Industry leaders reveal strategies for success

by | Dec 18, 2023

There is no doubt that 2023 has proven to be yet another challenging and interesting year. What is different about this year is that now, more than ever, independents and suppliers are highly resilient to changing economic conditions. In this year’s Industry Insight feature, industry leaders reveal their strategies on how they not only survived but thrived in the ever-changing hardware industry.

IHG CEO, Annette Welsh 

The Independent Hardware Group (IHG) has stayed resilient in the face of challenging economic conditions this year, while also remaining deeply rooted in its values of building successful independents. IHG Chief Executive Officer (CEO), Annette Welsh, sees the independent hardware network remain optimistic about the opportunities to come. 

“Our vision is to be the number one to the small and medium builder and the exceptional service provided by our members has allowed us to maintain this position particularly well. We are seeing builders look for ways to complete projects with a quicker turnaround time, and this has opened up more opportunities.”

“We want every opportunity to enable our ‘Whole of House’ strategy to be a one-stop shop. So we ensure that everything we do, from supply to also consolidating the procurement process, is made easy for both the builder and the tradie,” Ms Welsh said.

From a DIY perspective, Ms Welsh adds, “We continue to build our members to a strong number two position in the market. The recent half-year results saw sales growth in DIY. Our compelling customer value proposition of getting the job done right the first time proves that our product range offering resonates with the market and continues to peak consumer interest.”

“The transactions in DIY show that we held onto the DIY consumer that came to us during the pandemic and we continue to see a growing market share. We see a lot more people shopping locally and looking for excellent service and advice that helps consumers solve their DIY needs from start to finish,” Ms Welsh said.

Looking ahead, the building industry is expected to face ongoing economic challenges next year. However, Ms Welsh remains confident as the independent network continues to reinvest to further lift their overall store quality and competitiveness. 

“This year we have reached the milestone of 200 Sapphire stores. This is the ‘Best Store in Town’ program that delivers sales growth through a tailored range best suited to each store’s unique location in the communities they serve. Our network of Sapphire standard stand-alone trade centres have also grown and we have several Design 10 showrooms open which offer a differentiated experience for builders and consumers,” Ms Welsh said.

When talking market trends, the IHG group saw an increase in young shoppers come through their digital channels this year. Ms Welsh believes that this demonstrates the confidence consumers have for IHG’s brands online. 

“Our digital enablement programs have helped us determine how to improve the online experience not only in DIY, but also in how we bring more awareness to trade technology. We have got some exciting changes ahead as we look to grow the shopper experience across a new mix of digital channels.”

This year the IHG group was also recognised for its innovation in safety when IHG member, K & B Mitre 10 received the Highly Commended Best Solution of a WHS Risk at the recent (National Safety Council of Australia) NSCA Foundation Awards. Ms Welsh said this Mitre 10 member has demonstrated exceptional commitment and dedication to promoting health and safety to their local communities. 

“Our people and member network contribute to our success and safety is a big part of our focus. TRIFR (Total Recordable Injury Frequency Rate) measures how frequently recordable injuries are occurring and our score this year sets the benchmark with the industry standards. We will be working to introduce more safety measures to ensure we are keeping our people safe.” 

The IHG Expo 2024 is set to take place at the Gold Coast Convention Centre and will go off the theme of ‘Stronger Together’, with the Expo seen as an important event that brings members, suppliers and teams together.

“During our state meetings, we have spent time to understand what is important to our members and suppliers. We have spent the year providing investments in innovative programs that will future-proof their business. Our theme of ‘Stronger Together’ is a subset that spills into showing our members and suppliers how to leverage scale in all aspects to prepare for a thriving future,” Ms Welsh concluded.


NTHA CEO, David Little

In March this year, the Timber and Building Materials Association (TABMA) and Hardware Australia merged to become the National Timber and Hardware Association (NTHA), which, Chief Executive Officer, David Little says is their greatest achievement for the last 20 years.

“Since the merger, we have been working with our new membership to properly understand the needs of this new group. Members from both sides of the merger have been universal in their support, both for the need to consolidate to build strength and the approach we have taken to date,” Mr Little said.

“The combined membership – now almost 600 members across the country – has allowed us to revisit all Member Services with our new, much greater ‘buying power’. We will also be launching several Member Services, some already offered and a few new services in the first quarter of next year.”

The merged NTHA now offers the government a genuine critical mass of businesses in this space – particularly independent, family-owned businesses. Mr Little says they look forward to representing members and getting the results they deserve.

