Industry groups will prosper well into 2022 despite pandemic challenges
‘Industry Insight’ 2021 sees industry leaders express an overwhelming sense of pride at how their members have not only overcome the many supply issues, price rises and staffing challenges as a result of the pandemic, but thrived throughout the adversity. On-line spaces have never been so alluring to consumers, independent stores have never been more attractive to their local communities, but most of all retailers have mastered the skill of pivoting in an instant to ensure the on-going success of their businesses. In this special edition, read the most important lessons discovered by the ‘best in the business’ throughout 2021 and what they believe 2022 has in-store for them.
IHG CEO, Annette Welsh
Independent Hardware Group’s (IHG) focus remains on three key priorities in the coming year, according to IHG Chief Executive Officer Annette Welsh, including the safety of its people and customers, continuity of supply and support for members, and continued growth to ensure the long-term viability of the independent sector.
“With the Total Tools team now part of the Metcash family, we are really excited to be working alongside Total Tools Chief Executive Officer Paul Dumbrell and his team, sharing knowledge and insights to build an even stronger home for independents across both of our businesses in the years to come,” says Ms Welsh.
Despite the immense pressure of supply challenges, staff shortages and operating under imposed lockdowns, Ms Welsh says members have enjoyed a bouyant twelve months of trading and gained sizable benefits from a shift in consumer behaviour.
“The preference for local neighbourhood shopping and undertaking home projects, as well migration of people from cities to regional areas has vastly improved the competitiveness of independents,” says Ms. Welsh.
“IHG’s DIY growth particularly has been driven by strong performance from stores who invested in Sapphire, with average sales growth in excess of 25 per cent year-on-year. We have also focused heavily on supporting our network with effective range and price strategies, and growing share in emerging categories such as kitchens and garden.”
“In the trade sector, while growth was driven predominantly by a combination of government stimulus and border restrictions that saw consumers channel their money into home renovations, we have also gained traction with our expanding footprint of Mitre 10 Trade Centres as well as the rollout of trade technologies and supporting builders with a ‘whole of house’ approach to supply,” she said.
The biggest step-change within the IHG business however sits within its digital capabilities due to a surge in online shopping.
“Our e-commerce and fulfilment, loyalty programs, and data insights and analytics to support members has all experienced significant growth over the last year. Online sales have more than doubled in 12 months and now account for three per cent of our total group sales. Traffic and transactions via our websites are up more than 140 per cent and we see significant opportunities to scale up our loyalty programs by leveraging the combined reach of the Total Tools, Mitre 10 and Home Hardware programs.”
“Our digital capabilities in trade are also strong. Due to the rapid evolution in the way that consumers interact with technology, we are seeing a growing appetite amongst builders to adopt solutions that help them be more productive in their day-to-day. This is driving a significant uplift in our trade members adopting our trade technology suite of products, such as trade online, trade profiler and trade sync scanner, as a means to deepen relationships and better service customers,” Ms Welsh said.
While many lessons have been learned in the past few years, Ms Welsh says one of the simplest takeouts has been the need to continually listen, act and adjust to ensure IHG offers the right support and guidance for members through a highly unpredictable year of trading.
“Every aspect of our members’ business has been stretched to the full in 2021 but what has been most pleasing is our demonstrated ability to keep returning shoppers ‘sticky’ to our network of stores, as well as attract new ones. The quality of our store network also counts, with Sapphire and brand conversions continuing despite border closures and lockdowns,” she said.
IHG’s capital investment into its two-brand strategy has continued to see strong interest from Thrifty-Link and True Value members looking to convert to Home Hardware or Mitre 10, according to Ms Welsh, while the IHG team have also completed 40 Sapphire transformations in the last 12 months, putting the group on track to have a total of 170 sapphire stores in the network by April 2022.
“This year we also hit some important milestones, including our 100th Sapphire store completed at Womersley’s Mitre 10 in Sorrento Victoria, and the delivery of our 25th Trade Centre Sapphire at Clennetts Mitre 10 in Mornington Tasmania,” Ms Welsh said.
Now based on member confidence and IHG’s strong pipeline of projects, the group has reset its target of 200 stores by 2022 to 300 stores by 2025, according to Ms Welsh who said it is just such a privilege to work with an incredibly diverse mix of family businesses across almost every Australian community.
“In recent months we have had several new members and entrepreneurs join our group. It is wonderful to have them join our family and we look forward to providing the full weight of the IHG tribe to support their businesses.”
“By the end of the year there will be eight new brand store locations opened, including sites at Merimbula in New South Wales, Torrensville in South Australia and Gatton in Queensland. Plus we have just opened a new Design 10 showroom in Melbourne to add to our existing sites in Hobart and Geelong. Whether it is new sites or upgrades to existing sites, Ms Welsh said there is enthusiasm and reinvestment being made throughout the network, which is great to see.
Despite sales holding up well for now, there is no “business as usual” for any part of members’ operations at the moment. Ms Welsh says with a highly unpredictable market and the stress from lockdowns, heightened demand, supply shortages as well as home-life responsibilities, she and her team are very mindful of the toll that the last twelve months has had on members and staff.
“As such, the health and wellbeing of our people and our members remain our top priority for the year ahead.”
Looking to 2022, as the group draws on the strategic counsel and support of the National Advisory Council (NAC) and its Trade Action Group (TAG), Ms Welsh says the focus for the next 12 months will be on reinvesting into the business, on behalf of members, to retain DIY consumers whilst continuing to build and grow trade.
