News
Homebase acquired by Wesfarmers
Bunnings about to takeover Homebase
Wesfarmers
UK Renovation Forecast percentage growth
UK Major Home Improvement Retailers
Click to visit the HBT website for more information
Wesfarmers has offered GBP340 million (around $705 million) for the Homebase home improvement retail operations of the UK-based Home Retail Group. The offer is highly likely to be accepted by Home Retail Group's shareholders, with the transfer taking place in early April 2016. Homebase will be managed by the Bunnings team at Wesfarmers. After an initial period of operating Homebase as Homebase, there will be a rollout of a Bunnings-branded retailer in the UK, using the retail real estate currently operated by Homebase. As part of these changes, Michael Schneider has been promoted to be in charge of the operations of Bunnings in Australia, as managing director. Peter ("PJ") Davis has been promoted to be in charge of Bunnings operations in the UK and Ireland, also as managing director. John Gillam will oversee all of Bunnings' operations, and his title is now Bunnings chief executive officer (CEO). Wesfarmers has indicated it hopes to retain many of the current Homebase retail staff. The current managing director of Homebase, Echo Lu, who was appointed in April 2015, has agreed to remain with the company in the interim.

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Products
Ridgid Stealth Force oil-pulse driver
The Ridgid Stealth oil-pulse driver
Pro Tool Reviews
Description of the oil-pulse mechanism
Makita oil-pulse mechanism video
Click to visit the HBT website for more information
Hong Kong-based, US-controlled power-tool company Techtronic Industries (TTI) continues to surprise with its new product developments. If its final releases for 2015 are any indication, 2016 is set to be a year of strategic development.

One of the company's latest releases, to debut at US big box retailer The Home Depot in early January 2016, is the Ridgid Stealth Force Brushless 18V 3-Speed pulse driver, Model R86036K. The Ridgid and AEG brands frequently have similar tools, but there seems to be no sign this tool will be released under the AEG brand, and thus become available in Australia.

Despite this, it remains an interesting tool to examine, as it could point the way towards future developments at TTI. In particular, this driver could indicate a direction in which TTI may be moving its Milwaukee power tool brand, as it seeks to further develop and leverage investment in its One-Key Internet-of-Things approach to tool fleet management.
The basic technology

Standard impact drivers use what is typically a spring-loaded mechanism to drive a "hammer" component against an "anvil" component, creating a series of pulsed impacts which help to drive fasteners into materials by creating high-torque input incidents.

To see exactly how this works, Nick Moore has crafted a great video using a cutaway of an impact driver attachment, along with high-speed video, to show one fairly crude version of an impact driver mechanism at work:


There are a number of advantages delivered by this kind of impact driver. These include: A relatively small tool can provide a high driving force; effort by the operator is reduced; and time taken to complete fastening is considerably reduced.

However, there are also disadvantages. The two main ones are understood instantly anyone who has every used an impact driver: noise and vibration. Impact drivers are loud enough that prolonged usage - over an hour - requires some form of hearing protection. Extended use can also result in hand numbness caused by vibration.

To overcome these disadvantages, while keeping the high torque peaks of the impact mechanism, the "oil pulse" mechanism was developed in the 1960s. In this system the driver's motor spins an outer shell, which houses an oil-filled chamber. In this chamber is a rotor that is directly attached to the driver's chuck, and thus to the screw/bolt holder and the actual fastener.

While running "free", without any load, the outer shell and the inner rotor will spin in near synchronicity. As load is applied, the inner rotor will begin to resist turning. Due to the way the oil-filled cavity in the outer shell is shaped (either in a complex ovoid, or through the use of cams), the shape of the inner rotor, its use of a pair of spring-loaded blades, and the closure of a relief valve, the oil-filled cavity is divided into four areas, two of high-pressure, and two of low pressure. When the pressure builds up sufficiently, it moves the inner rotor, and the pressure is then released. This type of mechanism can deliver one or two pulses per revolution.

Comparing the standard mechanical impact driver with the oil pulse driver, we could say that the mechanical version uses a metal spring, while the oil version using the compression of the oil like a spring. The principle is really the same: the storage and then release of kinetic energy as torque.

The end result of this is that, as the metal-on-metal action of a standard impact driver is absent, the oil pulse driver is comparatively quiet. It also produces far less vibration. These two characteristics make it a much more ergonomically friendly device, and make it easier to use in sensitive environments such as hospitals, schools and offices.
The Ridgid Stealth driver

That is the theory. How does the actual power-tool perform?

While the Ridgid Stealth driver is not due for release just yet, we're lucky that Pro Tool Reviews, one of the top US-based tool review sites, managed to get its hands on a model, and has tested this extensively. The review's findings are that the Stealth is significantly quieter when compared to an older Ridgid mechanical impact driver, and provided significantly improved fastener driver speeds. The only caveat to this is that the comparison driver was a brushed motor Ridgid model, while the Stealth uses a brushless three-speed motor.

The review notes that the number of impacts is fewer than a standard impact driver, and that the oil-pulse driver tends to produce more torsion on the user's arm. The review also declares that this torsion is "softer" than with a mechanical impact driver, and that while it does make precision driving more difficult, it is less wearisome.

The review makes interesting reading, written in the hearty, lively style of Pro Tool Reviews.
Ridgid Stealth Force Brushless 18V 3-Speed Pulse Driver Review
The competition

In some respects the development of this driver can be seen as a countermove by TTI versus Makita, which is now on its second model of an oil-pulse driver designed for non-industrial use.

The first model was a physically larger, 14.4-volt model, while the latest iteration, Makita 18v DTS141 Oil Pulse impact driver, released in 2014, is typical of the current Makita line: 18-volt, brushless motor, and highly compact.

The latest model seems to use a slightly different oil-pulse mechanism than the one described above. Instead of relying on compression of the hydraulic fluid, it relies on a system of cams to deliver the pulse power. As the hydraulic fluid is used only for lubricating purposes, this means it does not require the regular replacement it would if used instead as a compression medium.

A video of the cam/chamber in action can be viewed at the link below:
Makita oil-pulse driver video
TTI Strategy

While matching competing brands model-for-model is an understandable strategy, this doesn't seem to be sufficient reason for TTI to invest not only in a new tool, but in developing an entire technology.

Instead, we believe TTI may be revealing the edge of a longer-term strategy.

There are two elements to this strategy. The first is what an astute comment by the reviewer of the Stealth driver for Pro Tool Reviews, Kenny Koehler, reveals about the oil-pulse driver:
The Ridgid Stealth Force Brushless 18V 3-Speed Pulse Driver is more than just a quieter solution for apartment, school, and office jobsites. Its clearly higher driving performance makes it an easy choice to swap out for your traditional impact driver in nearly every application.
...
As these oil impact drivers, like the Ridgid Stealth Force, become more readily available, I'm hoping they'll replace impact drivers in kits just like hammer drills have replaced drill drivers.

In other words, the oil pulse technology is not so much a specialty mechanism, as a better mechanism than the mechanical impact driver. What is preventing its widespread adoption is not capability, but simply price. As Mr Koehler states, the price of the oil-pulse driver is around twice that of its mechanical alternative.

The second element to this strategy has to do with an interesting characteristic of the oil-pulse technology: it is very data-rich. The main source of this richness is that the dataflow is two-way. Not only does it provide information about the tool itself, but indirectly about the state of the fastener as well.

This has been utilised since the earliest days of the oil-pulse technology. Originally the technology was deployed in assembly-line construction factories, which primarily used compressed air to drive their tools. The oil-pulse drivers would commonly be equipped with a mechanical shut-off valve. When the oil in the hydraulic chamber exceeded a certain pressure, a spring would release a valve, which would bleed off the air supply from the tool, bringing it to a stop. These high pressure incidents usually indicated the fastener had been set, so the bleed-off prevented the user from over-torqueing the fastener, and indicated it was time to move on to the next one.

From about 2004 onwards, the manufacturers of oil-pulse drivers began to develop a large number of patents that involved using sensors to monitor the condition of oil-pulse drivers. Typical of these is one from Hitachi Koki, which developed a patent to monitor the force of successive pulses. If the pulse force began to deteriorate, this could indicate a leak had developed in the hydraulic chamber. Early detection of such a leak could be crucial in preventing further damage to the drive mechanism and motor.
Hitachi Koki patent for oil pulse driver sensor

A good look into some of the innovations that were developed is provided by an article that appeared in "Assembly" magazine in June 2008, entitled "Pulse tools get smart". To quote from that article:
If a better pulse mechanism and an automatic shut-off are incremental improvements in pulse tools, the addition of sensors and controllers for measuring torque and angle represents a significant leap forward for the technology. In the past, accurately measuring torque and angle from a pulse tool was virtually impossible because the tool applied force in such small increments and sensor signals were too noisy.
Today, assemblers can measure dynamic torque, seating torque, angle, run-down time and pulse counts. Assemblers can plot a curve of torque vs. time, and the controller can be set up to shut off the tool when a specific torque is reached. The controller can monitor individual fastening operations or a series of operations to ensure that an operator does not inadvertently omit a fastener. Assemblers can also collect data for statistical process control, and they can marry run-down information to specific assemblies through identification codes.
To measure torque from a pulse tool, most suppliers use the same strain-gauge transducer employed with other fastening tools. What's different is the software for interpreting the sensor signals. Sophisticated algorithms filter out noise and translate the signals as a continuous torque event instead of a series of pulses.
SigmaSix [a manufacturer of pulse tools] takes a slightly different approach. In its tool, a non-contact, magnetic torque sensor monitors the motion of the driveshaft.
Pulse tools get smart - Assembly June 2008

This data-richness is an almost ideal match with TTI's One-Key development in its Milwaukee brand. Not only could future oil pulse drivers be set up to report all this rich data back via wireless connectivity to central administrative software, but the tools could also be remotely programmed to follow set patterns of torqueing.

In its simplest form: One-Key and oil-pulse technology are a very good match.
Why Ridgid?

That still leaves us with the question: Why release the oil-pulse driver as a Ridgid tool, and not directly under the Milwaukee brand, if that is the end goal?

Ridgid shares much of its product line with TTI's European property, AEG (it purchased naming rights from the original AEG company, which continues to produce its own line of tools as well). However, Ridgid also offers a range of "speciality" power tools that are not released by AEG, especially in the electrical and plumbing fields.

One interpretation would be that TTI sees the oil-pulse driver as another specialty tool, for use by installers and builders in noise-sensitive environments.

While this might be part of the overall story, it seems likely there is much more going on as well. The introduction of the oil-pulse driver through Ridgid could be something of a "soft launch" for this new category, a way of building interest and attention, before the introduction of an amped-up version - complete with One-Link wireless - in the Milwaukee line. It might also be a good opportunity for a thorough field-testing of the technology before a more mainstream launch, as the oil-pulse system is much more complex than the mechanical impact design.
Analysis

If HNN's guesses about the future role of oil-pulse drivers in the TTI brand line-up are correct, then this signals a further development of the One-Key system. The products announced so far for One-Key have been advanced products that feature One-Key as a helpful addition. A line of oil-pulse tools would be designed from the drawing board to make thorough use of the One-Key system - it would be a big part of their appeal, and a justification for an increased price.
Bigbox
Home Depot Investor & Analyst Conference
In-store logistics developments for 2016
HNN Sources
Sync in diagrams
Maria's story
Click to visit the ITW website for move information
The Home Depot Investor & Analyst Conference held on 8 December 2015 gave the major US big box home improvement company a chance to explain how its "connected retail" strategy will develop over calendar 2016.

The main difference between Home Depot and its competitors such as Lowe's, Menards and Sears, is the degree to which the company has committed itself to "connected", "omnichannel" retail, mingling together its online sales push with its established physical store fleet. This combination is something that the company is now referring to as "One Home Depot".

In realising the One Home Depot vision, the company has made several large investments. This is particularly so as regards the logistics infrastructure necessary for home delivery of often bulky objects.

Home Depot has, over the past three years, opened three dedicated distribution centres for online. It has also worked hard to build a system of product sourcing and transport that can seek out the most efficient and timely means to dispatching goods to customers. This can mean directly from a distribution centre, from the stock held at a store close to the customer, or from a distribution to a store and then to the customer.

It is interesting to examine the Home Depot strategy a little more closely. We would have to assume that it is built on the following two strategic considerations: that the consumer push for combine/online shopping services is going to increase quite sharply sometime in the next two to three years; and that this increase is likely to take place at a rate best reflected in a steeply climbing exponential curve.

This latter point means that when the strong consumer push for an integrated online/physical shopping channels does take place, it will happen so rapidly that major retailers will not be able to adapt quickly enough to meet the changed channel demand.

