Loganholme Mitre 10 battles saturated market
BUSINESS: Loganholme Mitre 10
OWNERS: Ian and Beth Gill
LOCATION: Loganholme, Qld
BUYING GROUP: Independent Hardware Group (IHG)
It is a situation most independent hardware operators find themselves up against – the realities of formidable Big Box competition in any given market. But the state of affairs for Ian and Beth Gill of Loganholme Mitre 10 is more unique as they share a carpark with Bunnings and have two other Big Boxes situated within eight kilometres. Their story is one of combat, adjustment and survival in a highly competitive metro market.
Located in the Hyperdome Home Centre in an established Brisbane suburb, Loganholme Mitre 10 is a small family business that continues to ‘punch above its weight’ in terms of holding sales and customer loyalty in a catchment area saturated by hardware, plumbing, paint and garden corporate competition.
In fact, the store is the second largest collection point for ‘Click ‘n Collect’ sales of all Mitre 10 and HTH stores nationally, representing over two per cent of Independent Hardware Group’s (IHG) current online volume.
The business celebrates its points of difference and pushes a unique service culture built on local knowledge, relationships and specialist brands. But for all the wins, there are also daily challenges that continue to test the long-term health of this unique family business.
Just last month it was confirmed a large-format Bunnings was proposed to be built in Loganholme, putting added strain on the battle-weary business.
Ian Gill boasts over 35 years in the hardware retail industry, including 25 years with Mitre 10. He attributes the position of the business today to his intimate knowledge of the hardware and retail market through decades of owning and operating stores, as well as his first-hand experience as a qualified builder.
“Beth and I bought our first hardware store in 1984 after the building game crashed. As a builder, I thought we always knew what there was to know about hardware, but jumping over the counter was a different kettle of fish. We initially bought an existing business and then moved it to another location in Springwood, but the store became too busy. I say this because back in those days you could not employ any more than six full time staff to operate a store seven days a week.”
“We then opened another shop in Chatswood Hills four kilometres down the road to try and draw some business away. Both stores took off for a while but after 11 years we recognised the market was changing and we sold. I then worked at other Mitre 10s to learn the ropes on what to do and what not to do,” he said.
Ian went on to open Loganholme Mitre 10 in the Hyperdome Home Centre in 1998. Back then, the shopping centre was pretty much a ghost town but the rent was cheap, he said.
“There were a lot of vacant shops nearby when we opened but our lease was affordable and I believe our store really kick started the shopping centre. We opened as True Value and then rebranded to Mitre 10 in 2012. Like most small businesses, starting out was tough but eventually sales came and the business grew. Ironically, we opened our store on the same day as Bunnings entered the Queensland market a few suburbs away,” Ian said.
Speaking up for small business
Business travelled well for a while. There were three Bunnings located within an eight kilometre radius at the time, but Ian was holding his own. However, he never imagined a fourth Big Box would set up shop in the same centre as his store, let alone one that would today become one of the busiest small-format Bunnings (3,000 square metres) in Brisbane.
When news came of Bunnings moving into the centre two years ago, Ian approached both the local council and the ACCC.
“The local council pointed out that Bunnings did not require its approval to open a store in the centre because the site was already an established retail outlet. If they build a store, yes they need development approvals but in instances like ours, nothing seemed to get in their way,” Ian said.
“We have had 10 hardware stores close within 10 kilometres in the last 10 years. On this basis it tells me that there’s already high concentration and there is not the room for another Big Box to enter the area especially given, at the time, we already had three within eight kilometres.”
“Don’t get me wrong, competition is healthy but I, along with many others, were vocal about the saturation of big business in a small catchment and the effect it was having on local business. But in the end, the green giant moved in,” he said.
Well before the latest Bunnings opened, Mitre 10 was right behind Ian and his team supporting the business with local combat strategies. Ian believes a big part of “defending your patch against the green box” is being acutely aware of what the local customers want and, of course, getting pricing right.