“From a strategic perspective, we have had a successful year which enables us to focus our attention and investment into the brands, the business and future-proof initiatives to support our independents for the next decades to come. This includes building on the shared learnings across Total Tools and IHG to improve our network coverage, to service more customers and to future-proof independents across both businesses.”
“Operationally, it will be another busy year. If all goes to plan, in February we will host a long-awaited return to face-to-face networking for our members and suppliers at the IHG Expo on the Gold Coast. In that same month we will also farewell our outgoing Metcash Chief Executive Officer, Jeff Adams, who departs the business after five successful years at the helm. We welcome new Chief Executive Officer, Doug Jones, an experienced retailer and wholesaler with broad international experience who looks forward to hitting the ground running and learning the ins and outs of the hardware business,” she said.
“The Mitre 10 and Home Hardware brands will also both undergo refreshes in 2022 with lots of exciting new creatives and initiatives to roll out. By July, the first of many system investments will go live with the launch of a new B2B Member Portal to replace existing systems as a single point of engagement for all of our members and suppliers.”
“Finally, in the second half of the year we will open a new purpose-built distribution centre in Victoria, with 25 per cent more capacity than our current Derrimut site, to service our growing network in the southern states,” Ms Welsh said.
Mitre10 NZ CEO, Andrea Scown
Mitre 10 New Zealand will head into the New Year with a substantial digital makeover well underway. The transformation is not only essential due to the ongoing need for an online offer as the pandemic continues, but also into the future as well.
Mitre 10 New Zealand Chief Executive Officer, Andrea Scown says lockdowns drove record growth in the online channel and has been firmly entrenched in customers’ expectations now more than ever.
“This performance all underpins the big digital transformation that we are about to hit year three of but it is just so critical now as a retailer – you just have to be in this digital space,” she said.
While Mitre 10 New Zealand had ‘Click ‘n’ Collect’ in place pre-COVID, the retailer progressed to one hour ‘Click ‘n’ Collect’ during this time and more importantly now has the ability to book time slots so that customers are reassured they will not wait in queues when picking up online purchases.
“We rolled this out last year and being able to book in a time slot and pick your purchases up in the drive-through is best in class in home improvement here in New Zealand.”
“We also launched a bunch of new functionalities in our e-commerce space in the past 18 months, moving to our on-line paint colour picker, which is so popular and has substantially increased how much product we are selling on-line to what we were selling pre-COVID. We also now have green garden online and this has boosted customer’s ability to shop when stores were closed,” she said.
Mitre 10 New Zealand is also now heavily engaged with its membership on what Mitre 10’s vaccination policy will be for its team members moving forward. While Ms Scown says the group does not have a position on this yet, Mitre 10 is seeking clarity as soon as possible.
“Our government has not been as quick to move on legislating different sectors so it has been left up to businesses, particularly retail to have forged their own policy. While I do not think making vaccinations mandatory is in line with our cooperatives’ values, collectively we will land on a policy that is right for us. There is the potential for some roles to be mandatory including truck drivers delivering into education facilities, as well as café workers in our MEGA stores – they will need to be vaccinated in line with government requirements. We will release our position on this soon,” she said.
It seems customers are also proving to be highly satisfied with Mitre 10 New Zealand’s offer, with the group recently winning the Canstar Blue Most Satisfied Customers Award in the home improvement section.
“We also placed second in the Kantar Customer Leadership Index of all New Zealand brands which was not limited to home improvement brands, which was just great. This customer satisfaction is evident when looking to the continued strong growth and demand we are seeing across all of our categories. Nothing stands out particularly with demand pretty much like Christmas trading for the last 18 months. This has been balanced by significant cost inflation in supply chain and freight which we are currently navigating,” Ms Scown said.
While there does not seem to be any sign of supply chain woes improving, Ms Scown did say they continue to follow supply chain concerns throughout North America, which often foresees what may happen in New Zealand, but there is still no sign of this easing.
“While Mitre 10 does have pockets of products we are low on, we are satisfied with where we are at from an in-stock perspective. Our members have invested in inventory and we are going into Christmas in good shape but this is where the advantage of being locally owned and operated comes in. Where we were struggling with supply nationally, these stores have the opportunity to buy locally or find alternatives. This is particularly the case with green garden and timber,” she said.
“We have already placed all of our orders for Christmas 2022 months ago. Next year we do expect Kiwis to continue investing in their nests both in home improvement and garden. New home building will also drive growth in our trade business so we need to be ready for this.”
“We had high demand in this sector before COVID with the pandemic just making the situation worse. New Zealand had record building consents pre-COVID and this is continuing,” Ms Scown said.
Looking at the past 20 months, the Mitre 10 New Zealand team has learned very quickly how to adapt to changing situations with Ms Scown saying she believes this new skill is one of the best things to come out of the pandemic.
“If you asked me two years ago what my biggest concerns were around our multi-transformation program, including changing the way we work and all of our technology, I would have said that I have concerns around our capacity and mindset around change.”
“I am now far more confident that this business will lean into all of the current transformations. Everyone has learned their capacity is far greater than what even they individually thought,” Ms Scown said.
In the New Year Mitre 10 New Zealand is investigating the implementation of centralised distribution centres as a potential solution to its supply chain challenges and growth challenges because it does not currently run its own distribution centre.