In that scenario, smaller retailers might pick up more market share. This might also open up possibilities for established online retailers such as Amazon to move into physical retail as well. One such scenario would see Amazon acquiring a relatively under-valued US national retailer such as Sears with its 1500+ stores, and building that into its physical distribution channel.

Other US home improvement retailers such as Lowe's, Menards, Sears and Ace Hardware are proceeding based on different strategic predictions. Their attitude indicates that they expect the shift to omnichannel to take place post-2020, and that the rate of take-up will be a much shallower exponential curve.

One aspect of this difference that often gets missed by analysts is that, if this description is true, then Home Depot's approach is actually the less risky option, overall. If the Home Depot strategic prediction proves wrong, and omnichannel take-up is delayed, its loss will have been through a less than optimal allocation of capital resources over a period of five years.

If its prediction turns out to be true, then the consequences for its competitors could be surprisingly severe. They would be faced with making very large (and slightly inefficient) investments in online resource capacity, during a period when they were experiencing ongoing losses of market share.

If you look back through the capital allocation and market activities of Home Depot for the past 30 years, you can see this particular "move" occurring in other places as well. It's part of the company's core strength that it can find fundamentally conservative investments that seem a little radical, but have quite a large upside, and a surprisingly small downside.

It's an equation that not only retail analysts but overall market analysts seem to have trouble bearing in mind. Home Depot has a trailing price/earnings ratio of 26.04, compared to Lowe's 25.06, but the forward price/earnings rations are respectively 22.44 versus 22.80.
Overview
The customer

As with most home improvement retailers, Home Depot faces the situation where the vast majority of its customers (over 95%) are DIY consumers, but the "Pro" (construction and tradie) customers far outspend them on an individual basis.
Home Depot Pro and DIY customers

The business logic that develops from this is that it is worthwhile pursuing the growth of the Pro segment. Home Depot has identified three different types of Pro customer:
  • Transactional Pro: these are Pro's who treat Home Depot like a hardware "7-Eleven", dropping in to pick up the items they need for individual smaller jobs. This category includes general handymen, and some general trades.
  • Complex Pro: this category accounts for half of all Home Depot's Pro sales. These are renovators, builders and installers. Typically they have a crew of people working for them or may even run multiple crews.
  • B2B: These are Pros who do not sell services, but provide services to a larger company, often as a division of that company.

  • Home Depot's CEO, Craig Menear, also noted that the typical consumer was rapidly evolving, and their needs consequently changing as well:
    People are also changing the way they are using their homes. More and more people are telecommuting. People are staying in their homes longer as they age. And The Home Depot has an opportunity to provide our customers with innovative products that make their homes smarter. And we think about smarter homes in three key pillars -- protection, convenience and conservation.

    The relationship between the store and the customer is also evolving. As Marc Powers, the company's executive vice-president for US stores put it:
    In addition, the baby boomer grew up with The Home Depot as an active, hands on, do-it-yourselfer. Now their expectations of The Home Depot are changing. Now people like me have less time and less energy to do it myself like The Home Depot taught us to do. Now I want someone to do it for me.
    The Home Depot currently performs more than 2 million installs a year and those installs are done by over 100,000 Pros that work with us. Bill Lennie will explain later in his presentation how this relationship, with both the baby boomer and the Pros, positions us well for future growth.
    The market

    This is how Mr Menear described the sectors of the market Home Depot seeks to address:
    The home improvement market is estimated to be a US$300 billion market. This includes Pro as well as consumer purchases with Pros representing approximately 40% of this market. You are going to hear more about each of these customer groups.
    Next, the services market where a Pro comes into the home to install or build a project is a US$200 billion market. Approximately 70% of this market is estimated to be labour costs and the remaining 30% is product pull through.
    And finally, our addressable maintenance, repair and operations, or MRO market, is estimated to be US$50 billion. This market includes residential, multi-family, hospitality and institutional customers.
    So in the past we used to say that we owned about 27% of the addressable home-improvement market. With the addition of services and MRO we now believe that our market share in the US is about 15%, so there is plenty of opportunity for growth.
    Online

    The online sector of the Home Depot business continues to grow. For the past two years online sales have grown by around US$1 billion each, and sales are set to increase by around that amount for 2015. At the moment, online sales account for 5% of all Home Depot sales, and the sector's growth rate is around 26% per year.

    The company has continued to improve its offering. This year, Home Depot has received the award for Internet Retailer of the Year as awarded by the Internet Retailer portal.
    The economic conditions

    Home Depot's chief financial officer, Carol Tome, remains optimistic regarding the potential of the US economy. She sees three main sources of growth for the home improvement industry: steady growth in the US gross domestic product (GDP); an overall housing market that remains below the levels reached before the market collapse in 2008; and the ageing of the US housing stock, with a consequent need for more renovation and maintenance expenditure.

    In terms of the GDP, Ms Tome believes that this will continue to grow at the modest rate of 2.5% per annum. She sees this as being complemented by an additional 1.5% lift in the housing market, to provide an overall growth rate for the industry of 4.0%.

    As far as the ongoing recovery in the housing market, Ms Tome notes that there has been a historic ongoing slowdown in the rate of new household formation, with many of the millennial generation remaining at home for longer than previous generations. She sees this as a sign of pent-up demand, which she believes is beginning to unwind, and exert a positive influence on the housing market.

    In terms of the ageing of the US housing stock, Ms Tome points to statistics that indicate only 37% of this stock was over 30 years-old in 1995, while today the proportion is now 63%.

    Speaking of just the current financial year, Ms Tome is forecasting an overall sales increase of 5.7%, with a 4.9% lift in like-for-like sales. (These estimates include further earnings declines due to the rising US dollar exchange rate.)
    Strategic directions

    During the Investor & Analyst Conference, Home Depot outlined a number of core strategic moves that will be rolled out in 2016 and likely strongly influence the retailer through to 2018. The areas that were detailed included:
  • Customer delivery logistics
  • Store-stocking delivery logistics
  • Sync logistics
  • Smart home products
  • Growth strategies for the Pro business
  • Deeper integration with suppliers
  • Use of data to develop markets
  • Use of data to better serve customers
  • Growth of service-based business lines

  • If a general theme emerged from all these strategic moves, it was the notion of adopting an "end-to-end" approach. Inefficiencies are typically found where some functions operate in siloes freight trucking does not take into account unloading, for example. By exploring the dependencies between different functional areas, and establishing mutual responsibility, Home Depot is seeking to better integrate its performance and execution.
    Customer delivery logistics

    Home Depot has a number of acronyms it uses to describe the various forms of delivery that online ordering of its products has opened up. These are:
  • BOPIS: Buy Online Pickup In-Store
  • BODFS: Buy Online Deliver From Store
  • BOSS: Buy Online Ship to Store

  • BOPUS is familiar in Australia as a "click and collect" means of ordering products. BODFS means that a product that has been ordered online can be delivered directly from the store nearest the customer. This saves both on shipping costs, and time.

    BOSS is in some ways the most interesting of these, and a delivery option that the company says is gaining rapidly in popularity. Previously, if an item was not held in stock in a local store, the only other option would be to have the item shipped from one of Home Depot's distribution centres.

    BOSS opens up the option of having the item delivered to a local store instead, and then picked up by the customer. As shipping to the store is going to be much less expensive than shipping directly to a home address, it is a far cheaper option.

    BODFS is also of some importance. This is how Mark Holifield the executive vice-president for supply chain and product development describes the opportunities provided by this facility:
    Another new capability to meet our customers' needs for improved fulfillment and delivery capability is Buy Online Deliver From Store, or BODFS. While we've delivered orders taken in our stores and on the phone for years, we have not been able to take orders online and drop them to the appropriate store for fulfillment and delivery, this new capability provides that.
    In addition, with this new capability we are implementing the ability to select a two or four hour delivery window for a fee. With this, customers will be able to count on us to deliver when they need the product as opposed to waiting all day for an all-day delivery window. We think this will be particularly valuable for our Pro customers with crews on the job site awaiting delivery to start work.
    This will also open up many more products stocked in our stores for delivery from online orders, providing new options for our customers. And the new system is more intuitive and simple for our store associates compared to the existing delivery systems.
    Store-stocking delivery logistics

    At many retailers it is simply an accepted fact that when the truck or trucks pull up at a store from the distribution centre, something pretty close to contained chaos ensues. Even well-planned systems for removing goods from trucks and getting them into storage and then out on the store floor commonly waste a lot of time and effort.

    Home Depot has applied itself to this situation, and has come up with some major productivity improvements that it will be rolling out during 2016. Most of these improvements are driven by data, and the "First Phone", a device issued to Home Depot associates.

    This is how the combination of different in-store logistical functions will work, as described by Mr Powers:
    Currently across all our stores there is still not a defined efficient process to move freight off of the trucks, into receiving areas, from our receiving areas to shelves, and if need be from our overhead stocking shelves down to the customer facing shelves.
    We are currently in the process of rolling out several documented processes to all stores to start driving operational excellence concerning freight handling in 2016. First we will implement Smart Sort.
    Smart Sort is software that can be accessed by the store associate which defines exactly what is on every inbound rapid deployment centre load. And not only does it show the carton counts of the load, it tells the store how many freight moving carts they will need for small cartons and how many pallets they will need for larger products.
    Combined with Smart Sort we will implement Engineered Unload. Engineered Unload is a diagram delivered through the same system showing the stores how to stage the carts and the pallets in the most efficient way designed to reduce product touches and footsteps to stage product. These two systems and processes have proven in pilot to reduce 90 miles of walking for each receiving associate a year.
    A third element which will be implemented is called Directive Pack Out. This software tells the associate the exact order in which they should put the product on the shelves. This process has shown to eliminate 1 to 2 feet of walking per carton per night. And let me remind you, our stores receive on average over 4,500 cartons of freight per week. Now that is a lot of footsteps taken out of the process.
    Next, we are addressing the efficiency of moving product from our overhead shelves to our selling shelves with Bay Directed Pack Down and Smart List. Both projects will also be implemented in 2016.
    Currently our associates are asked to pack down any visible shelf outs as well as executing a rotating schedule of predetermined areas to pack down throughout the store. Now with Bay Directed Pack Down our associates will only focus on the areas that matter.
    We will leverage our new First Phone 2 to deliver data that will identify heavily shopped areas from the previous day. The list will be store specific. Additionally, the areas will be sorted by department and aisle to minimise travel and drive productivity.
    The second project will be implemented we call Smart List. Once again, we will leverage the First Phone to deliver to our associates' pictures and attributes of a limited amount of products that are exceptions, meaning their selling patterns have changed over the last several days and should be investigated.
    In-store logistics developments for 2016
    Project Sync

    Of all the logistic developments, this is certainly one of the most exciting. To understand the opportunities in the Home Depot supply chain, it is necessary to know a little about the system. A primary feature of the system is what Home Depot calls rapid deployment centres (RDCs). These do not provide any warehouse facilities, but instead use information systems to manage the flow of goods from suppliers to stores. There are 18 of these in the US, and they handle around 50% of the dollar-value of Home Depot goods.

    These are backed up by a dozen stocking distribution centres (SDCs). These can hold a set amount of stock in items which either have an inconsistent source of supply, or are subject to sudden spikes in demand due to seasonal demand.

    Finally, there are the bulk distribution centres (BDCs). These are responsible for distributing loose items such as timber and other building materials.

