Home improvement industry market report by Geoff Dart
Geoff Dart, of DGC Advisory, has consulted to the home improvement and building industry in Australia and New Zealand for over 25 years, working with both publicly listed and privately owned enterprises. Services Geoff and his team provide include marketing research, strategic planning, supply chain improvement, e-Commerce (cloud based) development, implementation, acquisitions and divestments. These services have been provided to companies operating across all areas of the demand chain, from manufacturing, sourcing, wholesaling, e-Commerce and retailing. Geoff’s career has centred around research and strategy, having held senior roles with leading global organisations, ACNielsen and McCann Erickson. DGC Advisory’s value proposition is focused on working with companies to connect strategy with capability and deliver sustainable growth.
• The Home Improvement market grew by 3% over the past year to reach a level of just over $45 billion. In terms of per capita usage, almost $200 was spent for every person in Australia.
• Stimulating demand, introducing new and exciting products and services, branding and positioning, focused channel strategies, improved store dynamics, excellent visual merchandising, customer centricity, embracing technology and best in class supply chains will be key factors in retail and supplier success over the coming years.
• New housing approvals have increased for the past three years and importantly converted into starts. An improving housing market (new plus addition, alteration & renovation) will ensure a CAGR of 3% over the coming decade.
• Continued rationalisation at retail, wholesale and supplier levels will provide companies with clear growth plans and greater share of their respective pies. Along with this is the opportunity to increase profitability as well as revenue.
•Companies that wait for trends to happen and sit on the side-lines will be left behind.
• The Home Improvement market is fragmented, with the largest generalist retailer with less than 18% market share. In terms of specialists, Reece has a whopping 32% share of the plumbing and related category, double the size of its nearest competitor and increasing the gap.
• The industry is considered ripe for continued consolidation as evidenced in the latter section highlighting acquisition and divestment activity over the past eighteen months or so.
|EBIT % to Sales||Comment|
|Bunnings (Aust.)||$8,006||$920||11.5%||Market leader with a compelling consumer and growing trade offer.|
|Boral (Aust.)||$3,297||$218||6.6%||Solid brand portfolio with good growth prospects.|
|Fletcher Building (Aust.)||$3,276||$165||5.0%||Challenges ahead for most divisions.|
|CSR||$1,747||$126||7.2%||Solid brand portfolio with good growth prospects.|
|Reece (Aust.)||$1,600||$176||11.0%||Leading specialist, dominates plumbing channel through excellence in range and service.|
|DuluxGroup||$1,600||$183||11.5%||Industry leading supplier and distributor. Strong brand portfolio and balance following the Alesco acquisition. Good growth potential.|
|Woolworths Home Improvement||$1,527||($169)||(11.1%)||Confused positioning, lack of supplier support and high cost model will make survival difficult.|
|GWA||$578||$72||12.5%||Market leading brands, undergoing divestment of non-core assets and focusing on leadership categories. May be preparing for take over.|
|James Hardie (Aust.)||$367||$83||22.6%||High margin, differentiated offer.|
|Beacon Lighting||$150||$23||15.3%||Great product range and service offer with a growing commercial business.|
|Gale Pacific||$137||$12||8.8%||Strong core business. New management with clear focus.|
|Kresta||$101||$1.5||1.5%||Challenging market and increasing competition. Survival doubtful.|
|TOTAL SAMPLE||$24,328||$2,094||8.6%||The best and worst comprise the sample to highlight attributes of success.|
|Industry Average EBIT/Sales||n/a||n/a||7.7%||Best in class suppliers have strong relationships with best in class retailers.|