“Off-site storage is becoming a pressure point for our footprint. These are big businesses now and we have exhausted the footprint, so we are looking for more strategic options to hold stock and how we will manage logistics on both the North and South Islands. We have a new MEGA store opening in Silverdale which is just north of Auckland in March and we will also complete big expansions in a new and evolved garden centre model in another Auckland store, Mount Wellington in the next few weeks.”
“Our smart home offers will also roll out to more stores in the New Year. It is a slow burn but you have to be in it. The big focus for us is our transformation program including going live in our support centre with the new systems next year and changing out our website with all of the new tech as well. It is very exciting for us – changing all your technology is a big move but we are looking forward to the opportunities this change will bring to us long term,” she said.
TABMA CEO, David Little
There is no doubt the pandemic has changed the way many will do business indefinitely, even though many of the changes implemented over the past 20 months may be a version of “necessity being the mother of invention”, Timber & Building Materials Association (Aust) Ltd (TABMA) Chief Executive Officer, David Little said recently.
While obvious changes within the workplace include working from home and the move from face-to-face delivery to Training to Zoom or e-Learning based delivery, Mr Little said many of those in the southern affected states will never return to the way they were pre-pandemic.
“Perhaps not so obvious was the need to increase the quality and quantity of our communications with staff and other key stakeholders during this time. Now that we do not spend so much time in front of each other, we need to move away from e-mail tennis and pick up the phone, or Zoom or Teams each other,” he said.
Looking to the timber industry specifically, Mr Little agrees that the million-dollar question right now is how long timber supply woes will continue and when healthy supplies are expected to be re-stored.
“Our members believe supply issues will remain until demand reduces, with supply not expected to be restored until closer to 2023. Importantly, prices are highly unlikely to return to pre-2021 levels particularly for structural pine and engineered product, nor should they,” he said.
“The timber supply chain is an enormous wheel to turn. While demand remains high globally it is extremely difficult to address the issues locally, particularly given the challenges our industry faces from a resource perspective. Currently, we are seeing desperate builders search everywhere for alternatives but this also opens the door for non-conforming products from overseas to make their way into the Australian market. This is a current and serious issue facing all of us and could have long-term repercussions for the industry.”
“Pressure is now also on inspectors and certifiers to ensure the right product is used in the right situation. Often non-conforming products look very much like conforming products. When purchasing merchants must be very clear in their purchasing documentation to ensure the product complies with the standard for which it is intended for use,” Mr Little said.
It seems price increases are not expected to slow demand in the medium term, according to Mr Little, because the work is already in the pipeline and must be completed one way or the other.
“As far as sales being impacted by stock shortages, we are simply not seeing any relief just yet. Stock turns for timber are still at record highs and there is no such thing as dead (timber) stock.”
“It is only when the supply-demand balance equalises that we will then see normal market pressure reduce costs, but not back to where we were. One of the biggest lessons for me throughout the pandemic is that it is so important to stay focused on what is actually happening in the marketplace and not on what people think will happen,” he said.
In March 2020 everyone was predicting an unprecedented economic downturn but instead, house prices skyrocketed, alongside a building boom dealing with scarce labour, he said.
“For me I am just so proud that TABMA has continued to deliver on its promises to our membership, including introducing over 150 new trainees, delivering formal qualifications to over 2500 people and growing member equity along the way,” Mr Little said.
Looking to the year ahead TABMA’s attention will remain on its member’s exposure to insolvencies, particularly as builders tackle fixed-price contracts, rising prices and construction delays.
“2022 will be a very important year in TABMA’s history. In this – the middle year of our three-year plan – we will finalise the rollout of our statistics offering, release the first of our e-Learning products – Certificate III in Retail Hardware – and also announce a new recruiting division.”
“Having turned 80 years old you can expect TABMA will continue to provide exceptional industry-specific initiatives to recruit, develop and keep safe the people in your organisation. We are here to serve,” Mr Little said.
HBT CEO Greg Benstead
Hardware and Building Traders (HBT) has again had another impressive year with its membership numbers now at a record high of 890 stores, with more groups expected to come on board in the next few months.
HBT Chief Executive Officer Greg Benstead said it seems that many independent businesses are keen to make good use of HBT’s latest bespoke IT system, which has been set up to run as a completely separate entity.
“We now know that we can do all of the rebate work and buying work for another buying group, and do it all for significantly less than what the group is paying for rebate management and buying. We can undertake the rebate and buying/deal management on behalf of other groups, pay the stores on their behalf and pay the group to enable them to continue marketing and operating the group even more effectively than prior to us being contracted,’ he said.
“Ultimately if we do not get all of these independents under one central buying group and work with our suppliers as one big voice, with volume that counts, I think there will be grief in the future from the big box. It seems that all independents working in a divided manner are allowing suppliers to make additional profit from independents and use that money to fund big box or other corporate groups. This is funds to pay for warehouse allowances and supplier’s programs that are ultimately just fundraisers for the big guys.”
“This is because somewhere along the way suppliers need to make a $100 for a product. They give it to us for $110 and Bunnings for $90. It is just not right. My primary focus is to continually talk to other groups and suppliers about this. We need to work together as independents and ensure that our combined market share is one voice and try to make it a level field for everyone,” Mr Benstead said.
It seems that 2022 will be yet another big year for HBT, particularly with its annual conference making its way to the Gold Coast Convention Centre from May 3 to 5, with the big event expected to be presented in a very different structure next year. The 2022 conference will be more intimate, according to Mr Benstead, and specifically designed so that HBT can utilise smaller venues in the future.