    Mr Holifield details the system like this:
    As we have looked at our supply chain, there remains breakthrough opportunity to optimise our supply chain and we call that next phase Project Sync. We have actually begun this process and are in pilot now in our Houston, Texas, RDC and the stores in its service area.
    So first let's take a look at our supply chain as it runs in large part today. You can see the various nodes in the RDC supply chain along the arc shown here. The truck is at the top of the arc, as transportation is the dominant cost of operating our supply chain.
    While our RDC program has made vast improvements in our truck utilisation, there is still a large opportunity here. And our ordering of product is not optimised to fill trucks. And our order days aren't as predictable and consistent as they could be.
    As a result, there is lead time and inventory embedded across the supply chain to buffer for that variability. Our supplier lead times vary from 2 to 10 days. Our inbound transportation transit times vary from 1 to 5 days depending on the distance.
    Because of further buffers in our DC schedule it might take a few days for freight to be processed at our RDC. And because of all that variability, that creates challenges in our stores with unpredictable and lumpy freight flow. The result, as you see here, is an 11-day lead time on average.
    But all this can be optimised through more collaboration and rigour around our schedules, and we are doing this in our Houston RDC today. With these changes we can reduce the lead time dramatically -- in this case to as low as five days. By optimising our ordering through better planning and collaboration with suppliers we reduce the variability and unpredictability there.
    Now using intelligent truckload rounding algorithms, making data driven optimisation decisions on inventory and transportation costs, we order in full truckloads. Working with suppliers we can find opportunities to ship direct from plants, perhaps bypassing supplier DCs.
    Through better collaboration with and predictability for our suppliers, we arrange for next day or even same day shipping and coordinate loading configurations more closely. Transit times are optimised to avoid delays, and those full trucks are able to be more timely than less-than-truckload shipments.
    Through more collaboration and rigour on scheduling, product is received immediately on receipt at the RDC. That product then flows to the store in a much more orderly and level fashion, allowing our store associates a more predictable and stable flow of freight.
    These efforts have shown the ability to reduce lead time to as low as five days from supplier to store shelf, and lower lead times means faster replenishment with lower inventory and cost.
    Sync in diagrams
    Smart home products

    Home Depot has made a strong commitment to smart home products, and intends to grow this sector of its business. This was announced in the initial remarks by Home Depot's executive vice-president of merchandising, Ted Decker. He said:
    In addition, we'll maintain our momentum by helping our customers create a smarter home. A smarter home is connected but it is also safer, more energy efficient and more convenient. So, we are introducing products that help our customers protect their families, save money, and improve their homes.
    We ve introduced new products like intelligent smoke detectors, motion sensors, cameras, and door locks to help make homes safer. And, products like LED lighting, thermostats that learn patterns, and fixtures that save water help save money. Our customers can also choose to purchase products like wireless speakers and colour-changing lights to make their homes more enjoyable.
    We anticipate the demand for smarter products in the home will continue to grow. An industry study estimates that there will be over 500 smart home products in a typical family home by 2020. Therefore, we offer open platforms and related products, so our customers can select the best solution that meet their needs rather than be locked into one protocol. Today, we offer hundreds of products in our stores, with a continuous stream of product launches in the works.
    Growth strategies for the Pro business

    The Pro business received a particular focus all through the presentations. One of the primary drivers of the Pro business in the future will be the special programs Home Depot is implementing for them, including its Pro Xtra services, and an extended credit offering.

    Mr Lennie describes what Pro Xtra has brought to Home Depot like this:
    I would like to take a few moments to highlight the wins we're seeing from Pro Xtra, our Pro focused rewards program. Pro Xtra has over 3.4 million members, and it allows us to build loyalty with our best customers by providing valuable products and services that help Pros save time and money every day. These include purchase tracking, exclusive offers and several business tools.
    These benefits help Pro Xtra deliver on its intended purpose, which is to strengthen bonds between the Home Depot and its Pro customers. We see the returns of this enriched relationship in the data, and I would like to highlight just a few metrics.
    Pro Xtra members with registered tender on average spend 18% more in the first year after sign up. Pro Xtra members tend to be highly active, transacting more than two times the average Pro. Finally, sales to managed accounts, who are at the top echelon of Pro Xtra and covered by our PARs, continue to outpace the company average.
    The Pro strategy

    The details of the extended credit offer were described by Ms Tome:
    As you know, we have a private-label credit card program, and sales on our private-label cards make up about 24% of all of our sales. Importantly, our program is a financing program, not a discounting program. While our program is both for DIY consumers and Pros, as Bill mentioned, financing is really important for our Pros. We've been testing a new value proposition for our Pros, and we are ready to roll it out.
    Beginning in January we are going to offer our DIY consumers an enhanced value proposition of 365-day return. But for our Pro, we will be offering 60 days to pay, a new fuel reward program and 365-day returns. We are excited about these new programs as we think they will truly meet our customers' needs and help drive sales.

    Ms Tome later expanded on these comments in response to a question from an analyst:
    So we are very excited about this because we have learned a lot about our Pro. And Bill, you can add to my comments when I am through. First, if you think about our private-label credit card, you know we have a great offering for our Pros. The average line is US$6800, over 71% of all the Pros who apply for our card get it. But they only use about 21.5% of the line.
    Why? Because it is not a financing tool. Our Pros need a financing tool. So as we tested these 60-day terms we learned that we are providing working capital for our Pros. If they get paid before they have to pay us -- this is a good thing.
    We very much liked the sales lift that we saw on our pilots. But it is more than just a sales lift, it was about getting stickiness with that Pro. So how big can it get? Well, we ll tell you as we continue to grow the program, but we are very excited about the future.

    Mr Lennie added a comment to Ms Tome's response:
    And just one additional comment. The Pros do have a varying degree of credit requirements from size of jobs week to week, the degree of business, the velocity that they are in. So it is good to give them that flexibility.
    And then second, the 365 returns is important. It gives them more time on jobs. So I think that is also another benefit that rings solid with our professional customers.
    Deeper integration with suppliers

    Home Depot has always prided itself on having good relationships with its suppliers, and on getting involved in new product development at an early stage. During 2015 it has increased the level of its involvement, and intends to continue to focus on collaboration as much as possible.

    One example of a successful collaboration that the company helped foster, Mr Decker suggested, was the way Home Depot helped Echo, a maker of outdoor power equipment, get together with cordless tool/battery specialists Techtronic Industries (TTI), to develop a new range of 58-volt products.
    An example of collaborative planning is the work we did with Echo and TTI, two of our key strategic partners. As we have discussed, more and more product categories are migrating from corded or gas powered to cordless technology. Outdoor power is no exception, but offers unique challenges in power and run time requirements.
    Recognising the market opportunity, we worked with Echo, a global leader in professional-grade outdoor power equipment, and TTI, a global leader in lithium ion battery technology, to develop a new cordless platform. The two companies leveraged their respective strengths to deliver revolutionary innovations.
    The Echo 58 volt platform offers performance expected by our Pros through the power of gas and the convenience of cordless. The platform is a channel exclusive to Home Depot and demonstrates the power of collaboration.
    Power tool development timeline
    Use of data to develop markets

    Home Depot acquired a data analysis company, BlackLocus, three years previously, at the end of 2012. It has since been using the company's capabilities to help it shape products and markets.

    Mr Decker provided one example of this, which has to do with the development of markets for Rheem water heaters:
    Leveraging data and tools, we seek to better understand our customers, provide more localised assortments to fit customer demand, and optimise space to dedicate the right square footage to the right products in the right location.
    Let's take water heaters as an example to demonstrate the capabilities we are developing. The work started with the basic blocking and tackling of attributing SKUs with the right product information and features, think gas or electric, size or quality. We then overlaid demographic insights and analysed sales performance, including demand signals from online.
    Our BlackLocus subsidiary of data scientists then developed clusters of stores that sell similar penetrations of various water heaters. Once the clusters were defined, we built assortments for each cluster with our new, proprietary assortment planning tool to develop the appropriate line structure.
    We also looked at macro space considerations to see if we should increase or decrease the number of bays in each store, while considering channel profitability to determine if we should shift certain products online.
    Next we built plan-o-grams with an emphasis on micro space productivity to ensure we had the correct facings of each SKU. This ensures the right quantities on the shelf and also drives labour productivity in the store. Finally, we activated replenishment and launched a MET project to reset the store.
    After following this process we grew the water heater category by double-digits. But, there is always opportunity to improve, so we refreshed the work a year after the initial reset and accelerated growth yet again. We want to make these types of improvements an ongoing process rather than an outcome of formal business reviews.
    Water heater market development
    Use of data to better serve customers

    [Article continues in full text. Click full text link to continue reading.]
    Bigbox
    Lowe's Santa tracker
    Lowe's has developed its first-ever Santa Tracker
    Mobile Marketer
    Additional app tools include "Santa sensors" and "Santa cameras
    Mobile users will be able to prove Santa's visit to their residence
    Click to visit the ITW website for move information
    The home improvement retailer is boosting awareness of its Iris by Lowe's smart home app by integrating new features including "Santa sensors" and a "Santa camera" to excite holiday enthusiasts. Mick Koster, vice president and general manager of Iris Home Systems said:
    Iris' Santa Tracker offers a simple, fun way for families to bring the holidays to life. Smart homes shouldn't just be smart - they should be fun and make life more enjoyable.

    Lowe's is encouraging believers and sceptics alike to use the brand's Santa Tracker tool, located within the Iris by Lowe's mobile app. This latest version of Iris is designed to help families prove Santa's whereabouts in their homes on Christmas, as well as track his exact movements throughout the residence.

    Consumers who sign up for the Santa Tracker will be prompted to answer a slew of questions that will enable Iris smart home devices to sync with the app feature. On the morning of December 25, users will be able to see when, where and how Santa visited their homes.

    They may also view Mr Claus dropping presents underneath the tree or sneaking some milk and cookies. The "Santa sensors" will be able to tell if Santa is tiptoeing through the living room, enjoying a snack in the kitchen or dropping off gifts in Christmas stockings.
    Lowe's Santa Tracker from its Iris smart home app

    Lowe's creative approach to its smart home marketing strategy allows existing customers can open the revamped Iris by Lowe's app and select the Santa Tracker button on the homepage to take advantage of the holiday-themed tool.

    And Lowe's is also making the tracker available to non-Iris customers, a move which could convert some individuals into future fans. Mobile users can download the complimentary Iris by Lowe's Santa Tracker app for their iOS or Android smartphones and follow the setup instructions.

    Afterwards, users will be able to choose where Santa's reindeer are most likely to land, where Mr Claus will enter and exit the home and indicate what he might do once he is inside. They can later snap a photo of the area in which Santa is expected to arrive, and check the app on Christmas morning to confirm his trail and see proof of his visit.

    Ultimately, Lowe's is poised to excite holiday fans with the release of its Santa Tracker feature, which also functions as a prime advertising method for the Iris products. Koster said:
    Within Lowe's, our Iris team is committed to helping customers create a deeper relationship with their home through smart home technology. By dedicating a little of our after-hours time to integrate Iris' real and virtual technologies this season, we're hoping to enhance each family's holiday experience and play a magical part in creating lasting memories.
    Products
    After Li-ion, the next cordless tool revolution
    Location-based tool enhancement
    HNN Sources
    Industrial revolutions
    DeWalt's Tool Connect
    Click to visit the HBT website for more information
    Comparing an average power tool, such as a cordless drill/driver, and a smartphone like Apple's iPhone, it's difficult to spot too many similarities. iPhones are not known for their abilities to drill holes or drive screws. Yet the development of the iPhone, its popularity, and its influence on the entire mobile phone market, the changes it has made to electronics manufacturing, the networks that have been built and the software that has been developed, has had a profound effect on power tool design and capabilities.

    Even so, the changes fuelled by mobile technology that will develop in the near future - at least in the industrial and construction areas - will likely outpace the changes to date.

    The major technological change will be increased connectivity. This connectivity will be powered by mobile-based technologies such as low-energy Bluetooth connections, inexpensive Wi-Fi chips, and the use of RFID.
    Mobile technology dominates component availability

    As connectivity becomes common, it will change much of the way power tools are used in the industrial area. HNN estimates that by the end of 2020, one of the main differences between most "pro" and "consumer" power tools will be that the pro tools all provide advanced options for connectivity.

    Given the current state of development, a change like this is likely to drive strong benefits for the Techtronic Industries subsidiary Milwaukee Tool, and possibly disadvantage companies more cautious about technology, such as Makita.
    Mobile tech in tools now

    The two major benefits that have flowed through from the mobile phone to the power tool industry are vastly improved Lithium-ion (Li-ion) battery systems and a wider availability of brushless (also known as electronically commutated) motors. The small size of mobile phones drove development of lightweight, compact, highly efficient batteries.

    The numerous advantages of Li-ion over the previous Nickel-Cadmium batteries, combined with the significant advantage of cordless tools in general, has driven a wave of power tool replacement over the past five years.

    Brushless motors have also improved power tools by providing more power with less power usage, as these motors can reach between 80% and 90% efficiency, compared to 65% to 75% efficiency for standard electric motors. At the heart of every brushless motor is a computer chip that switches the electric current with microsecond accuracy.

    Mobile phone research spurred the development of the kind of chip needed to run these motors, something small, relatively powerful with low power usage. This work builds on a long history of the development of compact brushless motors in high-tech devices, from computer hard disk drives to laser printers.
    Brushed/brushless motors

    These two developments have benefited a wide range of power tool users, from the home handyman, to the tradesperson, on up to extreme use in the building, construction and manufacturing industries.

    The third development has an even closer relation to mobile phone technology. It is the ability to produce power tools that can communicate - communicate with a central controller, with each other, and even with the environment where they operate. This has become known in popular discourse as the "Internet of Things".
    What "Internet of Things" means

    In many ways the notion of the "Internet of Things" (IoT) has been something of an unfortunate buzz-phrase. Born more than 20 years ago, in 1994, the concept has been evolving as technology evolves, but it is only over the past three years that it has moved clearly out of the speculative and into practical implementations.

