05 Oct 2016

Budge over B&Q, Bunnings is after you!

Bunnings acquired Homebase and declared war on DIY and home improvement giants B&Q and Wickes. It’s a clash of business models, says Lucia Di Stazio MD of full-service agency, MRA Marketing. But whose blood will be on the floor when the fighting stops, Bunnings or B&Q’s?

Homebase staff were stunned when Australian-owned Bunnings bought Homebase, the UK’s second largest DIY retailer. They sacked senior managers, binned the Homebase brand and showed staff the Bunnings way.

If you were a Homebase customer and had chosen to shop there instead of a budget B&Q, you’ll be even more shocked.

Alongside a photo of what would normally be the ‘before’ of a store improvement plan, Insightdiy reported recently: ‘Only one year ago the inside of this store would have looked immaculate, with perfect product displays, impeccable POS and aisles so tidy and free from clutter you’d have thought you were in a hospital.

‘In its place we have price labels written on toilet roll by the spotty Saturday boy, cardboard boxes looking like they wouldn’t make the journey from the back to the front of the store… and more secondary product locations (in this one photo) than would have been allowed in the entire store 12 months ago. This apparently is retailing, Aussie style.’

Boards outside stores feature scribbled price comparisons showing how much cheaper Homebase-Bunnings is than B&Q and named local competitors.

Australian conglomerate Wesfarmers paid £340m for Homebase. Their Bunnings everyday-low-prices business model is a big success down under, but can it work here? Can Bunnings really give B&Q a run for its money?

It’s hard to argue against Wesfarmers’ analysis that the UK DIY market and its retail stores are staid and stale.

DIY is past its peak. Younger UK homeowners are less keen to tackle home improvements and less knowledgeable and confident than their parents. Once the passionate pioneers of DIY, Britain is now 5th in the DIY skills confidence league, and below the European average (Kingfisher’s Europe Home Report 2014).

But trade has more than filled the gap. “Today, people are spending 42% more in real terms on home improvements than they did 20 years ago,” says Alan North, Director of Credit and Analytics at Bank of America’s subsidiary, MBNA. “The past five years have seen the steepest rate of growth for more than two decades.”

The Bunnings Way feels more like a rugby scrum than a strategy. Set out at their 2016 Strategy Briefing Day, their strategy translates as compete for everything and everybody, through ‘every channel’ with the lowest prices, the widest choice and the best service.

From MRA’s experience we know Wesfarmers takes strategy seriously, but look at what they’re doing, rather than what they say they’re doing. Focus on their ‘Fail fast. Fix fast. Learn fast.’ way, rather than their strategy which doesn’t hold water.

David Errington, a Bank of America Merrill Lynch analyst, says the odds are stacked against Bunnings. Wesfarmers’ shareholders could be looking at capital losses of ‘up to £2bn’ if Bunnings implements its £500m restructuring plan.

Bunnings may have misread the market on a monumental scale. But Tesco, Sainsbury’s and ASDA also dismissed Aldi and Lidl before the German discounters got them on the run.

Does it matter to the window industry who wins this war?

We have ringside seats, and when business models collide in associated markets people look at the winner to see if a new model would supercharge their growth too.

Call Tom Rigby, Business Development Manager, on 01453 521621 or email tom@mra-marketing.com for help with your business model.

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