“We do not want to have meetings where there are 1000 people in the room if we can avoid it. This is why the 2022 conference will commence with a business lunch with everyone sitting around tables and we will go through some keynote addresses, along with various guest speakers and entertainment and networking throughout the afternoon. This will be the only time we will have everyone together.”
“We will also hold supplier meetings for the first-time next year. I believe this is worthwhile because we are launching a portal that suppliers will have access to and they will have the responsibility to do their own uploading of price lists and information,” he said.
The new-look supplier portal was developed after HBT became aware that there were too many deals in the marketplace that just were not making sense to many members.
“A lot of our suppliers have come from having a national account manager with many salespeople on the road who just did their own deals everywhere. This went on for many years, but this meant that deals were conducted more through having the right contacts rather than volume. So stores who do four times the volume often do not have a better deal than the smaller trader down the road.”
“As we come into the 21st century our suppliers just have to be more professional and specify their deal is based on volume. More volume should get you a better deal, and a group deal should always be better than a single store deal. Our new system allows us to have an individual price and deal for every member if need be,” he said.
While HBT continues to improve and refine its systems, ongoing developments come from learning from the past, particularly when the group is coming off the back of two years of exceptional growth.
“HBT is now tracking its sales up on last year which is amazing. I think this ongoing growth comes down to local customers trying out their local store over the last few years and finding that the local guy had the product they wanted at a competitive price. If half of these new customers stay with HBT then this is a significant gain for the independent market,” Mr Benstead said.
HBT has also remained vigilant when it comes to sourcing stock, and according to Mr Benstead, the group often sources products that the big box has struggled to source, Mr Benstead said.
“At HBT, in any category, we always had a preferred supplier, then additional suppliers in some categories to allow a range. Because of the recent supply chain woes, the additional suppliers have come in very handy. Some suppliers are tightening their purse strings and saying they are not going to deal with people they have not dealt with before – only existing customers, and even then, all orders would stay at the same volume they have been in the past – not increased at all.”
“For now, I think the global supply chain issues are flattening the building boom bubble. Without these issues, yes we would have higher sales but then we really would have had a huge sale bubble burst. Slowing the boom down has been a good thing,” he said.
The dynamics around price rises have also changed considerably due to the pandemic, with Mr Benstead pointing out that in normal circumstances trades often place retailers under pricing pressure because the trades are under pressure from their customers – this is now all changing.
“This issue is more about getting supplies rather than the cost. If a builder is not under as much pressure from the customer, then he is also not putting pressure on the store. Of course, the retailer is accepting what the supplier is saying about the current environment. It is such a unique situation when suppliers can put price rises through and no one bats an eyelid.”
“We are also expecting further price rises in the New Year. A lot of suppliers cannot put price rises through because there is a no price rise period in the lead up to Christmas. Hopefully, price rises will only be a short-term issue,” he said.
When reflecting on some of the lessons learned throughout the pandemic, Mr Benstead said members were reminded of how important it is that customers remain a priority – even more so with new store customers.
“If you can look after new customers who are coming into the store due to the current circumstances you have a good chance of keeping them. Providing expertise to builders when looking for alternative products due to supply constraints is also very powerful. It is where independents should have an advantage,” he said.
“In the New Year, HBT’s focus is to improve member reports and information. This allows owners and managers of businesses to decipher trends, focus on new categories and create great promotional deals that will drive traffic to stores. We will also continue to work with some buying groups for the benefit of independents, as well as seek new areas of growth.”
“New growth areas include hybrid decking products, digital door locks, security, and pet food and accessories. Additionally, it seems to be more of a trend now for customers to go for premium products – so not what is necessarily the cheapest but what is going to be the best quality and give longevity with the least amount of work. The newer generation is just not interested in spending the weekend painting decks.”
“Growth in member stores is about ease, convenience, and ‘premiumization’. Australians have got wealthier and this means the bottom end is also wealthier – they can afford to use better products and this will be where the growth areas will be. It is important to have a good, better, best strategy in many categories,” Mr Benstead said.
TradeTools Founder/Director, Greg Ford
As a Queensland based business, TradeTools was lucky enough to experience several smaller lockdowns throughout the pandemic unlike the extensive lockdowns in Victoria and New South Wales. Despite the minimal disruption TradeTools Founder and Director Greg Ford said the business still experienced a substantial upturn throughout this time.
“During the pandemic TradeTools’ main priority was ensuring we had enough staff on hand to handle the huge upturn in business – bigger than any of us had ever seen before in such a short space of time. Everything has increased in volume across all categories. In saying this we still are a business that focuses primarily on the construction industry,” Mr Ford said.
This year TradeTools launched its new two-hour delivery service, designed specifically to not only encourage customers to continually utilise its online offer, but also make it easier for customers to source products, particularly if they are stuck on a job and need a product urgently. While the service is currently being trialled primarily in Queensland, there are plans for the offer to be rolled out in other states in the near future.
Over the past 20 months, TradeTools has also faced the same supply challenges as most specialist tool businesses. While supply does remain a substantial issue for the business, TradeTools stores were fortunate enough to lead into the pandemic with excellent stock levels.
“We were lucky to not be as exposed to the same volume of supply issues as our competitors. In saying this, next year could be a worry. Products that need a large material component – such as ladders for example – are now becoming difficult to source in the quantities that we need,” he said.