Despite industries facing challenges related to an increasing skilled trade shortage, Mr Little says that right now their hardware retailers are enjoying the spring/summer uplift and though they are not at last year’s highs – they are not far off.

“We are seeing a multi-speed economy through our membership, as those members are more exposed to the project home market and are more affected by what is a downturn in the detached residential space. The alteration and additions sector remains strong and building approvals suggest this will continue through next year,” Mr Little said.

However, this year has not been without its challenges for the NTHA, particularly for its small to medium-sized member businesses.

“Some of the issues we face today have been decades in the making, notably skills shortages, our aging workforce, and challenges finding and retaining talented young people.”

“Employee welfare and safety generally are becoming more and more onerous responsibilities – evidenced by the Chain of Responsibility Regulations now applicable across a large part of the country,” Mr Little said.

Through its Trainee and Apprentice Programs, NTHA introduced over one hundred people into the industry again this year. Many of whom will go on to become the leaders of tomorrow – as many of today’s leaders are the TABMA cadets of yesterday, Mr Little says.

“Keeping our people safe remains the priority for employers and our WHS Division is helping members do just that. We offer e-learning programs, on-site inspections and formal WHS qualification training, and the take-up this year has been very high.”

“NTHA’s WHS division provides on-site reviews, regular updates and commentary and this year we ran country-wide workshops for groups of members to not only appraise them of the regulations, but to help them build programs for their own businesses which they can implement immediately.”

“We have developed several industry-specific programs designed to engage and develop, to address the skills shortages and aging workforce. An example is our Retail/Hardware Certificate III Program which can be completed with minimum disruption to their work. Courses can be completed online, but have a specific trainer allocated to the student to assist them in their progress. We work with the employer, student and sometimes the family to ensure the best possible outcomes all around.”

Looking ahead to 2024, Mr Little says shortages are likely to continue, particularly with timber supply issues, but a shortage of NTHA Member Services will not be one. 

“Ultimately, I am betting on the shortage of housing in Australia, not just affordable housing, as the critical driver for the medium term. I am hoping we never have a boom period like the COVID stimulus period, but when the next upturn in the building cycle comes, skilled labour still looks like the most critical.”

“We have been working hard behind the scenes on some of the more important Member Services, including HR, IR, and WHS and will be announcing the results of that work across the year.”

NTHA’s Training Division also has several e-learning products ready to go which will streamline learning and allow employees to complete these programs at their own pace, in their own space.

“We are providing information and even education to trainees and apprentices through age-appropriate media platforms including Tik-Tok, Facebook, and Instagram. It is a new world and the only way some of our trainees get their information. The mantra of any device, anytime, anywhere is now a reality,” Mr Little concluded. 


HBT CEO, Greg Benstead 

After a year of growth in HBT’s (Hardware and Building Traders) membership and sales, it seems the group is now well-positioned as it heads into the New Year. HBT Chief Executive Officer Greg Benstead says the focus for 2024 is to continually improve the business and look after its members to the best of their ability.

“While our store numbers are growing, I still believe it is so important that HBT continues to do what it is doing and stick to our principles. This includes supporting independent businesses by sourcing a better deal and pushing volume through our supplies. These principles will never change.”

“Much of our store growth still comes from disenchanted independents. But you also have to remember that independents are strong-willed by nature. So when a buying group goes to them and says they can offer them a better deal, they often do not believe us. They think they have the best deal because of the relationships they have built up with suppliers over many years. This is when we break things down for them. We now guarantee that their deal with us will be the same or better,” Mr Benstead said.

While HBT has spent the past 12 months undertaking many open-book conversations with potential members, it has also conducted a lot of analysis on the group itself in the past year. The team has improved the business by questioning how they can do things better,  especially when it comes to interacting with stores and achieving the best outcome for members.

Part of the improvements include the introduction of a new head office system that ensures the team has further analysis of store data. This gives the team access to in-depth data and the ability to source more insight into the business than ever before.

“Our business works in quarters and after finalising the quarter ending September 30, we are tracking up on last year. Last year was odd in that one of last year’s quarters achieved the most volume we have done through the business. This is because people came out of COVID ready to spend money, building was going through the roof and interest rates were not as high.”

“What is really encouraging is that the month that we are finalising at the moment is actually up on that record-breaking, post-COVID month. This is so inspiring after three months of flat sales. I budgeted expecting that we would be down about 10 to 15 per cent. The good news is it just plateaued, it did not drop and that September quarter is actually up for the first time on the previous quarter,” Mr Benstead said.