    On a casual level it conjures up images of refrigerators that know when they need to order the milk. This is a poor example. One difficulty is that actually knowing when to order milk turns out to be a very complex problem to solve. Also, it's not true IoT because it is just a single device sensing a need and making a one-way communication.

    IoT is more than that. Sticking with the kitchen analogy, a better IoT example might be a toaster that helps prevent you burning your raisin toast in the morning. The toaster senses the package of bread, notes its type, and adjusts its settings, possibly with reference to a central computer that has stored your toast preferences. This is a direct communication between "things", with a possible boost from a central knowledge repository. It's the more common pattern in IoT.

    The toaster example also illustrates something fundamentally wrong with the IoT name: the internet doesn't really need to be involved. When the toaster and the bread packet communicate, it probably wouldn't be done by the toaster accessing the internet website of the bread. It's more likely that the toaster reads an RFID tag on the bread packet or a Bluetooth beacon on the clip used to keep the packet closed. It is a direct "thing-to-thing" communication.
    IoT in construction and manufacturing

    On its own, the notion of IoT probably wouldn't have that much of an effect on either construction or manufacturing. However, it turns out that when IoT is associated with other developments in construction and manufacturing, the result has so much potential that, in the case of manufacturing at least, the combination is seen as possibly ushering in the fourth stage of the industrial revolution.

    What gives IoT such a boost in terms of possibilities is the invention and development of what is often termed "virtual modelling" of both construction and manufacturing. Virtual modelling means building a model in software of something that exists as a collection of physical objects.

    The idea of the model is that it should reflect the physical model as much as possible. Drive a virtual car far enough, and it will eventually run out of petrol. Rock a virtual building with a strong enough earthquake, and it will fall down.

    In construction, the virtual model is created as the centrepiece of using Building Information Modelling (BIM). BIM seeks to gather all the information that relates to a building, before, during and after construction. This then provides the single, unified virtual model of the build and the building. Post-build, it is a very helpful guide to maintenance, improvement and continuous renovation.

    In manufacturing, a virtual model of how the plant works is part of the Smart Factory specification. Originally put together as an idea in 2008, it was inspired by Mark Weiser's idea of the "smart environment". This is described as:
    ...a physical world that is richly and invisibly interwoven with sensors, actuators, displays, and computational elements, embedded seamlessly in the everyday objects of our lives, and connected through a continuous network.

    The Smart Factory model is designed to sense almost everything that happens in it. This includes major events, such as supply delivery and product completion, down to the smallest events, such as ambient temperatures, and the completion of each assembly operation.

    The two virtual models have some differences. In the case of the construction site, the model that drives the BIM is - at least until the building is completed - idealised and therefore incomplete. Its primary role is to drive planning and execution. In the case of the Smart Factory, the model is not idealised. Instead, it is largely passive, made up of a great deal of feedback, from machines, sensors and human input.

    Despite these differences, the opportunities offered for connected power tools to help improve productivity, quality and worker safety are very similar across the two models. Building on both BIM and especially on the Smart Factory concept, two movements have already been started with the aim of rapidly developing these opportunities.

    In the US, General Electric is leading the field, with its concept of the "Industrial Internet". At the moment, however, the most developed concepts are coming from Europe, specifically Germany. The German government sees the development of Smart Factories allied with tool connectivity as being so important they have labelled this movement "Industrie 4.0", and see it culminating in nothing less than the fourth stage of the Industrial Revolution.
    Existing technologies

    Before we get to discussing what the Europeans and the Americans have in mind, it's a good idea to take a brief survey of how far this technology has developed already, and what we are likely to see further develop over the next two years or so.
    DeWalt's Bluetooth battery

    A good example of an interesting IoT product yet to gain wide acceptance is the Bluetooth-equipped 18-volt batteries brought out by DeWalt in mid-2015. As HNN has reported in its past reviews, the battery has its own iOS and Android apps. The user downloads these to their phone or tablet, then "pairs" the battery with the device. From that point onwards the user can monitor a range of performance aspects, such as the battery's current state of charge and its operating temperature.

    There are three sets of features the Bluetooth connectivity brings to these tools. These are: monitoring of the battery status, notifications for certain changes; and pre-set actions that occur when certain changes are noted.
    DeWalt's Tool Connect

    In the first category of monitoring, the charge state of the battery and its current operating temperature can be seen. In terms of notifications, the connected app can alert the user when the battery has a low charge, when it has completed recharging, and when it has gone beyond the range of the Bluetooth connection. The actions that can be preset include turning the battery off when it loses the Bluetooth connection (eg. it has been moved off-site), having it automatically switch off overnight, or even setting a defined number of days until it deactivates itself (for example, a battery loan period).

    Most power-tool users will see some of the immediate benefits of these communicating batteries instantly. The most important immediate gain is simply making sure that everyone on the worksite begins the day with fully charged batteries, with the charge state checked from one central location. During the day the charge state can be monitored, and freshly charged batteries sent out to workers who are beginning to run close to empty.

    Equally, of course, there are some aids here to help prevent both theft and accidental loss of batteries. The batteries could be set to be active only for the day of use, so that if they do wander off, they would no longer work. If the worksite needs to be packed up at the end of the day, it's also easy to inventory the batteries. Each battery can be sent a message to flash a light, so individual batteries can be easily identified.

    It's likely that the kind of battery management the Bluetooth connection enables would be enough to cut back on the stock of batteries kept as a redundant backup, possibly reducing the total number required by 10%. On a worksite that is running 200 batteries, that could mean a net savings of over $2000 in equipment costs.

    As helpful as many of these uses are, this is really just scratching the surface of what could be achieved even with as simple a system as this. If DeWalt is wise, it will open up development of the software component of this system to third-party software developers, who would be able to integrate the information flow that Tool Connect offers with other software products.

    For example, in construction the amount of battery power being used could indicate that workers are not working as efficiently as they could. Very low battery usage could indicate that they are not working as hard as they might, or that some problem is interrupting their work. This information could be integrated with a project management system. Such a system could indicate, for example, cases where reported project progress does not correspond with observed power tool usage, which could warrant further investigation.
    Milwaukee Tool's One-Key system

    The full suite of Milwaukee Tool's One-Key products is set to launch in February 2016. Where DeWalt has opted for a simple, practical system with its Bluetooth battery, Milwaukee has been more ambitious in launching a comprehensive system.

    http://hnn.bz/Milwaukee-One-Key-Inventory-Feature.jpg}Milwaukee Tool One-Key}http://hnn.bz/Milwaukee-One-Key-Inventory-Feature.jpg

    The first layer of that system is already in place. It enables users to manage their entire fleet of tools (including non-Milwaukee tools) from a web browser interface. The next layer that will launch in February will enable wireless access to individual tools so that they can be custom programmed. For example, the tool manager will be able to take a specific drill that will be used for a certain job, and set it up with several settings options for torque and rpm. The actual user of the drill can then select the appropriate setting for the task at hand from a short range of options. Further, the actual task that is undertaken is recorded by the system, enabling the tool manager to check back on how the tool was used.

    For construction sites, manufacturing facilities and some automotive assembly applications, this kind of centralised control will bring big benefits. It will radically reduce the number of fasteners applied with incorrect settings, for example, and enable companies to more easily meet contractual obligations that require the certification of tasks as having been performed within tight limits - a common requirement in, for example, the aviation industry.

    As with the DeWalt Bluetooth battery, it's easy to see how this might develop into an adjunct to project management software. As it tracks actual tool use rather than battery use, the system could deliver highly accurate numbers as to how both teams and individuals are performing on the job.
    Suiting the tool to the job and the place

    While the Milwaukee One-Key product development is ambitious, already a number of companies have formed a consortium in Europe, and are hard at work pushing the boundaries of what connected tools can do. These companies are part of the Industrial Internet Consortium (IIC). The IIC has implemented a program of "testbeds", where interested and complementary companies get together to work on developing new systems based on Internet capabilities.

    One of these testbeds is called "Track and Trace". The companies involved with it are Bosch, Cisco, National Instruments and TechMahindra. Their goal is to develop a system for factories where each individual power tool can be tracked within 30cm of its location. Once the system can do this, it can tell by the location of the tool and the date what action the tool needs to perform, and then automatically program the tool with those parameters.
    Location-based tool enhancement

    If that seems over-elaborate, this is a quote from a case study by the IIC which looked into aircraft construction:
    As an example, a given subassembly of an airplane has roughly 400,000 points that need to be tightened down, which requires over 1,100 basic tightening tools in the current production process. The operator has to closely follow a list of steps and ensure the proper torque law settings for each location using the correct tool. Because of the manual process, human error adds a lot of risk to the production.
    This is significant since even a single location being tightened down incorrectly could cost hundreds of thousands of dollars in the long run. A smart tightening tool understands which task the operator is about to perform using vision to process its surroundings and automatically set the torque. And the device can record the outcome of the task in a central database to ensure the location was set properly. With the central manufacturing execution system (MES) database and the distributed intelligence of the devices, production managers can precisely pinpoint the procedures and processes that need to be reviewed during quality control and certification.
    Airbus Case Study

    Even this kind of development is likely to be extended still further. As tools become ever-more connected, further details of tool usage can be captured. This might include the orientation of the tool during the performance of tasks (horizontal, vertical, overhead), and even (through sensors located in the tool's grip) the amount of force exerted on the tool by the user.
    Industrie 4.0

    There are three different components that get grouped together to set up the coming revolution that the German government has taken to calling "Industrie 4.0". These are: the IoT, the Smart Factory, and what is known as the "Internet of Services", or IoS.
    Industrial revolutions

    IoS is actually a quite complicated system. It enables elements of an industrial production or construction process to interact with external and internal suppliers. For example, a supply hopper might sense that, by monitoring its weight, it had run out of a particular type of fastener. The request for replenishment might go from the hopper to the warehouse. The warehouse might discover that resupplying the hopper would reduce its store of those fasteners to the critical level where it needed a new delivery. Using IoS it would then be able to send out a request for resupply, which would be delegated to a service handler. This system would be capable, through using the IoS, of sourcing competing bids for supply, evaluating these based on requirements, and then contracting for resupply.

    In combining these three systems together, the Industrie 4.0 concept is guided by these six principles:
  • Interoperability: the ability of cyber-physical systems (semi-automated processes), humans and Smart Factories to connect and communicate with each other via the Internet of Things and the Internet of Services
  • Virtualisation: an implementation of the Smart Factory systems in a virtual environment, which will enable managers to model the effects of change and external influences
  • Decentralisation: a shift from a command-control structure, to semi-autonomous structures that make decisions based on network feedback
  • Real-Time Capability: the use of continuous data sensing and data monitoring to provide an ongoing over of what the "state" of the manufacturing system is at any moment of time
  • Service Orientation: offering of services (of cyber-physical systems, humans or Smart Factories) via the Internet of Services
  • Modularity: flexible adaptation of Smart Factories to changing requirements by replacing or expanding individual modules
  • Drivers of change

    While the systems described above evidently provide the potential to increase efficiency, there are other drivers as well. What initially sparked much of the discussion about the Smart Factory in Germany was the development of the Siemens plant at Amberg. The management of that factory described some of the factors that drove them to develop it along "smart" lines like this:
    Dieter Wegener, Siemens' coordinator for Industrie 4.0, argues that companies aren't pushing these developments; consumers are. We want customised products, he says, we want them now, and we want them made efficiently, in order to both bring down prices and preserve natural resources. This isn't possible without networked production processes.
    The Independent

    Customisation is not, of course, limited to industrial production, but is coming to apply just as much to construction. By making production/construction processes "smart", they also become flexible, and easier to modularise. This flexibility adds considerable value from the point of view of end-consumers.
    The developing tool market

    As we remarked above, HNN believes that connectivity will become a major feature of high-end industrial/construction tools by the end of 2020. How will the tool market develop over the coming four years leading up to that?

    The release of One-Key by Milwaukee in early 2016 will mark the beginning of a major market change. While it will not affect professionals using a smaller fleet of tools, contractors who look after as few as 30 to 40 tools will find the management capabilities of One-Key attractive. We can expect to see Milwaukee progressively rev-up its One-Key offering in the first calendar half of 2017, at which time we will hopefully see the software side of the system opened up to developers, so that it can be integrated with project management and other systems.

    As this happens, the tool lines at Milwaukee will begin to diverge. Many tools will be offered in two versions, with and without One-Key. Other tools are likely to be released in One-Key only form.