Price hikes have also begun to impact the group, according to Mr Ford, who said although this is an inconvenience, price hikes are not too concerning when considering much of what TradeTools’ sell has barely increased in price – in real term – in almost 10 years.
“Price hikes may dampen turnover slightly but all of this will be easily offset by the upturn in prices. I think all areas will see price rises and are doing so as we speak,” he said.
Despite the recent upheaval and uncertainty, Mr Ford said that one of the most substantial lessons he learned throughout the pandemic is that the market is much more resilient than what he and his team had previously realised.
“We really are capable of achieving much more turnover than we thought possible. But we are also a solid and conservative company. We know to never bite off more than we can chew, unlike a few of our competitors,” he said.
Considering there is now a substantial backlog of work in both the building and construction sectors due to ongoing lockdowns, Mr Ford expects the market will remain buoyant for at least another two years. After this it is anyone’s guess, he says.
For now, Mr Ford continues to celebrate the successes within his business including the ongoing opening of new stores, one being the new Browns Plains store based in an outer suburb on Brisbane’s southside.
“The Browns Plains store has proven to be an outstanding success from day one. We believe the best opportunities now lie for us within the regional areas over the next five years,” he said.
“Throughout 2022 our primary focus lies with opening more stores, completing more upgrades and continuing to improve on all that we do. Now in its fourth decade, the company has no ultimate destination, it is just on a never-ending journey,” he said.
CSS MD, Jeff Wellard
Industry segments CSS members operate across – and most of the trades associated with CSS – were fortunate enough to be regarded as essential throughout the pandemic and maintained enough momentum to create a good deal of economic drive and opportunity for many, Construction Supply Specialists (CSS) Managing Director, Jeff Wellard told AHJ recently.
In saying this, Mr Wellard also pointed out that the past few years have been tough going, particularly as the group continued to modify and alter systems and operational techniques, while also adjusting the way members interacted with each other.
“Everything changed and is still being modified in some shape or form as we continue to move forward. In some ways we were fortunate enough to have a year prior that we could take lessons from and make the necessary adjustments where required. Hindsight certainly helped circumnavigate the obstacle courses being thrown up throughout 2021 – especially as the pandemic dragged on and there was some fraying around the edges and nerves tweaked,” Mr Wellard said.
“The now 20-year-old mantra of CSS ensuring that ‘people’ are important no matter how big a company they are and whether they are an employee, member or supplier remained a solid stabilizer for the group throughout 2021.”
“CSS, as an entity, has never had ‘preferred suppliers’ but rather we have ‘supplier partners’ and like every one of our members, they are seen as just as valuable as any other. The very essence of CSS goes well beyond being just a few people working together to get a better deal – it is about professional partnerships, respect at all levels and being open and honest with everyone,” he said.
While Mr Wellard is adamant there is no secret formula to the group’s success, he believes it simply comes down to “understanding the needs and wants of everyone we deal with and being able to do everything we can to provide suitable, mutually rewarding outcomes for all concerned. This is what provides the impetus and the structure our success is built on.”
With so many different issues evolving from the pandemic, staffing is just one major hurdle businesses are struggling with currently. Several CSS members are also experiencing staff shortages in stocking products, sales, administrative and middle management positions, particularly in rural areas, with the problem exacerbated due to COVID.
“Proactive businesses searched their communication channels and found ways around the shortage by learning from others with similar problems and made adjustments, updated operating systems and dug in to get the job done.”
“The CSS support office has been fortunate enough to maintain its total workforce throughout 2021 and while, being separated through the ‘work from home necessity’, we maintained momentum in marketing and commercial operations that supported the sales effort of our members. Staff stability and a positive, strong and collaborative understanding of the supply chain’s operational, marketing and commercial sectors remain a key factor in the business,” Mr Wellard said.
Emerging stock issues in both raw materials and finished products are resulting headaches for everyone in the industry, according to Mr Wellard particularly as suppliers’ backorder lists become longer. While Mr Wellard agrees that finding “alternative methods and materials and seeking out new suppliers with the quality and technical attributes required,” will be challenging enough, he also believes price increases from manufacturers and the steeply rising costs associated with intercontinental freight will require the development of specialist skills in the workforce section that administers this area of business.
“Companies will have to be agile and nimble and take up any opportunity that comes their way,” he said.
“It is for this reason that CSS, as part of its Impact-A home brand sourcing strategy, is scouring Australia for local manufacturers of products that suit its business model as well as looking for alternatives to countries we traditionally imported from. We have already converted a couple of key product lines from imported to locally sourced and are working on a few more under our Australia 1st strategy.”
“We are excited by the opportunities ahead and are hopeful there will be enough focus on increasing manufacturing in Australia to kick start a new wave and then have people – from all parts of the economic trail – get in and support those locals having a go.”
“Our strategy is, and always will be, inclusive of our supplier’s considerations and we do partner where we can if the track forward is mutually rewarding. Some great new collaborations have been made in the past 12 months and we are looking for more. Buckets, janitorial chemicals and aerosol paints are prime examples where local manufacture has replaced imported product,” Mr Wellard said.
As 2021 winds up, the CSS group is satisfied that it came through all of the pandemic’s challenges on top, and will round the halfway mark of the 2021/22 financial year with strong generic growth. Mr Wellard says this growth is driven by a confident, united, active and forward-thinking membership list and a very strong and involved supplier base.