Recent feedback from HBT members indicates that although retail purchases have softened, the trade sector continues to travel well off the back of several factors. One factor is the stockpile of work being rolled out in both the construction and renovation sectors. Renovation demand is coming from the mid to higher income bracket which, Mr Benstead says, “is most likely celebrating out of increased rates, which is not the mortgage belt.”

“HBT is also a rural-based group and this sector is going well off the back of strong rainfalls. A lot of market growth just depends on where your market is. Our business is also slightly different to everyone else because we are strong in trade more than anything else,” he said

The percentage of HBT customers currently sits at 85 per cent trade to 15 per cent retail with the majority of its stores designed for specialists. The few hardware stores that are in the retail group still have a lot of business going through the back door, Mr Benstead said.

Market segments

Segments that have remained particularly strong this season include rural and pet products, while the power tools market has slowed significantly, according to Mr Benstead.

“We are hearing that the power tools market has slowed significantly right across all brands. I believe this had something to do with the boom that occurred out of COVID when both DIY and trades stocked up on power tools, and I also wonder if this trend is also about early adaption and late adaption.”

“What I mean by this is that the transition to batteries encouraged growth throughout the whole industry as people moved to an entirely new platform and built up their network of tools. We are now at the end of that cycle and business is going back to normal after the change, so there is no longer a substantial amount of innovation in that area. In addition, the warranty program from suppliers has meant an increase in tool repair versus new tools. I just see no other reason why this segment would be slowing,” he said.

Current growth areas include timber due to increasing stock supplies and price decreases, although, Mr Benstead says timber supply will struggle again in 2025.

“We are also very strong in our pet areas as well as it seems every tradie has a dog. I believe if you can carry a range that is outside of the normal supermarket range then people will buy it. In the building industry itself, growth in units has continued even though new home approvals are down about 30 per cent,” he said.

Technology upgrades

When it comes to continually improving and evolving IT throughout the HBT group, Mr Benstead pointed out the membership is quite diverse within this space. While some stores fully embrace technology, there are late adapters in the mix as well with about 70 per cent of members upgrading their technology in-store.

“More and more retailers are purchasing technology to analyse data, to look at sales trends, while improving their front end. Although there is talk that the online space is growing, the reality is that distribution networks are also changing to match this type of profiling that is occurring so deliveries are fast and cheap. This means that technology also allows retailers to order anything they require and have a supplier deliver it to them quickly and economically.”

“As this happens more warehousing will move offshore because they are cheaper and because we can move products around easily. Buying groups, like ourselves, need to ensure that our IT is in line with this direction and have this IT ready when the membership is ready to go this way,” he said.

Inflation

Although it seems consumers have accepted that inflation is now just a way of life, Mr Benstead says this is not necessarily a good thing because unless there is pushback from consumers, inflation will continue.

“Broadly, in the retail sector, retailers will pass on pricing because that is all they can do but in passing you check what your competitors are doing. We are trade based so our customers will always buy from a store that can service them the best, that knows them, that offers them an account and delivers to site on time – and ultimately the trade just puts the price rise through to the end consumer,” he said.

2024 

Next year, Mr Benstead expects inflation to slow along with rate rises because, “if rate rises continued, we would kick the economy into reverse and we do not want this to happen.”

“Going forward I think consumers will remain positive. Remember 600,000 people came into the country last year which is the most immigrants we have ever had in our history. While it puts pressure on rents it also means building will continue,” he said.

“I also see some of the smaller buying groups have some pressure again on them, due to rising costs and flattening sales. I am always happy to have discussions on consolidation or integration and assist them to continue to grow.”

“In the meantime, we will continue to show independents how good our offer is and hope they hear our message and take it on board. A good independent will always outdo any other store. Chains can service the masses but there will always be room for an independent who can do the job and will out-service and out-manage their competitors providing they are a good operator. Our job is to give people the tools to do this properly,” Mr Benstead concluded.


Bunnings MD, Michael Schneider

As increasing interest rates and the rising cost of living continue to impact the Australian economy, consumers have responded by prioritising value for money more than ever. Bunnings Managing Director Michael Schneider says stores are well positioned within this space as its ‘lowest prices’ proposition continues to resonate with consumers.

“We have worked hard to help consumers get the most out of their money, particularly when it comes to non-discretionary items. Our expansion into cleaning is a good example of this and is underpinned by our commitment to offer the widest range to customers at the lowest prices. We have long had a steadfast focus on ensuring our operating model remains resilient across all phases of the economic cycle which also helps us navigate any prevailing conditions,” he said.