    By 2018 there will be a number of competing systems available. It is unclear what moves DeWalt and other Stanley Black & Decker divisions will be making. It seems quite clear that Hitachi, through its recent acquisition of Metabo, will be offering similar connectivity. Another key player will be Bosch, which is already playing a central role in the testbed developments at the IIC.

    One of the more interesting questions is what Makita will do. Makita has not always been at the forefront of technical developments - for example, it only made battery gauges standard on its products in 2015. To compete in the connected tool segment, Makita would likely either have to enter into a partnership with another Japanese company, or even acquire a company that can provide it with this technology.

    What is clear is that for tool suppliers the connectivity revolution will turn out to be a very profitable shift in the industry. Not only will tool purchasers be seeking to renew their tool fleets ahead of the regular schedule, but they will be considering a near-total refresh. To help capture this market, tool suppliers will need to ensure that they have a thorough understanding of this new market, and can offer guidance and assistance to customers who may be struggling to understand this more complex world.
    Products
    Bathroom products that can elevate
    The square basin from the Cielo Collection
    HNN Sources
    The collection is made with a robust and quality construction
    It is being distributed though Highgrove Bathrooms
    Click to visit the HBT website for more information
    Bathroom accessories are considered a design highlight in their own right. They can be used to upgrade existing bathrooms without committing to a full renovation. Highgrove Bathrooms have introduced a range of accessories that can integrate into most bathrooms called the Cielo Collection.

    Stainless steel remains a natural choice for customers who want a contemporary and sophisticated feel. The soft squared designs express the classic modernism of the Cielo Collection and can be an ideal addition to any bathroom interior. Each item is made with a robust and quality construction.

    The Cielo Collection consists of shelves, hooks, rails, rings, soap dishes, a toilet brush holder and tumbler holder. Frosted glass also makes a cameo in the Cielo Collection with its glass soap dish, toilet brush holder and tumbler holder.

    This range and other complementary pieces are distributed though Highgrove Bathrooms stores around Australia.
    Reports
    Building the women's DIY market
    Vintage caravan makeover
    HNN Sources
    The master closet
    Floating nightstand
    Subscribe to HNN weekly e-newsletter
    The "women's market" has become an increasingly difficult subject for home improvement retailers over the past five years. On the surface, just about every hardware retailer in the market is doing at least an OK job of encouraging women customers to make use of their retail spaces. Some of them are doing very well. This is clearly indicated by the Roy Morgan statistics for visitors to hardware stores shown in Figure 1.
    Roy Morgan: percentage women shoppers May 2015

    Most home improvement retailers, however, will admit that there is another side to this story. While women are frequent visitors to hardware stores, they don't tend to spend the way men do. Often they are a prime influence on what a family does buy - think kitchens, bathrooms, paint colours and so forth - but their direct expenditure tends to be low.

    If Australia follows trends that have been established over the past two years in the US market and elsewhere internationally, that could be set to change in 2016. Not that we can expect most women to begin whipping up outdoor decks and kitchen counters en masse. That would be about as likely as the average husband graduating from sewing on his own missing shirt buttons to following a dress pattern for the daughter's prom dress.

    What can be seen developing is a budding market in what could be called craft DIY, furniture repurposing or even furniture hacking. At the low end of less complex projects, this is a slight extension of the more traditional activity of making "craft" decorative objects. At the high end it extends to a complete reworking, or even recreating, of more traditional furniture.
    Empowerment

    The aspect of women's DIY that most hardware retailers struggle with is the idea of DIY as being somehow "empowering" for many women. An academic paper entitled "Do-It-Yourself Projects as Path Toward Female Empowerment in a Gendered Market Place", written by Marco Wolf, Pia A. Albinsson and Cherylynn Becker and published in 2014 deals with this issue. It uses a survey of women DIYers in the US as the basis for its exploration of DIY and empowerment.

    Part of the authors' conclusion is that this kind of empowerment can be divided into three types: power-over, power-to, and power-from.
    Power-over

    Power-over is a largely genderless form of empowerment. As described in the paper:
    The power-over perspective is often linked to consumer control through an increased availability of information. Information (ie., Internet, television, home improvement publications) empowers consumers by providing knowledge, which enables them to make more informed decisions.

    This is familiar to most consumers these days. It refers to being able to, for instance, access the reviews of fellow users for many tools, to compare prices across a wide range of sources, and even to make use of online purchasing options if physical store options seem less than the best idea.
    Power-to

    Power-to is quite different. As the authors of the paper describe it:
    Power-to differs from power-over as it involves intrinsic elements and does not require a power disparity between two parties. The findings in the current study support the earlier findings of Wolf and McQuitty (2013) in that DIY activities were seen to inspire the development of personal values that exceed the practical value of a project. Power-to highlights the feelings individuals have regarding their abilities to secure a desired outcome in a given domain. This fact appears relevant for the process of DIY consumption as it directly affects how consumers feel about themselves and their work.

    Again, this is not something strictly limited to women, though given the cultural moment we are currently in, as women are achieving more success at pushing their case for not just recognised equality, but meaningful equality (political representation, wages, etc.), it tends to be more highlighted for women.
    Power-from

    The third category, power-from, is the most gendered of the three, and relates directly to women being able to expand their role in DIY, often against some opposition from men. According to the authors of the paper:
    The concept of power-from empowerment is revealed through the women's expressions of personal freedom relating to a diminishing dependence on spousal assistance and gender stereotypes. Research organised around leisure and gender has found leisure can provide a source of empowered, self-determined identities with which women can resist and undermine construction of traditional and normative femininity (Currie, 2004; Green, 1998; Wheaton & Tomlinson, 1998). The authors observe a similar effect for women who engage in DIY.
    Direct experience

    To simplify the three types of empowerment, we can view each of these types of empowerment as sets of relationships. Power-over concerns the relationship of both men and women to the retailer. It is largely ungendered, except in the sense that women might feel they are being directed towards certain purchases because of their gender, and this kind of empowerment can make them aware of better choices. Men, of course, can experience something very similar, though they will frequently attribute the retailer's less considered attempts at influence as being all about profit margins and stock levels.

    Power-to is much more about the relationship the DIYer has to her/himself and the task at hand. In this context the paper quotes one of the survey respondents as saying:
    You feel good about yourself when you learn and figure something out you never thought you would do. When I bought a house, I had to pull up the carpet before installing laminate floors. It took me awhile to learn how to do it and what tools to use, but after reading things online; I went down to Lowe's and asked them to show me where the tools were. I bought knee pads and tools and went to work...It took me three days to pull out the carpet, but I felt mighty good about myself that I did it!

    Men are often more inclined to pretend that they know how to do something, and after a successful DIY project will communicate something like "no biggie". However, the truth is that most men experience a similar feeling of elation and capability when a DIY task works out.

    The power-from relationship is the one of the three that is the most gendered. Women frequently feel frustrated in feeling that society imposes a sense of dependence on men. Further, having been raised (many women) in a culture that supported that dependence, they experience a degree of self-doubt that is dis-heartening. As one of the respondents of the paper's survey put it:
    Oh my god, it makes me feel strong. And I don't mean this in a feminist way, but rather by looking back at the things I have done on my homes. I've done it. Over the years I had people giving me a hard time about it: 'You need to get married, you need a man.' And every time I would do a project I would step back and say - I don't need a man, I can do this on my own.

    A more forceful statement about the challenges faced and overcome comes from another academic paper, "Understanding the do-it-yourself consumer: DIY motivations and outcomes", by Marco Wolf and Shaun McQuitty, published in 2011. The paper quotes one survey respondent, Linda, as saying:
    It makes you feel independent, but the matter of fact is that I may feel stronger as a female. I still have to go against Joe, the contractor, and convince him that I know what I'm doing. It may be a disadvantage at times because you are so frustrated to make your point. It's a constant reassuring yourself you know what you are talking about, because they are going to counter with a different way to do it. They constantly try to sell you on the up-scale product assuming you don't know what you are talking about. However, knowing what I know adds a lot of confidence in dealing with that.

    Of course, many men might face quite similar issues dealing with "Joe, the contractor", though these problems would not be either expressed or perceived in terms of gender.

    The main difficulty that many home improvement/hardware retailers face when attempting to expand their marketing to women is that they tend to confuse these three categories. As the entire issue of "empowerment" seems a hotbed for difficulty and dissent, they try to work around it, rather than with it, and thus may end up missing out on some opportunities.
    The new DIY

    The "new DIY" that has become quite developed over the past five years in many overseas markets. At its core, we could define the new DIY as attempting to deliver the biggest possible impact while making use of the smallest amount of time, the least expensive resources, and a limited experience with DIY tasks.

    There are three basic types of DIY that fall into this category:
  • Craft projects that require simple structural assembly, but may require more complex finishing work, such as paint and/or decoration.
  • More complex projects that take existing pieces of furniture and rework these to better suit a functional need and/or a stylistic desire.
  • Very complex projects that are designed to deliver an area or functional piece of furniture, where the DIYer is very clear about what is needed - for example, a walk-in wardrobe, pantry, corner cupboard or desk.

  • The most interesting of these three areas is likely the second one. Where in the past many women were more content to continue with DIY as a craft pursuit, there is now a greater willingness to go a little further and to experiment with more difficult projects.
    DIY stars

    A sure sign of the growth of this new DIY is the growing proliferation of websites and blogs dedicated to helping women develop their DIY skills. Most of these blogs are run by women who are not professionals in their field, but gifted amateurs who have honed their skills over a decade or more, and are willing to share their knowledge.

    The content often consists of a blow-by-blow account of specific projects, complete with their failures and disappointments. There are also articles about specific techniques, especially as regards paints and finishes. A more recent development is that many of these blogs now offer complete plans for projects, with these often offered for sale.

    The following examples do not present a complete overview, but more a taste of what is available online.
    Ana White

    Ana White is virtually a DIY home improvement industry all to herself. In addition to a very successful website (ana-white.com) that garners monthly hits of over two million, from over 300,000 unique visitors, she has also hosted her own TV show on the HGTV network, and is launching a new TV series on the diyNetwork in December 2015.

    Her story exemplifies the kind of conversion process many women go through on their path to becoming DIY-interested. Ms White met her husband while he was in the process of building an extension to his garage (in her home state of Alaska). The pair then actually lived in that extension after marrying, while they set about building a complete home, doing all the work themselves, except for some masonry on the front of the house.

    Her conversion from the design/helper role to something more central happened when her husband, busy setting in the rafters of the house, asked her to take five or six centimetres off a piece of two by four. At first, as Ms White recounts the story, she was a bit distressed about using the power saw, but after she had cut a few rafters, she began to enjoy it.

    While few DIYers will go on to the kind of success both online and on TV that Ms White has experienced, many women will recount a similar experience. Kept away from power tools as girls, when they go to use them as adult women they find them to not be intimidating to use, and often fun.

    Aside from her advice and profiling of new projects, Ms White's website is best known for its generous provision of thousands of project plans for DIY furniture. This ranges from simple craft projects such as a simple two-box "floating" nightstand:
    Floating nightstand

    All the way up to more complex projects, like this sliding barn door media console wall unit:
    Barn door media console

    Or even a corner cabinet for a kitchen:
    Kitchen corner cabinet

    There is also a wide range of DIY videos:


    In a clever move, her website features a "brags" section, where readers post images from their own projects, many of them based on plans from the website.

    Ms White also has an ongoing relationship with power tool manufacturer Ryobi. Ryobi has a dedicated website for DIYers, Ryobi Nation (ryobitools.com/nation), and Ms White is one of the many project creators who contribute regularly to that site.
    DIY Diva

    While based on the name alone you might expect this to be something more towards the gentle end of DIY, it turns out to be anything but that. Run by Kit Stanley, it is very much a personal blog, as opposed to the slightly corporatised blog of Ms White. Ms Stanley is also something less of an amateur and more of a professional, as she is a fully qualified builder. That said, her day job has, apparently, really nothing to do with building.

    The "tagline" to her website is:
    Bridging the gap between woman and power tool wielding badass (farmer) one project at a time.