“Our strength of membership and their faith in their own abilities and knowledge of the support on offer from CSS and its partners can be graphically demonstrated knowing that seven members recently moved to, or are about to move, to larger operating premises, with increased exposure. This is an amazing figure that warrants recognition,” he said.
“Maintaining close relationships was one of the hardest things to deal with as tactile communications were almost phased out because of proximity limitations. This forced change and resulted in a rethinking of communication methods and systems. We all had to acquire new skills to ensure we kept our customers and workmates up to speed and in the loop. Now we are looking to merge the old with the new and train ourselves for what a new ‘normality/reality’ might look like in 2022 and beyond.”
“CSS is an inclusive operation, and we are keen to get the members and our supplier partners back together – up front and personal – and we certainly have plans to make this happen as soon as we can in 2022. Having said that, we are still mindful of the ‘lock down threat’ and are developing our conference plans with security measures to protect us all as we look forward to 2022,” Mr Wellard said.
Bunnings MD, Michael Schneider
‘Agile’ is the best word to describe Bunnings’ ongoing success throughout the pandemic with the agility of the business most evident when the big green box pivoted to a point where it assisted in substantially boosting vaccination numbers throughout Victoria, New South Wales and Queensland earlier this year.
Bunnings Managing Director Michael Schneider says he has always known the Bunnings business occupies a unique place in the community’s mindset, and is beyond just a place where consumers buy home improvement products.
“For a long time, we could not have our barbecues in Melbourne and Sydney so we had to think of different ways to support the community through incentives – such as gift cards. We also ran our ‘Challenge Accepted’ competitions with team members throughout COVID, which included everything from push-up challenges to dance challenges. We would give a winning store money if they won with these funds donated to local community groups,” he said.
“It was during the pandemic that we also realised we had a unique physical asset, which is also a place where people feel safe. This is when I began thinking that Bunnings could also play a role in vaccinating the community, particularly tradies because they move around the community a lot.”
“We approached General Frewen and his team and asked if we could use Sydney Bunnings stores to vaccinate tradies and team members. We were also approached in Melbourne by Western Health who asked if they could use our vacant Melton warehouse. This became our first drive-through hub and this model was then replicated at our Silverdale Trade Centre in New Zealand and our old Albany warehouse in Western Australia,” Mr Schneider said.
It was not long before the Bunnings’ vaccination programs expanded on a national scale, with programs launched throughout Perth, Launceston, Alice Springs, and Queensland. Over 20 per cent of Queenslanders were vaccinated in one weekend at a Bunnings store, according to Mr Schneider, with well over 100,000 Australians vaccinated at Bunnings’ sites in total. While Bunnings has now wound down vaccination hubs, Mr Schneider said the team can be exceptionally proud of the role they played in boosting vaccination numbers nationally.
Another hot topic within the construction industry currently is of course the current boom, which is attributed to a buildup of projects from lockdowns, the Federal Government’s HomeBuilder funding, as well as population movement around the country. Mr Schneider said while pandemic sales were exceptionally strong, he also attributes a lot of the current business as purely seasonal.
“After seasonal sales slow down, 2022 will be particularly interesting because there is still pent-up demand in the construction sector as well as a lot of projects still outstanding in the small building sector including bathrooms, kitchens and extensions. It is these projects that I anticipate will be strong in the first half of 2022.”
“As international borders open up and travel and immigration returns to normal, there are some things that will be a positive for the economy and other things we will have to wait and see about. Whether you listen to the RBA or the government, there are already some thoughts on inflation, including price pressures on fuel. I imagine there are some aspects of the pandemic aftermath that will take the shine off the view that 2022 will be a golden run. In the end there is a lot of demand and that is good for building materials, nurseries, and home retailers as well,” Mr Schneider said.
One such ailment of 2022 are the imminent price rises which in some cases have already begun to take effect. Mr Schneider pointed out that despite the expected price rises, “Bunnings remains committed to its ‘lowest prices are just the beginning’ mindset and will work very hard to be disciplined on costs and strategic on our purchasing.”
“I do not accept the premise that retailers should instantly put prices up. Customers are very value conscious so we will work hard to have the lowest prices in the market.”
“The reality is that the supply chain is a challenge globally and demand for consumer products – as well as different lockdowns in cities around the world – are putting pressure on shipping. China continues to pursue a COVID-zero approach so they will have longer lockdowns. It is all still uncertain. We will do everything we can to not pass on increases and absorb, delay or seek alternate products where we can, but all retailers will be looking at price and demand which means there is pressure on cost as well,” he said.
For now, supply gaps remain Bunnings’ biggest challenge with ongoing supply challenges expected for another six to 12 months. Mr Schneider says while no one is sitting on a stockpile of timber, “we do have a good global supply chain and we will leverage this as best we can.”
Looking into the year ahead, there is no doubt that one of Bunning’s strongest campaigns is to continually build its trade customer base, with Mr Schneider outlining three areas of growth that will remain a focus in the coming months.
“The three areas include working with our specialist trades and focusing the ‘whole of house’ build with our builder customers. An emerging part of our business is called ‘business and organisation’, which includes supply and procurement for bigger organisations whether this is government departments, education, health or umbrella organisations such as ‘Hire a Hubby’. We are doing a lot of work in this space and seeing some great results,” he said.
“We are also investing in frame and truss to improve the efficiency and quality of the plants that we have because we see this as another opportunity within the builder’s segment.”