“The key is to be prepared and match fit well before they open. Bunnings is a well-oiled retail giant who we respect and who have clearly won the hearts and minds of consumers. When they enter your territory, you need to know your points of difference and back yourself 100 per cent. Keep trying new things and having a go. You also have to be prepared to take a hit in sales and profit, but you can survive,” he said.
The sales decline was particularly brutal in the first 12 months, says Ian.
“We took a sales hit of 40 per cent and ran at a loss of $160,000 in the first year of Bunnings opening. We had banked on a decline and prepared our business financially for this outcome. In the early days, local customers were curious and went to visit the new store but over time our traffic count increased and we managed to claw back sales,” he said.
“We are now close to the volume pre-Bunnings through going the extra mile and ensuring we give true ‘red carpet service’ that they cannot get elsewhere. We listen to customers. If they want a particular product and we can source it then we do. Bunnings cannot be that nimble with its ranging.”
“For a 1440 square metre store we carry about $1 million worth of stock. We also have specialist brands that Bunnings cannot access, such as Weber and STIHL, and for the like-for-like products we have a clear price match policy. We are also aware of any promotional activity happening in the area.”
“For me, what really struck home was the reality that you can get all the help that you like on combat strategies but if you are not doing the right thing on the floor, it does not matter how much you spend on advertising, it is not going to work. Every staff member must have the right attitude and service towards your customers,” he said.
But conveying that all-important message to the local community is not easy, according to Ian, especially with Bunnings’ significant marketing spend.
“Alongside our core catalogue program, we conduct a lot of our marketing through social media and word of mouth. Facebook is a very effective marketing tool and it is surprising how much of our online information is shared around and the feedback we receive from this,” he said.
Experienced service culture
While it is important to market the business online, customer service remains a priority above anything else, states Ian.
With over 200 years combined hardware experience amongst the store’s seven full-time staff, Ian credits the extremely low staff turnover as a crucial element in driving a best practice service culture.
“Most of our staff boast 10 plus years tenure with the business. That is a real asset for customers to know that level of local experience is here when they walk through the door. My staff know I expect a customer to be served within 10 seconds of being in the store. They have to be approached whether it is just a ‘hello I can help you’ but customers have to be spoken to before they get past the counter. We rated 98 per cent in our last Mystery Shop test and the only reason why we did not score 100 per cent was because one staff member did not bring his name tag to work that day,” he said.
Ian is also a ‘hands on’ owner who walks the floor daily completing spot checks and talking to customers, and is very transparent with staff on the performance of the business.
“We are very open with our team and share daily the numbers we need to hit. Average sales are key – measuring and sharing this has given the team more ownership and has also created a competitive and fun culture within the business. We have seen our average sales grow considerably with a team focus on sharing and driving results, rather than just focusing on the challenges we face,” he said.
Trusted brand specialists
Predominantly the store’s best performing categories can be found in any hardware store, including outdoor furniture, BBQs, garden and paint, while key brand differentiators include being a registered STIHL and Weber specialist dealership.
“Weber has such strong recall and is the number one BBQ brand on the market. We sell the entire premium-grade Weber product range, not just standard models. Customers often find our store when sourcing products online, while costing up one of these premium products. They then click on the button of ‘where to buy’ and find us, which is great. Another good thing about Weber is they do not saturate the market, with the next Weber specialist being about 25 kilometres away. We also have a full kitchen display centre and will shortly trial a brand-new ‘Connected Home’ concept as a foray into the growing field of products that electronically control and monitor the home,” Ian said.
The vast majority of products ranged in Loganholme Mitre 10 are national brands comparable with any corporate competitor, but the ability to also cater to local ranges is an advantage, adds Ian.
“Our paint and garden departments are really good sellers and that partly relates to not just having trusted brands, but also the right product mix for what customers around here want. For instance, we stock the premium and bigger bags of potting mix that Bunnings do not carry. Bunnings sent two customers to our store the other day because they could not supply that.”