    A typical project from Ms Stanley would be this bathroom vanity, inspired by a very expensive vanity sold by homewares retailer Pottery Barn:
    Bathroom vanity

    Or this picnic table and seating benches:
    DIY Diva picnic table
    In my own style

    A little more towards the "typical" suburban woman who is more into decorating than actual construction, Diane Henkler's blog "In my own style" still does not shy away from more complex projects. An example of a typical project would be this one to transform an IKEA Tarva dresser into a rolling desk:
    Converting IKEA dresser into rolling desk

    Her real expertise is in helping with finishes and decorative touches - not surprising as her background is as a retail display designer. A typical article would be something like the following, where she provides procedural advice on how to paint over laminate-surface kitchen cupboards:
    How to paint laminate kitchen cupboards

    This fits in nicely with some of the simpler projects she offers as well, which combine pre-fab elements in a more craft-like manner:
    Recipe holder
    Vintage Revivals

    This is Mandi Gubler's website. It is a curious, but very interesting mix of a wide range of DIY styles and tips. Repurposing vintage finds from thrift shops is certainly a part of what is offered, but as it turns out, only a very small part. A typical Vintage Revivals post is something like this one, which details some steps for fixing up a rental apartment:
    Apartment makeover

    A less typical project, and one that makes this site standout, is Ms Gubler's reworking of a small vintage caravan to make it into an ideal "day stay" centre for outdoor activities:
    Vintage caravan makeover

    Mixed in with all this is, surprisingly, some commercial furniture rehab and design as well, as Ms Gubler sets about fixing up her family's Mexican restaurant, Durango's Mexican Grill.
    Fixing up Durango's Mexican Grill
    Sawdust Girl

    Sandra Powell's website Sawdust Girl is one of the more "serious" project DIY blogs for women. The projects she lists come down to an almost complete reworking of the house where she lives with her husband, and the projects tend to be large-ish and well thought out.

    A good example is one for a cupboard space in the "blind" corner of the room. Ms Powell solves the problem by adding a cupboard insert that slides over:
    Blind corner kitchen cabinet

    To really get the idea of how this works, you need to watch the video:


    Just as interesting is Ms Powell's build-out of her master closet:
    The master closet

    Sawdust Girl makes the plans for this closet available as a US$9.99 eBook, along with a text written by Ms Powell on basic cabinetmaking, also for US$9.99.
    What this means for retailers

    Hopefully after reviewing the above, it's clear that, at least overseas and potentially soon in Australia, many women have become more committed to doing their own DIY, and are interested in becoming more proficient. While craft and decorative projects remain important and still dominate, the invisible barrier that used to prevent women from picking up a power tool and "having a go" has now almost vanished. This means that it is quite likely that over the next couple of years a new, more active market could develop here in Australia.

    If we look at the three types of empowerment women associate with DIY, it would seem that perhaps the best path to take in developing this market is to emphasise the most active and useful of these, the power-to. There are three possible pathways to making the most of power-to in retailing.
    Workshops

    While many home improvement retailers hold workshops, much of the time these tend not to be as successful as they could be. One reason for that is that the general quality of workshops for women has to be a notch higher than the workshops that are held for men.

    Men are quite content to go along to a 30 to 40 minute workshop where they might learn more on a particular technique, or get to ask questions about a topic they have some uncertainties about. Women, in general, are quite happy to go to a 70 minute workshop, if it provides them with a good overview of how to complete one specific project.

    The following are some basic guidelines on how to run a successful series of DIY workshops for women:
  • If possible, they should be run by women
  • Whoever leads the workshop needs to be very competent, not just at the DIY task, but at communicating as well
  • The above point means either reaching out beyond available retail staff to workshop professionals, or thoroughly rehearsing workshops given by amateur presenters, possibly with the help of a professional presenter to provide training
  • The workshop task should be based on producing a finished product, not illustrating a particular technique
  • In particular, the task should require the integration of a number of techniques in producing the product
  • For example, in a workshop for men, building a doghouse could be illustrated by an example made of plain wood; for women, it is vital to integrate the process of painting and decoration into the project
  • It is vital that the workshop participants be provided with some kind of "take-home" guide to the subjects covered in the workshop; illustrated diagrams are particularly effective

  • As a final note on workshops, it is also worthwhile thinking about expanding the range of topics that are taught at these. As we note below, one of the activities that women value highly in DIY is the planning and design stage. An example might be workshops using the free 3D design tool SketchUp.
    Tools

    Selling tools to the women's market brings up two key questions: exactly what tools, and where and how should they be displayed in the retail space?
    Tool types

    In terms of the type of tools that might be most suited to women, there are some real opportunities in some of the more recent power tool products in particular.

    Amateur DIY men, as a rule, have a tendency to "over-tool". Their buying behaviour is based not on the most common use to which a tool will be put, but rather the maximum stress that will be placed on it. Women tend to be more open to buying tools that will work for 99% of the tasks they need, and to then find an alternative solution (such as buying/renting a tool) for the other 1% of tasks.

    In particular for power tools, the ongoing development of the 10.8v/12.0v line of Lithium-ion cordless tools shows some real promise for the women's market. Most of the major manufacturers - Makita, Hitachi, DeWalt, Milwaukee, AEG, Bosch, etc. - have developed at least the basics in the lower voltage, offering combined drill/driver and impact driver kits at attractive price points.

    Makita and Milwaukee have, in particular, built-out their offering with a wide range of tools, including jigsaws, hacksaws, circular saws, sanders and even, in Milwaukee's case, a compact nailgun. These smaller tools are, in general easier to use, and can fit into the kind of awkward spaces often encountered in craft work with ease.
    Tool display

    The way in which most men and most women begin thinking about a DIY project tends to have some fairly strong differences. Men tend to be mostly concerned in the first place about structure and strength. They begin by thinking about the materials necessary for a project, and then assess the tools they have available to achieve the job.

    Women, in contrast, will often begin by thinking about what the job will look like when it is finished. They will begin with what colour the final coat of paint will be, what kind of stain needs to be applied, the shape and finish of any external hardware. From there they work back to the materials that will be used, and only then begin to seriously consider structure and the required construction process.

    What this means is that, curiously, one of the best places to sell tools to women may be in the paints and finishes part of the retail space.

    This brings us to the second consideration in terms of display space, which is what exactly needs to be displayed. Where men tend to enjoy the process of sorting through a range of tools from different manufacturers to find their ideal tool, most women have much less interest in that process. What they want, typically, is a good, reliable tool, that will do the job and not let them down.

    For many retailers this means a good approach would be to develop their own sense of what the ideal women's tool would be. Choose one brand, and from that brand choose a very limited set of basic tools.

    This kind of sales approach creates a very different buying situation for a woman than is normally encountered in a home improvement store. In the usual situation, the customer has to navigate through perhaps five or six brands of tools, and four or five possible choices in each brand. In this situation there is a clear and certain choice provided, and she encounters that choice in an area of the store, paint and finishes, where she feels confident and at-home.
    Planning and design

    The design and planning stages of a project tend to be more important to women than they are to men. It is not uncommon for male DIYers to make some rough plans, get going on a DIY project, encounter some problem they hadn't considered, and to at that stage sit down and do the real design and planning.

    Women, in contrast, usually enjoy the whole planning and design stage nearly as much as they enjoy finishing the project. One way of helping to better engage them with a home improvement retail outlet is to provide them with some kind of space where they can easily continue this activity.

    Some retailers have already begun to provide at least some space for this. In the larger ex-urban Mitre 10 Sapphire stores, for example, the paint counter includes a counter space where family members can sit down and discuss their plans. Masters has begun to include a similar stand-up counter/table in its paint department. Bunnings has its counter/chairs setup where people can access its kitchen planner software.

    It would not take much to expand this into more workable spaces, complete with gridded graph paper and pencils where couples can sketch out what they are thinking. It's curious that Bunnings hasn't thought to move at least one of the kitchen design terminals into an area of their cafes.
    Conclusion

    As we said at the beginning of this article, there are very few hardware retailers who do not do a good job of making sure the needs of women customers are met. However, this does remain a market with much current impact, and a much stronger growth potential for the future.

    While not a great deal of change is needed from retailers to make better use of this potential, some change is needed. The fear many retailers have is that in improving the store experience for women, they will degrade it in some way for men.

    As should be clear from the suggestions we have made above, this really doesn't need to be the case. A special "women's tools" section in the power tool racks might be something some men would find a little unpleasant, but they unlikely to even notice an additional display in the paints and finishes area.

    In other areas, it is likely that the same accommodations made for women will turn out to be as attractive for many men. In particular, as we move to a market when the general level of DIY skills is declining, building the ability to teach the basics in a friendly, encouraging environment will likely prove to be a great advantage in the future.

    Related:
    Savvy, single and mature: the new female customer - HNN
    The handywoman - myth or reality? - HNN
    Editorial
    Bunnings retail insights
    The new Bunnings Warehouse at Epping, Victoria
    HNN Sources
    The Bunnings palette example
    The cafe is a vital element to Bunnings
    Give to Amnesty International
    Competing retailers often see Bunnings as succeeding simply through its scale and access to an efficient supply chain. In fact, however, Bunnings' success owes just as much to its merchandising and clever use of its store spaces. By looking at what Bunnings does and how it does it, it is possible both to find innovative ideas that can be used elsewhere in retail, and to better understand the strengths and weaknesses of the Bunnings business model and ways of doing business.

    HNN has recently undertaken a survey of Bunnings stores in Victoria, ranging from Cranbourne and Carrum Downs in Melbourne's south-eastern suburbs, out to Ballarat in the state's west.

    More recently we visited the brand new Epping store. Based on these experiences, but using the new Epping store as the main example, we've developed six key examples of how Bunnings excels at merchandising and retail store/situation design.
    Insight #1: The drop palette

    At its origins, the "drop palette" (a palette of goods positioned in a large aisle of a store) was likely a quite innocent invention. Retailers had some seasonal goods to sell. The didn't want to allocate permanent shelf space to them, and they didn't want the work of packing and storing existing items to make room for the new items, only have to repeat the process in another two or three months.

    So, creatively, they "made space" in the store, by plunking down a complete shipping palette stocked with the seasonal goods in the middle of an aisle. It made a quick impression on customers, and - importantly because these seasonal items were strong sellers - it was easy to restock: hoist the palette on the forklift, take it back to the storeroom and restock, or simply bring out a fully stocked palette to replace the existing one.

    At many hardware/home improvement stores - including Masters Home Improvement - things have not really moved on since that stage of development. There is a little more art and craft in selecting products, but the basic palette concept has stayed the same.

    Not so at Bunnings. Bunnings has taken this casual invention and raised it to the status of an almost scientifically designed on-floor selling machine.

    The following images explain what HNN understands about how Bunnings designs and makes use of its drop palettes.
    Bunnings - drop palette
    Insight #2: Scale

    It might seem at first that the use of scale is an obvious technique for Bunnings to use in some of its very large warehouse stores. However, scale has to be carefully applied, especially in such large spaces. Too much use of scale, or a poor use of scale, can make a space seem disorienting.

    Bunnings only uses scale for two reasons. The first is pure functionality. When a selection has to be made from a large number of small items, or from a moderate number of quite large items, scale can transform that task into something much easier to achieve.

    The second use of scale that Bunnings makes is just pure fun. It's enjoyable to see certain objects displayed at scale across a vast space. It brings a new perspective to the process of choosing and comparing.

    The examples below illustrate some of the good uses of scale that Bunnings makes.
    Bunnings - scale
    Insight #3: Go vertical

    As with scale, going vertical in a large warehouse space seems like an obvious idea. However, using vertical space correctly is even more difficult than making use of scale. Looking up can easily become uncomfortable, awkward or make product selection difficult.

    One of the key aspects that Bunnings gets right is making sure to space the products out. Tightly packed products at height are hard to see and hard to assess. The whole point of the vertical should be to add perspective to what is being seen.

    The following are some examples of this use of the vertical.
    Bunnings - vertical
    Insight #4: The little touches

    While the big design ideas we've looked at so far are important, they are supported in Bunnings stores by a range of smaller design touches. Many of these seem at first to be quite casual - until you go to a number of Bunnings stores on the same day, and find they have been repeated in nearly identical form.

    Bunnings' insight about these little touches is the customers will not necessarily be attracted to slick displays of merchandise. Often what they are looking for is something friendly and approachable - something to which they can relate.

    Coming up with this kind of display is something Bunnings is expert at. Here are a few examples.
    Bunnings - little touches
    Insight #5: Bring the community into the store

    The newer Bunnings Warehouse stores tend to have what HNN has come to call Bunnings' "Community Pod". This consists of a space for DIY courses, a play area for children, and a cafe. These are usually alongside each other, though in some circumstances the cafe will be separated, or the play area in a different location.

    The possibility for community interaction that these facilities provide is substantial. Dad or Mum can attend a DIY course, while the other parent has a coffee, popping over once in a while to make sure their children are playing safely. Mums and Dads can meet up with other Mums and Dads, their children can play together while they sit in the cafe. And so on.

    What Bunnings is offering through these facilities is a genuine set of solutions to shopping and socialising for parents with their children.

    Insight #6: Trust the customer

    One of the rules we have at HNN is that if we spend a long amount of time in a store, and especially if we have any interaction with the staff, we must buy something from the store. (That is only fair, as we are using up the store's resources in some ways.)