“We want to serve our trade customers better particularly with industrial tools, so this is behind the thinking of the Adelaide Tools acquisition and also the opening of Tool Kit Depot stores, starting in Western Australia. Two stores are already open with a couple more to open before Christmas,” Mr Schneider said.
With plans for 75 new Tool Kit Depot stores to be launched over the next few years, Mr Schneider said this offer is all about bringing more than just a tool shop to its customers by stocking power gardening, PPE and site safety products as well.
With Flybuys also now available at Bunnings from December 2, Mr Schneider said the implementation of the reward point system is also about knowing more who is shopping in stores and personalising experiences as much as possible.
“We wanted to double down on our data and analytics. We have made significant investments alongside our digital agenda in the last 24 months in technology and take the information customers are prepared to share with us and use it in a positive and engaging way. In saying this Flybuys is not available to trade customers buying through their account program because this comes with its own unique attributes,” he said.
When asked whether there will be more acquisitions planned for Bunnings in the New Year, Mr Schneider said he believes Bunnings’ acquisition card is now full, so the business will focus more on the opportunity to expand Tool Kit Depot while also integrating the Beaumont Tiles business, into Bunnings.
“For us, it is really about doubling down on what is important to us including lowest prices to our customers and a really strong value proposition. We want to have that winning offer and engage with our team and help them on their journey to build their careers at Bunnings, while also making positive contributions that build trust with the community.”
“It will be about driving the basics with new products, new stores in Doncaster in Melbourne, and Campbelltown in Sydney, another one in Leppington. Preston is also underway. For now, we will just do everything we can to be the best version of the business. If we do this, we earn the right to be chosen by our customers while keeping all of the team happy, occupied, passionate and energized,” Mr Schneider said.
Total Tools CEO, Paul Dumbrell
Total Tools has evolved substantially since March 2020, when at the commencement of the pandemic the group was still a privately owned business with 20 plus shareholders, the majority being franchise owners.
However, in September last year Metcash acquired a 70 per cent stake in Total Tools and is expected to purchase the remaining 30 per cent in 2024. While the Total Tools group does continue to be a standalone business underneath the Independent Hardware Group banner, Total Tools Chief Executive Officer Paul Dumbrell says it made perfect sense to partner together to drive growth of both businesses and franchisee profitability.
“While the acquisition leverages the scale, capability and knowledge of the overall IHG and Metcash business, Total Tools still stands alone in all of its customer-facing functions and this really allows us to focus on our customers, franchisee success, and execute our strategic plans as well,” Mr Dumbrell said.
“Looking back over the past few years, initially no one knew what the future would hold at the start of COVID but very quickly we saw that the hardware and the professional tool sector was fortunate enough to be largely unaffected. Our business has gone from strength-to-strength in the past 20 months as we continued to open new stores, and our core business remains strong, with our focus remaining on supporting our team, our franchisees and our customers throughout,” he said.
While the pandemic continues to throw up supply challenges, Mr Dumbrell said there was still plenty of positive momentum in the first half of this year, with the next six to 12 months expected to be business as usual.
“Prices continue to rise due to raw material scarcities and increases in freight and distribution costs. This is all putting pressure on the whole value chain from the supplier all the way through to customer. Our promise is to continually deliver a low price for our end-users and this will remain a key focus for us and our supply partners as well,” he said.
“The price rises are industry-wide. In the end, when our customer wants to buy a tool they are willing to spend X amount of dollars. Product availability could see the consumer shift in brands or develop a longer cycle between replacing a tool. These are definitely all factors now coming into play.”
“What we have seen through various raw material and building material shortages is that the demand curve will flatten. While we could be at this elevated level for a little bit longer, there would have been a higher peak and subsequent trough if product availability was unrestrained, so it is a positive for our customers and retailers to have a little bit more of a stable forecast period,” Mr Dumbrell said.
In the harder lockdown states, Mr Dumbrell said the retail and franchise teams coped very well with all of the challenges, even if it meant wearing masks 10 hours a day.
“While lockdowns did add a lot of pressure for differing reasons, our teams remained focused on placing customers at the core of all of our decisions. Although our business is 90 per cent trade and we remained open through the lockdowns, ‘Click ‘n’ Collect’ and ‘Online Delivery’ still saw substantial increases because DIY customers had to buy online and some tradies just preferred not to go in-store during lockdowns,” he said.
For now, the industry will be driven by macro factors, according to Mr Dumbrell, including interest rate rises, and borders opening as interstate and international travel resumes.
“There has been an increase in the savings of the Australian population over the last 18 months so naturally over time this money will move to leisure activities and could see a subdued retail spend across the professional tool and retail sector as well,” he said.
Next year the Total Tools group will finally have the chance to celebrate 30 years of business during its 2022 conference, scheduled to be held on the Gold Coast in April.
“Even though we are 32 years as a group this year, we have not had the chance to celebrate the 30-year milestone as our last conference was in September 2019. The 2022 conference will see us reflect on what the founders, our team and our franchisees have built over the last 30 years and celebrate the growth of the business as a phenomenal journey.”
“They all should be so proud of the blood, sweat and tears that have gone into their businesses and we are grateful that we benefit today for the really bold decisions they made many years ago,” he said.
For now, Total Tools will continue on its trajectory of opening in excess of 10 stores per year while also doubling down on its in-store experience and digital investment.