Click n’ Collect destination
In addition to the strength of the brands carried, Loganholme Mitre 10 also maintains a highly active eCommerce sales count despite the close proximity of Bunnings. Incredibly, the store accounts for more than two per cent of IHG’s total ‘Click ‘n Collect’ sales from a network of 600 stores nationally.
“I believe we have done so well in this program because of where we are located, and we are also currently the only national hardware group active online in Queensland. The program currently offers more than 11,000 SKUs to purchase and this is expected to grow.”
“Click ‘n Collect is a great asset for small-format stores in particular because it opens up access to more products than ever before – the ‘endless aisle’. For example, where we previously only stocked a handful of barbeques and mowers due to our small footprint, now customers can shop online for over 50 different models and have them delivered to store for collection. That is customer service where it matters. The average value per online customer transaction tends to be three times more than what the in-store basket size is and we are now averaging at least one online customer order every day,” he said.
Having the choice of Afterpay and ZipPay payment options has been extremely popular with customers and helped drive a substantial sales lift over the last twelve months, adds Ian.
“It is amazing to see the time of day when our online customers are doing their shopping. One-fifth of purchases are made overnight when a hardware store is not open. Again, that is providing a consumer-friendly service where they can shop when they want to shop.”
But the long-term benefits of Click n’ Collect go well beyond pure sales leads.
“We have an extremely loyal customer base, but Click n’ Collect has brought many new customers into our store. And we get a lot of repeat business through online orders because often the customers who come in are happy with the service they receive from us. Be loyal to your customers, and they will be loyal to you in the long-term,” he said.
Local maintenance service
In the last 12 months, Ian has also established a home maintenance service as a value-add and cost-effective option for local customers compared to hiring a trade. Awareness of Ian’s services as a licensed builder have grown over time, particularly through word-of-mouth.
“We started up a property maintenance service because we had so many single mums come in and say how hard it was to get a repair person to their house to hang a picture or TV bracket. I put a sign on the counter advertising that we will do odd jobs that the tradies will not do. I am now heading out four or five times a week to complete odd jobs, while also maintaining a connection with the local community,” he said.
“The service has really taken off – last week we even did an entire kitchen installation. It is a true local point of difference and customers really value dealing with the owner of the business. And it is an added sales generator in terms of both product and labour,” Ian said.
Working with the community
With the Loganholme area established in the early 70s to mid-80s, Ian said the store sits at around 80 per cent retail, but with plans to expand its trade offer due to a growing demand for general repair work within the local area.
“Hardware stores like us work better in older areas. Although we deal with a lot of repair type business, we also get many tradies that live in this area who pick up their gear at our shop for the next day. So we are getting the best of both worlds,” he said.
Ian has always prided himself on working closely with the local community, sponsoring sporting clubs and offering a unique local service to these bodies, including a Mighty Rewards card membership. This not only provides reward points that accumulate and allows the club to spend in store, but also aims to ‘look after locals’ by offering unique rewards such as senior’s discounts and trade discounts to build long-term loyalty.
“Because we issue the Rewards cards to sporting clubs, our brand comes up on their newsletters, so it certainly helps raise awareness of our store locally,” he said.
There is no doubting that it has been a tough few years for Ian and Beth with the realities of competing against such saturated competition taking a toll on their appetite to ‘continue the fight’. It is far from a fairy-tale ending for this combat story, says Ian.
“We have had some really good wins but we have also faced many, many challenges. Competition aside, the housing downturn and consumer confidence to spend money on home improvement projects has hurt us these last 12 months, just like it is impacting many other pockets in the industry. We also now have the added pressure of a fourth Bunnings potentially entering our market, which is a serious threat,” he said.
“We don’t know for certain what the future holds for our business, but for now our focus is on pushing through and doing what we do really well: knowing what our competitors are doing and listening to our customers so we remain ahead of the game.”
“It is also about recognising that you are not alone. Being part of the Independent Hardware Group and networking opportunities via the HAQ help me to learn from like-minded stores that are also doing it tough. Looking out for what tactics work for other independents and applying components back into my business is a powerful thing. Independents are much stronger together than acting in isolation,” he said.