    So at the end of our Bunnings store visit at Epping, we trooped off to the power tool section to buy a tool we intended to product test.

    Unfortunately, as sometimes happens with new stores, while there was a display for this tool, there was no stock to be found. About mid-way through the interaction we were having with the staff, we realised that the team member we were dealing with likely had a learning disability, and was part of the programme Bunnings has in place to provide some assistance in these circumstances.

    It was, without doubt, one of the best retail experiences we have ever had. The young man in question was polite, keen, attentive. He was more distressed than we were, it seemed, that the product could not be found.

    What occurred to us later about this experience was this: in offering that assistance programme, Bunnings is, more than anything else, trusting its customers. The thing about that is, in view of the kind of demographic that Bunnings does attract, it can absolutely trust them.

    There are probably not that many places in the world where that could be said with such confidence - perhaps some of the Scandinavian countries. But we all know that young man is going to do fine. He'll be looked after. Because it is just unthinkable to us, as a society, that anything else should happen.

    Until next time,

    Betty

    You can contact me directly via email betty@hnn.bz or Twitter @HNN_Australia

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    News
    HI Weekly Vol. 1 No. 7
    Download the latest HI Weekly, issue number seven
    HI Weekly No. 7
    Mark Laidlaw, CEO of Mitre 10, at the hardware industry lunch event
    HNN Home Improvement Index week for ending 16 October 2015
    Click to visit the HBT website for more information
    Read all the content from the HNN weekly e-newsletter in one convenient PDF. Easy to read onscreen, or print it out.

    Just use the following link to download the PDF:
    http://hnn.bz/HIWeekly-1-7.pdf

    In this week's edition, we take another tour of Masters older and newer stores. We attended the recent opening of the latest Masters store in Cranbourne (VIC) and compared it to the very first store it established in Braybrook (VIC).

    We also cover Mitre 10 CEO, Mark Laidlaw's recent presentation at the National Hardware Industry Luncheon held at the MCG in Melbourne recently. We examine what Mr Laidlaw had to say about the industry and Mitre 10's strategy going to 2020.

    A transcript of the presentation is also included.

    Also in this edition: regular updates on big box retailers and independent retailers; winner of the Rising Star award from Hardware Australia; IKEA's CEO admits the retail group was late to e-commerce; a report on the opportunities that exist in prefab construction and an overview of the Pro Tool Innovation Awards.

    Plus all our regular features: HNN Home Improvement ASX Index; new products; and other news.
    http://hnn.bz/HIWeekly-1-7.pdf
    News
    HI Weekly Vol. 1 No. 6
    Download HI Weekly, issue number six
    HI Weekly No. 6
    Metcash sales revenue to 2015
    HNN Home Improvement Index for week ending 9 October 2015
    Click to visit the HBT website for more information
    Read all the content from the HNN weekly eNewsletter in one convenient PDF. Easy to read onscreen, or print it out.

    Just use the following link to download the pdf:
    http://hnn.bz/HIWeekly-1-6.pdf

    In this week's edition we cover Mitre 10's presentation at the recent Investors' Day. Mitre 10's CEO, Mark Laidlaw, emphasised the role of the Sapphire store concept in the company's future. Will it be enough to offset under-investment by Mitre 10's parent, Metcash, and increased competition from Bunnings and Masters Home Improvement?

    Also in this edition: updates on big-box retailers and the latest at the UK's Screwfix; online home improvement services gather momentum in the US; and a recent US study indicates big box stores are losing market share to some specialty stores, especially in paint.

    Plus all our regular features: Indie store update; HNN Home Improvement ASX Index; new products; and news.
    http://hnn.bz/HIWeekly-1-6.pdf
    Products
    Shining light on the jobsite
    GearWrench LED light provides 380 lumens of illumination
    GearWrench
    The LED light in action
    It will last five hours of continuous use
    Click to visit the HBT website for more information
    The GearWrench LED light is one of the brightest hand held inspection lights on the market, providing 380 lumens of illumination that will last five hours of continuous use. This light also has three settings to brighten up any environment at the touch of a button: torch mode, 50% light and 100% light.

    The mounting magnets on the back and base of the light will make sure the unit stays in one place, and the versatile hanging hook allows users the option of above the head lighting.

    For those working in tight spaces, the GearWrench LED light can be rotated 150 degrees for access to difficult to reach places. The LED light is also capable of being charged via a PC or via wall mounted socket with a USB charger.

    Other features include:
  • Super bright spotlight
  • 360-degrees folded out swivel hook
  • Samsung 3.7V/2600mAH Li-ion rechargeable battery
  • Includes USB charger
  • Thin design provides access to hard to reach places
  • News
    HI Weekly #5: Bunnings grows categories
    Download your copy today
    HI Weekly 1.5
    ABS Retail stats
    Greycork provides quality IKEA alternative
    Click to visit the HBT website for more information
    The latest edition of HI Weekly is out now. You can download the complete PDF by using the link below:
    http://hnn.bz/HiWeekly-1-5.pdf

    In this week's edition, we look at how Bunnings is seeking to expand sales through going deeper into certain market categories.

    It has already had some success in broadening the appeal of its Kaboodle kitchen brand, by making it an option in the $12,000+ market. Now Bunnings is doing the same with its outdoor furniture as well.

    How can Bunnings extend its ranges into the quality/luxury category without alienating the core Bunnings customer? It's a drama that is being played out in the big-box retailer's advertising - and HI Weekly is covering it, print ad by print ad.

    This edition also takes a look at just how credit card data thieves make use of the data they steal. It's a frightening world of complex, global criminal organisations using innocent "reshipping mules" to disguise their location. With profits for just one such operation estimated at over US$7 million, this means retailers have to be especially vigilant in protecting their systems.

    All that, plus the latest retail statistics from the Australian Bureau of Statistics, the HNN Index is lifting up a little, the latest big-box news, new products, and more.
    HI Weekly Vol. 1 No. 5
    Statistics
    Hardware retail statistics, August 2015
    ABS retail sales for hardware, August 2015
    Australian Bureau of Statistics
    Per capita retail revenue by state/territory
    Comparison of hardware retail revenue statistics between 2014 and 2015
    Click to visit the HBT website for more information
    The Australian Bureau of Statistics (ABS) has released its retail sales figures for August 2015. Queensland posted the largest percentage gain of 17.28%, compared to the previous corresponding period (pcp), which was August 2014.

    This was followed by New South Wales with 15.65%, representing a gain of $58 million over the pcp.

    Tasmania fell the most in percentage terms, down by 12.63% over the pcp, a loss of $5 million in revenue. The Australian Capital Territory fell by 3.10%. Victoria was down by $2 million.
    ABS Retail Sales for Hardware, August 2015

    In longer term trends, NSW grew at a higher rate than it has since 2009, while VIC, which had showed higher levels of growth than NSW since 2009, flattened out. QLD has returned to the pattern of growth it had since 2010, which was interrupted with a decline in 2014. TAS has reported good gains for August in 2011 through 2014, but has returned to a level just above that of 2013.

    According to commentary from the ABS, Household Goods Retailing (which includes hardware) saw both a trend and a seasonally adjusted estimate growth of 0.2%. Hardware's trend estimate rose by 0.3%, while its seasonally adjusted estimate fell by 0.3%.
    Online retail

    The National Australia Bank's (NAB) Online Retail Sales Index showed that in seasonally adjusted terms sales rose by 0.6% for August 2015, while the trend estimate was 0.4%. NAB estimates that online retail sales have grown by 7% over the past year.

    NAB estimates that in the 12 months ending August 2015 Australians spent $17.5 billion in online retail. This would be slightly over 7% of the spending in physical retail in the 12 months to July 2015. The daily deal category continues to see its sales decline, while electronic games, media and fashion all showed strong gains.
    NAB Online Retail Sales Index Aug 2015
    News
    HI Weekly No. 4 - September 30
    HI Weekly's fourth issue for 30 September 2015
    HI Weekly No. 4
    The market map for Milwaukee Tool
    TTI CEO Joe Galli presents results for Milwaukee Tool
    Click to visit the HBT website for more information
    The fourth edition of HNN's Home Improvement Weekly (HI Weekly) is out, and can be downloaded from:
    http://hnn.bz/HiWeekly-1-4.pdf

    As more technology enters the power tool industry, markets are changing and being reshaped. In this edition of HI Weekly, HNN looks at how two innovative companies, the Techtronic Industries-owned Milwaukee Tool, and the Stanley Black & Decker-owned DeWalt, are using technology to expand their market share. We also look how the incumbent in that expansion market, Hilti, is moving to counter these moves.

    This edition of HI Weekly also takes a look at the small electrical appliance market, Home Depot's innovative use of hydrogen fuel cells at its distribution centres, and Mitre 10 New Zealand's bumper year.
    Retailers
    Restoration Hardware 2015-16 Q2 results
    Restoration Hardware 2015/16 second quarter results
    Restoration Hardware
    Restoration Hardware announcement video
    Part of the RH Modern collection
    Click to visit the ITW website for move information
    US-based home furnishings retailer Restoration Hardware (RH) has released its results for its second quarter ending 1 August 2015.

    Net revenues were US$506,942,000 up 16.9% over revenue for the previous corresponding period (pcp), which was the second quarter of 2014/15. Fully adjusted net income was US$45,864000 up by 31.6% over the pcp.
    Restoration Hardware 2015/16 second quarter results

    During the quarter, net revenues from stores grew by 21%, as contrasted to 9% for the pcp. Revenue from direct order business (largely driven by Restoration Hardware's catalogue) increased by 13%, versus 19% in the pcp.

    The company's selling square footage reached 605,000 square feet during the reported period, up from 549,000 in the pcp. It currently operates 67 retail operations, down from 69 in the pcp.

    While the company demonstrated good growth for the quarter, its CEO, Gary Friedman, pointed out that the company's performance for the year would be largely determined by events in the upcoming third and fourth quarters.
    The continued momentum of our core business, coupled with the launch of RH Modern and RH Teen, and the opening of four next generation Design Galleries later this year, gives us further confidence in our financial outlook for fiscal 2015. We are increasing our adjusted net income guidance for fiscal 2015 to growth in the range of 33% to 37% - well above our long term target of mid to high twenties - and now expect net revenues to grow in the range of 16% to 17%. While still in the early stages of building RH into the leading home brand for the luxury customer, we are well on track towards our long-term goal of US$4 billion to US$5 billion in North American sales, mid-teens operating margins, significant free cash flow and industry-leading return on invested capital.
    Restoration Hardware's expansion plans

    In response to a question at the investment analyst presentation, Mr Friedman explained some of how the company developed its strategies:
    We go through two significant strategic reviews in the company a year. And as we go through those things we always have ideas that get surfaced. Current things we're working on, new things we're working on, new things that come to the table, as thoughts connect we see new opportunities and new businesses. And we go through a very rigorous strategic process here, where every idea is dimensionalized and valued based on its financial value, its strategic value and its emotional value.
    And so the financial value to the company is that sometimes a more obvious one, what is the revenue value, what is the earnings value, what is the cost reduction value, what is the efficiency value, when we think about the financial value to the company. Then we go into the - we rank everything on strategic value. How does it position us in the market? What competitive - how does it create competitive differentiation? And how does it position us long-term to win? And so we go through many discussions around that. We try to value things strategically, and then we try to value things emotionally. And emotionally, as it relates to two constituencies, one, our consumers had is what we're doing? How will it connect with consumers? How - why will they care about it? And will they connect to it emotionally?
    And two is our people. How will our people connect to this choice, this initiative, this strategy, because to get great people and to get great people to do great work, they have to really care about what they do. We would like to say inside, I mean, I shouldn't say this publicly. By now I guess, I can't, okay. But we - they have to give a blank, right, about what we're doing, and they have to feel connected and passionate to it.
    Online

    Mr Friedman adamantly defended RH's offline-first to retail investment in a presentation video that accompanied the results.
    Many investors and analysts are seduced by the notion of a capital-light retail strategy and completely overlook the fact that the ongoing advertising expense to market an invisible online store is an unproven, and we believe, unsustainable model.
    ...
    Shifting transactions from one channel to another does not change the economics. We know of no store-based retailers that significantly increase their operating margins are growing online faster than retail.
    ...
    While our model might be capital-heavy it is also earnings-heavy, which we believe will prove to be significantly more valuable than a capital-light, earnings-light model.
    The Australian connection

    As part of the Restoration Hardware range, outdoor furniture from Australian designers Nicholas and Harrison Condos launched a series of outdoor furniture settings for the brand.
    Outdoor furniture for Restoration Hardware from Nicholas and Harrison Condos
    Companies
    Mythbusters duo star in Dulux campaign
    The same campaign is being rolled out in new Zealand
    AdNews
    Video of the Wash&Wear brand at a Bunnings store
    Mythbusters re-enact scenes from the Breaking Bad TV series
    Subscribe to HNN weekly e-newsletter
    Dulux has recruited pop-scientists from TV show Mythbusters to be the face of the company's biggest advertising campaign in almost a century.

