Retailers – Get ready for DIY surge
Every time new housing construction eases, DIY activity and sales of hand tools rise. Australia is in for a bubble-bursting housing downturn, following unsustainable growth fuelled by low interest rates. John Power reports.
Let’s accept a blunt reality: Australians’ love affair with property is the result of a combination of economic and social factors, including follow-the-leader mimicry, a lack of inventiveness about how or where to invest money, and years of conditioning from an overzealous financial sector.
Sooner or later, however, a trigger will activate a reversal of fortune: it might be a trickle of prominent sell-offs of high-profile investment properties (already started), leading to an avalanche of copycat sales; a rise in interest rates; a corporate slowdown sparked by a negative international event or disaster; or just the simple realisation that it is possible to buy an island off Fiji or a four-bedroom villa in Tuscany for half the price of a townhouse in Sydney or Melbourne.
A sell-off could be as swift as it is reactive, aggravated by the fact that over 40 per cent of all new property-related loans in Australia in recent years have been made to investors – a highly volatile and disposable class of investments compared to family homes. The figure is closer to 50 per cent in NSW.
So, how do these observations relate to hand and power tools? In simple terms, a rapid sell-off of property means a reduction in investment in new housing and apartment construction of all types, leading homeowners to hold on to their primary residences and wait for a return to more profitable times. These homeowners, inevitably, undertake more DIY work as they economise and carry out their own low-cost home improvement tasks. This entails a greater demand for DIY-style hand tools and small-scale building supplies for suburban projects. As DIY levels increase, there is mounting pressure on building professionals to look for more work in small renovation and extension services in a declining market. Again, this fuels trade demand for portable tools as the average job size diminishes.
Arguably, the next downturn will be quite severe, for the simple reason that we Australians are mostly an uninventive lot, as mentioned, and are unlikely to divert attention to other investment classes to repair the damage quickly. In the absence of any
inspiration to tackle direct or indirect business-based investment, for instance, or strategic local or foreign share markets (way too difficult), property investors will simply cop a loss and then do nothing until the next upswing in property prices.
Grab the opportunity
If a housing construction downturn does arrive swiftly – perhaps as early as next year according to many mainstream economists – then hardware retailers should be ready to seize the opportunity to service growing DIY markets as homeowners carry out their own maintenance works ‘on a budget’.
Unlike the last major national property crash in the 1980s, a slump today would require astute attention from hardware retailers to avoid being left behind. Increased competition from online retailers and alternative homewares-based businesses means Australian hardware retailers must present ‘powerful arguments’ to customers to win their loyalty. One ‘argument’ would be that high-quality (high margin) hand and power tools are better than cheaper options; another would be that personal in-store shopping is superior to remote online shopping; and a third argument would be that full in-store guidance and services, delivered by professionals, ultimately generate greater efficiencies and better project outcomes. High-quality hand tools should be part of every self-respecting DIY kit. That message needs to be sent loud and clear to customers. When customers enquire about saws, chisels, saw horses or any other traditional items, be ready to check they have a full arsenal of complementary tools, including basic ratchet sets, mixed-size nail and bolt sets, wrench, hammer, vice, as well as protective gear like safety goggles. As a means of differentiating quality hardware store offerings from lesser stuff in $2 shops, online portals or homewares outlets, hardware retailers need to be adept at getting customers into their store. Made-to-last hand tools are all about personal taste and correct fit. Retailers need to be patient and invite customers to touch and feel products to make sure personal preferences are established, ideally with a demonstration area for try-outs. After all, direct experiential interaction with products and displays is the main selling point of a bricks-and-mortar store, so make the most of it. Explain why a high-quality item will not only last longer, but it will also deliver a more polished result. Customise package deals around same-family items and, most importantly, make the customer feel at ease about long-term, hassle-free performance. This may mean having formal or informal agreements with tool sharpening services or providers of replacement parts, for instance, so the customer can see that ‘all bases are covered’ regarding future ease of use.
When creating promotions, be sure to offer giveaways that require a personal visit to the store. So, forget online vouchers, electronically transmissible discounts, or postage-size goods like caps. Instead, consider offering a bulky Esky or an article of clothing with different sizing options to pull the customer into the Hand Tool department.
While a healthy DIY sector is now entrenched, be mindful that a property downturn in the next year or so will produce a new generation of DIYers who need basic coaching. Never assume customers know the full working principles of a tool or its scope of applications. In this context, the advent of new video-based instructional material will only become more important. The best in-store displays already highlight website addresses alongside in-store displays, helping customers to undertake initial research on the spot.
Dust off the shelves
Australia has enjoyed boom times in the last five years due to an incredibly buoyant property bubble. Th e downside of such bubbles is that they always lead to apathy – literally, we became habituated to property investment over the last five years. If there is one good thing about property downturns, it is that they engender a return to more classical values of self-reliance around the family home, DIY originality, as well as renewed interest in handyman skills. So dust off the shelves in the hand tools department and prepare for more enquiries.