Trading tools in a tumultuous market

by | Jun 15, 2022

CSS (Construction Supply Specialists) continues to experience strong demand under easing COVID constraints due to healthy activity within the building and construction industries. Hand, power and trade tools remain popular off the back of this strong demand.

Despite the boom, CSS Managing Director Jeff Wellard says there may be a slight slowdown within the segment later this year. 

“My ‘crystal ball’ predicts a potential, slight softening of the hand, power and trade tool sector in quarter three and four and this will predominantly be a trade/commercial focused softening. For now, I believe the current level of major construction activity across the country will ensure our overall figures remain up on previous years. For those who rely heavily on the DIY segment, the question will be whether consumers shift their spending from renovations to holidays or if they take a more cautious approach and ‘sit pat’ for a while,” he said.

For now, the demand is riding high compared to previous years and while the high-level growth is welcomed, it continues to apply pressure to an already ‘stretched’ supply chain, Mr Wellard says, with supply pressures evident in both the DIY and trade market segments.

“Predicting how long increased demand and supply chain issues will last is anyone’s guess. There are many factors to consider when ‘crystal balling’ what is likely to happen. Easing COVID restrictions, rising interest rates, materials, staff shortages, and even changing weather patterns are just some of the key issues that will affect the commercial aspects of our lives.”

Mr Wellard says one of the great unknowns when it comes to the ripple effect of COVID is how the trading landscape will operate both nationally and globally, and how this may also affect operational conditions in the future. 

“Raw material shortages, production delays and shipping container shortages have all hit the domestic market quite hard while the slow reaction time from some suppliers has also aggravated the problem. Having said this, even the most experienced supply and demand organisers struggled – and are still struggling, with predicting when and what supply is needed and where to find a reliable source,” he said.

On-going communication between CSS members and suppliers remains a vital element when dealing with the shortages and is the only way to ensure that specific sourcing issues are well covered when seeking alternative products. Mr Wellard pointed out that casting a wider net to source similar hand, power and trade tools to satisfy the end user’s needs was an alternative when sourcing supply during this time.  

“Thankfully many of our suppliers really stepped up to the plate and provided specialist training for resellers on ‘product alternatives’ within their range. That is, if a particular product was out of stock, they made sure that the reseller knew there were other products on hand that would substitute and solve the application.”

Brand loyalty is ‘arguably’ under the heaviest attack due to the supply chain constraints, he says, as consumers are forced to look for alternatives in tools when their preferable brand is no longer available.

“This comes at a time when information systems are easier to access and provide ‘push button’ comparisons on all aspects of just about anything you are looking for. Mind you, when you have a purpose-built power tool system, going outside of it and introducing alternative battery platforms can be a major issue for the user.”

Mr Wellard also pointed out that the diversity of CSS members, along with the market stretch within the CSS membership means there is no definitive answer as to whether or not its market approach to selling hand and power tools has drastically altered during the pandemic. 

“Taking a more personal approach when it comes to interacting within the group is imperative throughout this time as many stores operate B2B for the most part. Our social network and website content has also grown in importance. Our publications, The F.A.T. P.I.G. catalogue and F.A.T. Mag remain as popular as ever with continued strong advertising support and take up at shop level as well. Our member’s areas of operation are predominantly trade and industrial based B2B businesses that have been fortunate to have had a strong market right throughout the pandemic,” he said. 

Mr Wellard says that when it comes to market trends, there are no dominating products at the moment because the market is all about maintaining ‘supply and demand’ for now.

“You might say that the marketplace is obsessively ‘cordless focused’. As battery performance – with regard to power output and run times, are improved and innovation brings more traditional hand tool applications into the system, it is reasonable to expect traditional hand tools might suffer down the line. Big brand power tool companies love new products and will continue to introduce innovations going forward but this is what they have been doing for some time now.”

“When it comes to quality products competing with entry-level products, not much has really changed in the industrial tool sector. You still get what you pay for and good tradespeople generally buy ‘named’ products that offer tangible features and benefits and are fully supported by those that sell them. Bad news travels fast in this industry and poor performers develop an undesirable reputation pretty quickly in the trade market,” he said.

When reflecting on the past two years, Mr Wellard says that there is no doubt the well-organised, stock healthy, big brand companies appeared to have handled the lumps and bumps of the last couple of years pretty well. 

“This should also give us confidence knowing they are there and ready if we encounter more turbulent times along the way. For now, CSS is taking an onwards and upwards approach and will continue to follow the processes that have got us to this point and look for improvements as they might appear.”

“Those that are nimble and able to react and move quickly when change or interruption interferes with the norm are the ones most likely to be in the best position to look after the needs of their customers and in turn prosper in the months to come,” Mr Wellard said.  

Frustrated home-owners turned off renovating

Sourcing a tradesperson to complete or simply quote a job this year is no mean feat, as the high demand within the renovation and building sector remains high. As a consequence, so too does the hand, power and trade tools space.