While remaining competitive is a high priority for Bunnings, staying committed to its three key pillars of providing the lowest prices, widest range and best experience also take precedence.

Mr Scheider says while there are many intricate strategies built within remaining competitive, executing Bunnings’ three key principles goes a long way in helping it remain trusted and chosen by consumers. 

“We have also doubled down on providing customers with value for money across a wide range of categories, which seems to be resonating strongly with them at the moment in the face of tightening economic conditions. This is particularly the case with non-discretionary product lines and goods that can be purchased in bulk.”

Despite the current economic climate, one segment that has remained popular with customers is gardening, as the dry spring sees them roll up their sleeves and spend more time outdoors.

“We have also had a great response to our expanded pet range as customers enjoy the variety and value it provides. The initial launch exceeded our expectations and we have maintained that momentum ever since.”

As the trade space becomes quieter due to a slowing building industry, Mr Schneider pointed out that the DIY space has remained solid with the pandemic encouraging consumers to get on the tools themselves. 

 “Working from home has remained popular among many traditionally office-based industries, which has also further encouraged people to update and personalise their private spaces,” he said.

Industry issues

One industry issue that has continued within Bunnings stores, and the retail industry as a whole, is the rising occurrence of abusive and violent customer behaviour. While Mr Schneider says most customers do the right thing, unsavoury customer behaviour has continued.

“I take a very simple view that everyone deserves the right to come to work and feel safe from verbal and physical abuse. It is incredibly saddening to hear what our teams have to endure every week. Our goal is to have all our team feel safe and secure coming to work every day, and we will seek to achieve this by investing in safety tools and training, while further advocating for stronger legislation to protect frontline retail team members,”
 he said.

Strategy and opportunities

Current strategies for Bunnings include engaging with customers in a more personalised way while also leveraging data and analytics through platforms like Flybuys and OnePass. 

“Providing customers with the best experience is at our core, and gaining valuable insights into what they want and what projects they are working on really helps this. This allows us to tailor our content and marketing so it is specific to a customer’s local store, keeping it relevant to them while we remain competitive across our entire network,” he said.

“Another opportunity for us is to continue optimising space in our stores which ultimately improves the overall customer experience. We are using analytics to better understand the categories and range mix that drive sales at each of our stores, ensuring it best reflects the store size and customer base. We are also thinking strategically about stock weight and the way we display certain products. The introduction of the expanded pets and cleaning ranges are examples of changes that maximise the customer appeal of our space,” Mr Schneider said.

Store developments

Store developments have continued throughout the store network over the past 12 months with five new stores opening across Australia and New Zealand, including Preston and Wonthaggi in Victoria, Caboolture in Queensland, and Timaru and Waipapa in New Zealand.

“We have also continued our Tool Kit Depot expansion with new stores in Mentone, Victoria and Seaford, South Australia and we have just launched Beaumont Tiles in Western Australia with the opening of three new sites in Joondalup, Mandurah, Midland – alongside another in Seaford Meadows, South Australia.” 

“We were excited to open our fifth frame and truss plant in Minto, New South Wales, this year, and announced a sixth to come early next year in Wacol (Queensland), which forms an important part of our ambition to grow the commercial side of our business and foster deeper connections with our trade customers,” he said.

2024

This year has seen Bunnings do a lot of work within its technology space to boost productivity and operational efficiencies. The advancements have helped Bunnings reduce the overall number of hours the team spend on manual and repetitive tasks in store – particularly around inventory management. 

“This has allowed our team to reinvest their time into customer service and provide the best experience, which is always a focus for us. We are certainly looking forward to continuing to progress this next year.”

“We never stop listening to our customers’ feedback so we can continue providing a relevant and appealing offer, and 2024 will be no exception,” he said.

 Next year will see Bunnings open its sixth frame and truss plant in Wacol, Queensland, with the site set to feature state-of-the-art, automated assembly equipment and help bring frames to market with greater efficiency. 

“We have also recently expanded our outdoor recreation range in-store and through our online ‘Marketplace’ platform, so we are looking forward to seeing how that resonates with customers over the next year, particularly during the warmer months. Outdoor living has been a part of our core range for a long time and we see recreation as a major opportunity within this category, particularly as we know so many of our customers love getting outdoors.”

“Next year also marks the thirtieth anniversary of the Bunnings warehouse format and we are looking forward to celebrating that tremendous milestone with our team and all the communities we serve. We will have more to share on that front soon,” Mr Schneider concluded.