. This member reached out to other HBT members on Facebook to source ideas on what to do, with many members suggesting this store finds its strengths and plays to them. We reminded this store to find what they are good at and make sure everyone in the local community is aware of it. We told them to find a way to say to your local customer that you are great at something so people become loyal to you. Bunnings cannot do this.”
Mr Benstead also believes regional councils should be more aware of the negative affects a Bunnings development can have on a rural town.
“Bunnings will say they will employ 200 plus local people by developing in a rural town, but there could be 15 other local stores that will most likely go broke who are employing 300 people in those areas. The money that goes into Bunnings goes straight to Wesfarmers, but the money that goes into independents goes to the local community, because these storeowners buy their house and car locally. The money stays in town. Why is the local council even thinking about doing this when they are only hurting the town?” he said.
He also touched on his concerns in regards to the culling of brands within Bunnings stores – brands that are often replaced with house brands and how this could be prevented from happening throughout independents.
“We are going to end up in a situation where we have Bunnings brands and then we have all these other brands that are no longer in Bunnings, that are out there shuffling to get as much share as they can out of the market place – between Natbuild, IHG, HBT and all the little independents. Therefore, we may end up with these big brand players at Bunnings and then a whole lot of people who are struggling for profitability. Yes, they can survive and do their job, but they then may not have the funds for product development or marketing that you should be getting out of your supplier if you want to grow,” he said.
“This is why independents need to work together and talk about how we align ourselves in these areas. Who are the suppliers that we believe we can align ourselves with and are keen to redevelop the category? We need to use these suppliers to get a true group of independent suppliers that can do the same as what they are doing with Bunnings. The key point of difference would be the tag line, ‘only available at good independents’.”
“The suppliers who support our conference are also most likely the suppliers who want to work with us. It does not mean that they cannot be in Bunnings as well as HBT. They could have one brand exclusive to the independents and one to Bunnings or ensure our price is as competitive. We have to do this as a group otherwise in ten years’ time, we are going to be sitting there with secondary brands and struggling because we cannot have the primary brands that have aligned themselves with Bunnings,” Mr Benstead said.
Boosting distribution through shared warehouse
Although online shopping and the threat of Amazon does remain of some concern to any independent bricks and mortar retailer, Mr Benstead said because HBT is not as urbanised as other groups, the online threat is not as intimidating.
“HBT stores are far more regionalised, meaning it is difficult to get stock to some rural stores, and the Amazon’s also cannot necessarily get to these markets. They can get to their metro areas easily but the rural areas are a little bit harder, especially the distribution of larger items because it is all about fuel and transport.”
“When you do analysis on the Amazon model, it is actually about the supplier being able to deliver to the customer directly and avoiding warehouse distribution where possible. And of course there are always those customers who want to feel and touch a product before they buy – so it has some challenges,” he said.
HBT has also recently made substantial developments to its distribution network, with exciting news for members to be announced at HBT’s upcoming national conference.
Mr Benstead said HBT is set to substantially boost its small pack distribution after working closely with a number of suppliers with warehouses, one being CW Brands, who are already a distribution arm for around 300 HBT stores.
“We are pleased to be launching HBT’s new distribution evolution, after CW Brands has agreed to put additional items for us, in their warehouses. These will be items that members have found MOQ’s are too high, with all products available through our portal. CW Brands are very happy to put in this range of products at our request, and we also co-brand that particular location as a HBT warehouse,” Mr Benstead said.
More positive news for HBT also comes after the completion of its new buying team in October last year, with several substantial deals secured in recent months.
“From a KPI perspective, one of the areas that I am focused on investigating is the average percentage rebate per member. If we continue to grow members for example, our sales and rebates will grow, but it will not necessarily mean that each individual store is improving.”
“What is more important for HBT is that individual members are improving. If a member is putting $100k through the group, their rebate percentage is five per cent, but in the next quarter we would like this to be 5.5 per cent. Members then know the value they are getting from the group is getting better. There has been improvement in this area in the last two quarters because it is a direction we are really focusing on,” he said.
“We are also focusing on sales after we began a monthly online catalogue promotional program in January, and every month it is improving. We need to understand what works and what does not work, from our perspective, so we get the right promotions that work for our group. From a merchandising perspective, we are also continuing to chase products we can promote and market in-store. This is also often about recognising a great deal, because buying additional stock at 20 per cent off will only improve margin,” Mr Benstead said.
The online catalogue is available on the member portal so HBT members have the ability to browse through it and find a product that works for them. A quarterly H Hardware catalogue is also produced for the 34 H hardware stores now on board, with another six stores to be branded H Hardware soon.
“We still do all the marketing the same, but the new promotional program has become a central program for every store. The deals that go into the catalogue go straight out of this so we are not going searching for additional deals. The best of the deals go into the H Hardware catalogue, but this also means the skin of the H Hardware catalogue may be reskinned into anyone’s catalogue for a minimal cost, which everyone can take advantage of. This new concept will also be announced at the upcoming conference,” Mr Benstead said.
National Conference update
With HBT’s National Conference just weeks away, several substantial changes have already been made to both the upcoming national and state conference.
HBT’s state conference, which is usually held in September, is now replaced with individual state meetings, led by Mr Benstead, Mike LoRicco (HBT General Manager – representing the operations team), Jody Vella (General Manager – Buying) along with steering groups and member executives.
“Conferences are often a one-way street, where the group spruiks plans to members. The state meetings are more of a two-way street, with the team discussing what we can do better alongside members and suppliers,” he said.
Several changes were also made to the National Conference schedule, with the usual cash draws announced at HBT’s Gala Dinner replaced with rewarding stores who fully support the HBT group.
“Supportive members are those who have a certain amount of accounts open with the group, use key suppliers and also are a loyal member. ‘Store of the Year’ award winners will receive a trophy and cash prize, as well as a trip away, alongside the ‘Supplier of the Year’ award winners,” Mr Benstead said.
HBT will also now fund all cash prizes in place of supplier’s funds, because Mr Benstead said he would rather generate a sales opportunity for a supplier, rather than make them feel obliged to put their hand in the pocket.
“Supplier funds should be delivered to all members, not just a few lucky ones,” he said.
There are certainly plenty of key changes for members to be aware of in the lead up to the National Conference, as well as a very positive CEO leading HBT members through a year of challenge for any business in the building industry. However, Mr Benstead’s optimistic message to members is to continue to look for opportunities within their local communities, and highlight the major strengths of their store, to remain in good stead over the next 12 months.
As HBT’s official conference media partner, AHJ will deliver extensive coverage of HBT’s conference to the industry in AHJ’s June edition.