It seems sourcing any kind of trade professional to complete a job in a new or existing home has become near-on impossible with trades telling many hardware independents that if they spent all the time that they needed to undertake job quotes that are coming in currently, they would not be able to complete the existing jobs that they already have on-hand.

HBT’s National Business Manager – Industrial, Kevin Marshall says trades are not easily tempted to purchase outside of their regular brand.

HBT’s National Business Manager – Industrial, Kevin Marshall points out that this pent-up consumer frustration is not necessarily a good thing for the hardware and building industry, particularly when homeowners are told they cannot even source a job quote for at least three months.

“What we are finding now is that the consumer still wants the job done but they do not want to wait three months just for the quote to come through – so they spend their money on a holiday instead. This is why HBT stores are so concerned about what the future will hold for the hand, power and trade tools space,” he said.

“The trade market, along with the hand, power and trade tools sector, could very well slow down by the end of the year because homeowners are frustrated that they cannot find anyone to complete their renovation, or small fix-up. Even though the market is busy now, in the long-run customers might give up on getting the job done at all,” Mr Marshall said.

When asked how long the sales boom will last, Mr Marshall said he would have expected the boom could continue until the end of next year, but after speaking with many HBT members at the recent national conference he sees a different side to the story.

“This is because trades know they are in high demand when quoting a job so they can ask for a premium price. Often people just want the job done and are happy to pay whatever they need to pay. But then a lot of consumers also do not want to pay twice as much as what they were quoted 12 months ago so they then spend the money on going on a holiday instead,” Mr Marshall said.

For now, the pent-up demand is being exacerbated by shortages in timber, sand, cement and insulation. Despite the shortages, it seems trades are sticking to their guns when it comes to the products they choose to use within the hand, power and trade tool space.

“Trades are not easily tempted to buy and use another brand if the product they normally use is not available because they want to stick to the same battery platform and do not want to buy all new batteries and chargers.”

“What trades will do is shop at a different store to their usual hardware store to see if they can source the product they always use, elsewhere. We have also found that if a leading brand like Makita is out of stock of a certain power tool product, then you will find that everyone is out of stock. Suppliers also do not play favourites in the power tool market and they will try to allocate stock as evenly as possible.”

“In saying this, if a HBT member cannot buy measuring tapes, for argument’s sake, they will buy another brand so they do not have empty spaces in their stores,” Mr Marshall said.

While some outstanding innovations have launched onto the market in recent months including DeWalt’s new battery platform and Makita with its XGT, Mr Marshall said most of these products were introduced to ensure there are no corded products anymore, particularly on building sites.

“There is an on-going need within the power tools space for batteries to run all day on a building site and most suppliers are aiming to provide this at the moment. Innovations within the Australian market have fallen behind a bit. This is not only because suppliers are trying to maintain supply, but also because there is still a majority of corded products being used in developing countries like India and South East Asia. These countries still have a long way to go when it comes to moving across to the battery platform, and this is where a lot of suppliers will get their growth from.”

“Once these markets are fulfilled then a lot more innovations will come onto the market as well. Future innovations will be based around advancements in battery chips, so boundaries can be placed on how far the tool travels from its charger or the user’s phone and this will prevent a lot of future theft as well,” Mr Marshall said.

When it comes to marketing hand, power and trade tool products in-store Mr Marshall said that, because a lot of the HBT stores are trade-orientated, many trade customers do not come into the store. They simply ring up and ask for their usual deliveries.

“There has been an uplift in DIY customers buying hand, power and trade tools throughout the HBT group. This is because often these are the customers that would just go to the big box to buy a tool and simply try to work out what they need by themselves. But when the lockdowns happened and you could only shop within a five-kilometre radius, these DIY customers started shopping at our stores and what they found surprised them,” he said.

“When they came to a HBT store, they realised they had easy access to staff that were friendly and were also well educated on the tools they used. Once DIY customers understood that our trade-orientated stores could assist them as well when purchasing hand and power tools, while also getting the advice they needed, they did not want to go anywhere else.”

“This is also why so many members have said their over-the-counter sales have increased dramatically over the past couple of years. And the new customers continue to shop at their stores, particularly for hand, power and trade tools, which is great for our stores,” Mr Marshall said.

HBT’s sales remain strong in the power tool sector, particularly as Makita, DeWalt, Hikoki, Milwaukee and Metabo brands maintain 95 per cent of the group’s sales. Mr Marshall says the biggest supplier throughout the membership currently is Makita which services around 250 of HBT’s stores.

“Although there were a lot of problems sourcing chips for batteries within this segment last year, when it comes to our major brands their inventories are very strong. We are not getting the reports that we were getting this time 12 months ago when a lot of combined tool kits were simply not available.”

Although the pent-up demand will keep the sales and purchasing up within the power tools and hand tools space from some time, Mr Marshall says he believes stock will also hold up, which is great news for members and the consumer as well.