“We will also look for new franchise partners to the business, expanding our existing network with our franchise partners as well, growing franchisee profitability and introducing new product innovation across our business. Primarily we will continually work on the customer experience within our stores and online, which is what will set us apart from our competitors, alongside the knowledge and passion from our franchisees and our unique in-store experience,” he said.
Natbuild CEO, Peter Way
Natbuild Chief Executive Officer Peter Way says the group has experienced record sales throughout the pandemic which he attributes to strong industry growth along with an increase in prices across the board.
“The good thing about our representation around the country is that the growth has not just been in one place or one category – the growth is national with the rebound in Western Australia helping with the overall picture,” Mr Way said.
“Our biggest challenge is feeding this demand when supply is an issue and this has varied across several categories at different times. Supply shortages with raw materials and in certain categories has had a flow-on effect and we need to manage this by maintaining strong communication with key suppliers,” he said.
For Natbuild the past two years have been about remaining a hands-on business to its 38 members. The group also channels its purchasing to around 150 deals, according to Mr Way who said it is crucial the business relies on working in tight boundaries so that it remains meaningful to members, he said.
“In-store we had to pivot from being a face-to-face operation to more of an online presence with our members. Our member base is very much trade-focused or trade-aligned so there is still a significant amount of product delivered to the site. Members have certainly developed or enhanced their internal systems where store members will collate and get the order ready so that it can be delivered or collected with minimal impact in-store,” Mr Way said.
Natbuild’s internal systems were also developed extensively in recent years, including the development of a news presence within its TradeNET central communications platform where all information is filtered through to members and suppliers.
After extensively developing Natbuild’s internal TradeNET program, the platform now boasts a comprehensive eCatalogue and rebate management system alongside the overall communications platform. The platform is now so well established that other groups are showing interest in utilising the service, according to Mr Way.
“We already have our first customer in the Plumbing Plus group who have taken on the platform to utilise within the business. Plumbing Plus was looking to develop their own internal system or secure other industry software but they decided they liked what we did and are making it work for them,” he said.
“Natbuild also saw the opportunity for other buying groups to utilise this as well so we developed a separate company called TradeNET Solutions Australia Ltd. that is now front facing to the market and has its own structure separate to Natbuild.”
“It is a solution for buying groups that improves processes and overall communications. Members have direct access to the information and this allows them to make an instant decision in the market any time of the day or night. Our members have invested heavily in this and are committed to this opportunity being developed into the future,” Mr Way said.
When tackling supply challenges Mr Way said Natbuild is combatting concerns by working on areas they believe will have the most challenges, while building capacity within its existing supply lines and working with suppliers to forecast demand so they can secure their position.
“Dealing with this is all part of our overall communications and our three Product Category Managers work closely with suppliers to transfer this information to members as soon as they can. So if one member is seeing supply issues in a certain area then we quickly act as the facilitator in between.”
“While we have seen people look at things like steel framing as a potential alternative, to pivot and deliver something new in this space immediately while you are busy is almost impossible. We are just highlighting the product categories we do have and providing support at this point in time working with members and suppliers.”
“All areas of business have been challenged particularly when it comes to employing new staff – they have been hard to source, and members staff have been working at high levels for a sustained period. This is also why some members have increased their online presence to make it easier for customers to interact with them. An example from one of our members is the development of Bowens online store which has gained some great traction after significantly developing its online offer,” he said.
Mr Way also said the building boom to come out of the pandemic has delivered much more growth than anyone could have predicted at the beginning of the year.
“Although we did have a couple of members leave the group in the last financial year, overall, our group has still achieved record total group aligned purchases of $640 million in purchases last financial year which is a 15 per cent improvement over the previous year. Our existing members have grown close to 30 per cent over the last 12 months to September. Yes, price increases have been part of this – we estimate in the 12 to 15 per cent range – but the underlying demand has grown,” he said.
“While price increases do not come through a lot in the Christmas and New Year period, we demand that our guys get as much time as possible from suppliers to manage any price increases so they can inform their customers in a reasonable amount of time. There are mixed messages that prices will go through the roof next year but I believe although there will be price increases, it will not be to the levels we have seen.”
“We have got a lot of members who have frame and truss plants and these plants are good forward predictors into where our orders are. A lot of those plants are certainly in demand until the end of the first quarter next year so there are still a lot of houses that will not start until March/April and so on. Hopefully, there will also be a return to a steady market that we can all work with,” Mr Way said.
Looking to regional areas Mr Way said these areas have experienced higher growth as more people migrate out of cities. The agricultural community also has had a better season this year with people investing in their houses and infrastructure when they have money in their pockets, he said.
“Across the board I would say that we have seen more growth in regional areas than what we normally do. Regional areas do not have the peaks and troughs that you see in capital cities. It is a more of a gradual development and growth,” he said.
Looking to the New Year, Mr Way said Natbuild’s conferences are already planned for Brisbane in May and Noosa in October.
“2022 will see Natbuild continue to push the dial because we want to get better at what we do. For us we have had two years of not being able to be in members’ businesses. We also have some tools ready to go for when we get back out in stores and start making the most of face-to-face time.”
“We have a new member joining us in the New Year which is exciting news and there has definitely been a huge interest from other potential members joining the group. I say to anyone who wants to join the group that we have to be able to add value, but they have to add value and growth to us as well. We believe we can continue to grow with some focus in a number of key categories, there are opportunities for us to really take hold of. Natbuild will always be a secondary brand for our members. Their brands are what is known in the markets they operate in and we are proud to be associated with each and every one of them,’ Mr Way said.