    The four 30-second TV commercials, created by PR agency Communicado Marketing Communications, are a major change in direction for the paint maker. It had been using an Old English Sheepdog as the brand's mascot and star in ad campaigns for 50 years.

    Mythbusters stars Jamie Hyneman and Adam Savage spruik the new Dulux Wash&Wear paints by performing science experiments to test the durability of the range.

    Dulux Australia's marketing director, Murray Allen, said the company's new range represented a "huge leap in technology" and using the Mythbusters duo are the "perfect choice" to align with the innovative nature of the product.

    Hyneman and Savage, who are famous for challenging the myths, beliefs and rumours in science - often creating mayhem in the process - said there was "real alignment" when approached to participate in the campaign. Savage tests the endurance of the paint by drenching it in red wine and drawing on it with markers. He said:
    In our characteristic style, we jumped in with both feet and found playful ways to challenge the Dulux claims.

    Hyneman and Savage, who filmed the campaign in San Francisco, developed the scenarios, co-wrote the scripts and designed the machines.

    In addition to the 30-second TV ads, Dulux will air 15-second versions, while the full versions of the videos will appear on YouTube and on a dedicated webpage duluxtested.com.au.

    You can view the campaigns here:




    Companies
    GWA Group FY 2014-15 full year results
    GWA Group continuing operations for FY 2014/15
    GWA Group
    GWA Group consolidated reported results for TY 2014/15
    GWA Group revenue and normalised EBIT
    Subscribe to HNN weekly e-newsletter
    Australian building fixtures and fittings company GWA Group has released its results for FY 2014/15.

    As with several companies in the home improvement industry, the results for GWA are something of a tale of two companies. During the 2014/15 financial year it divested three divisional operations, and re-focused its operations out of manufacturing.

    The divisions divested were Brivis Climate Systems, the Dux Hot Water business, and Gliderol Garage Doors.

    Brivis Climate Systems was sold to Japanese company Rinnai for $49 million. The sale was announced in December 2014, and finalised in early February 2015.

    Dux Hot Water was sold to Japanese company Noritz Corporation for $46 million. The sale was announced in November 2014.

    Gliderol Garage Doors was sold to Reliance Doors in July 2015 for $7 million. GWA purchased Gliderol for $42 million in 2010.

    In addition to these changes, GWA has also closed a number of manufacturing facilities, and will instead rely on the importation of product for its bathroom and kitchen operations from low-cost production regions, such as China. The closure of its manufacturing facilities at Wetherill Park, New South Wales and Norword in South Australia resulted in GWA incurring a one-off restructuring charge of $39.3 million.

    To further add complexity to this time of transition, GWA is set to lose two of its long-term executives. Les Patterson, the chief executive of GWA's bathrooms and kitchens business has left as of 30 June 2015, after 11 years with the company. GWA's well-respected CEO, Peter Crowley, will retire as GWA Group managing director on 30 June 2016.

    Mr Crowley's replacement has already been located and hired. He is Tim Salt, whose previous position since 2008 was as managing director of Diageo Australia and New Zealand, a beverage company.

    Mr Salt joined the GWA Group on 7 September 2015 as executive general manager of GWA's bathrooms and kitchens business. He will replace Mr Crowley as managing director on 1 July 2016. Mr Salt has a background with US-based Pepsico and Australia's Lion Nathan.

    In addition, the company appointed a new chief financial officer, Patrick Gibson, in April 2015.

    Thus not only has the FY 2014/15 been something of a transition year for the company, but FY 2015/16 is set to be another transitional year as well.
    Results

    To accommodate this, HNN is presenting two sets of numbers for the company. The first set of numbers relates to its statutory performance, that is, including both continuing and discontinued operations.
    GWA Group consolidated reported results for FY 2014/15

    The second set of numbers reflects results for continuing operations.
    GWA Group continuing operations for FY 2014/15
    Overview

    While the company is overtly optimistic about its future, the reported numbers provide some cause for concern. In particular, the doors and access systems part of the business seems to have increased sales, but its EBIT has not kept pace. This is partially explained for FY 2014/15 by a one-off increase in stock provision for its Gainsborough business.
    GWA Group revenue and normalised EBIT

    In answer to an analyst's question during the presentation of the results, Mr Crowley defined a rough share of the markets in which the company competes.
    In terms of the demand drivers of our business, as I've said we're of the view that commercial activity is about 12.5% of their our business. The real driver of the business is what we call the replacement and renovation market which ranges somewhere between 50% to 55% of demand for our products and the remaining number is what I would call the dwelling well in construction which can be split between detached houses and medium density and high rise. That runs at around 33% to 35% of demand for our product.

    In regards to the above, the company has commented that it has seen a lag in demand, which it partly puts down to demand for its products as being heaviest during the completion stage of dwelling construction, the "final fix". However, other commentators believe that GWA's market share has been eroded significantly, and that even if sales do pick up in the near future, they will still lag past performance.

    GWA sees the statistics around new dwelling activity to be very encouraging. In its presentation to analysts it supplied this slide, based on statistics from analyst firm BIS Shrapnel:
    New Dwelling Activity - 12-month moving annual

    Mr Crowley discussed some of this expectations for the housing market in response to a question from an analyst at the results briefing:
    Certainly that market [renovation] has been positively anaemic for some time. It hasn't seemed to rebound and I think we all would have thought with rising house prices [it would have]. But I might add that I think we're all aware that the real driver of the rising national rising house prices has primarily been Sydney. And Melbourne. Queensland has been much lower and the other states are much lower so probably more a Sydney/Melbourne thing.
    But the renovation activity has not been that strong. I would expect that over the coming years we could expect to see that improve; there's a view that about every fifteen years or so houses need to be done up. The last big construction boom was in the early 2000s, so probably a lot of those houses that were built then are coming up to a freshen up time. So I have a view that 2017 to 2018 onwards, we actually might see some reasonably good activity on that front but it certainly in the last year or two has been pretty ordinary.

    The company presents itself as being very interested in innovations, with plans for a number of new products that it hopes will boost its market share. In response to an analyst's question at the results presentation, Mr Crowley provided some detail to these plans.
    I think there's some really good opportunities for us in terms of new product development and innovation around products, around digital. That's where we see a significant opportunity and that's where we are really giving our focus.
    There's quite a lot of new things coming through the line. What we've got coming on pretty much as we speak is a lot of new taps. I mentioned earlier we saw tapware as an area where we can get growth and we have a range of new product. Really more product styles, to be honest with you, than new technology coming through in the tapware area.
    If we go into the other parts of the bathrooms and kitchens business we have a range of new ceramic products and I don't really want to get into much more than that, other than that they are in regards to toilets.
    But we see some new, broader bathroom solutions that ... I probably still a little ways off but will need some investment to support.
    ...
    The other thing is we're continuing to invest around digital strategies to reach more and more of the decision makers in our target markets, and finding how we how we can engage digitally with decision makers.

    In terms of general markets, Mr Crowley also sees the commercial market as a good source of revenue:
    Just addressing your question about the non-residential market. I'm actually quite optimistic that we will see some growth in that sector. Our commercial order books are at record levels. We've got a couple of very big projects coming through particularly around Sydney as you might expect. And I'm certainly very confident given the order books we have and the work we're quoting that we will see upswing and activity in the non-residential sector.
    Bathrooms and kitchens

    GWA is responsible for the following brands:
    Owned brands
  • Caroma
  • Dorf
  • Fowler
  • Stylus
  • Clark
  • Distributed
  • Hansa
  • Schnell
  • EMCO
  • Virtu
  • Sanitron
  • Products and markets

    GWA's Caroma brand has a fine history of innovation. It introduced one of the first two-button dual flush toilet systems in 1982, and also developed lower-capacity effective flushing mechanisms, such as Smartflush. It was also the first company to gain a Water Efficiency Labelling and Standard (WELS) rating of 5 for a toilet suite, and the first to gain a WELS rating of 6 for a urinal.

    Its primary markets are renovations, new residential dwellings, replacement systems and commercial usage. During the results presentation in response to a question from an analyst, GWA's chief financial officer Patrick Gibson, offered some information about the relative market share of products in this division:
    Sanitaryware is obviously the largest segment. That's probably roughly about two-thirds of the of the business. The next largest then is tapware. Which obviously grew here. I think that our net sales are just under 8%. And then kitchen/laundry and bath/spas, which are relatively small in terms of volume and revenue.

    Mr Crowley followed up these remarks:
    We talk about baths and spas. Baths as a product category seems to be in decline. Particularly with the move towards more apartments so that seems to be a declining and pretty small market to be honest with you. Kitchen and laundry, what we're talking about there is kitchen sinks and laundry tubs. Kitchen sinks seem to be by far the biggest part of that business.
    Tapware is as big a market as sanitaryware in total dollar opportunity. Our place in the tapware market is somewhat lower than where we are with sanitaryware and that's been an area where we think we could grow and we see significant opportunity going forward.
    When I talk about tapware, I'm referring to the one-piece and three-piece tap you might find in either a kitchen or a bathroom or a laundry, but also showers and products like that. Also, the sort of accessories that go with taps and showers. That's a pretty big market actually and it's a great market opportunity. When we talk about a sanitaryware we're talking about toilets. We're talking about ceramic and plastic cisterns, we're also talking about basins and that's an area where we are very strong...

    Asked by an analyst at the results briefing about the surprisingly flat volumes in sanitaryware, Mr Crowley replied:
    The main factor that we've identified in that category probably relates more to plastic systems to be honest, where we have seen a number of homebrand-type plastics come into the market. That would be the primary impact on the volume upside that we've seen in the business. In terms of other areas in that category, we've been performing pretty well.
    Doors and access systems

    GWA is responsible for the following brands:
    Owned
  • Gainsborough
  • Renovator
  • Trilock
  • Austral Lock
  • Distributed
  • Salto
  • Hillaldam
  • Eco Schulte
  • Service
  • API Locksmiths

  • As part of a response to an analyst's question at the results presentation, Mr Crowley indicated the company would pursue the development of digital security devices, as well as standard manual locks.
    When we go over to door and access there are some very clear product opportunities that we're pursuing around locks whether they be manual locks, but also electronic access opportunities. So those things will be progressively coming through from later this year through the next 18 months or so.
    Analysis

    The two words that seem to describe the approach GWA has taken to radically altering its business are "determined" and, actually, "courageous". The company has taken some very tough decisions, and taken them all at once, thus giving itself the best chance of improving its circumstances. No doubt, this has not been easy to achieve.

    That said, one of the difficulties that any company faces in performing a sharp change in direction is that its new strategies are formulated by the same people who formulated the previous strategies. In the case of GWA it does seem as though the pace of development post-change is more suited to a manufacturing-based company, even though that is now a minor part of GWA's business activities.

    The difficulty is that this slow pace reduces the amount of time available to a company in finding its new direction. Technology-based products in particular often need to go through several revisions before they work successfully in the market.

    That said, the bathroom, kitchen and home access are areas where technological innovation will play a big part in the future. For example, there is US bathroom and building fittings company Kohler's surprise hit "Moxie", which places a Bluetooth-enabled speaker in the showerhead.
    Kohler's Moxie Bluetooth speaker showerhead
    Products
    Dewalt, Milwaukee make smart tools
    Screenshots of the DeWalt App
    Tool Guy
    The Tool Guy provides some more in-depth information on One-Key
    These systems help to replace scanner-based tools
    Click to visit the HBT website for more information
    Technology is set to play an increasing role in the development of power tools. The industry is just at the beginning of bringing "internet of things" (IoT) developments to these tools, enabling a range of functions that will help make construction projects and worksites more efficient, and possibly open up new business opportunities as well.

    Two of the companies at the forefront of this kind of development are the Stanley Black & Decker-owned DeWalt, and the Techtronic Industries-owned Milwaukee Tool. DeWalt has launched a range of 20-volt batteries of two-amp and four-amp capacities that can be controlled by Bluetooth connection with a smartphone app. Milwaukee Tools is set to launch a range of innovations in the near future. It has announced its One-Key system which delivers a range of computing cloud-based functions directly to its tools. MilWaukee has also announced an expansion of its battery range to include much more powerful options.
    DeWalt: batteries that stay in touch

    On any construction or reasonably-sized worksite, the effective management of batteries for cordless tools is essential to keeping things running smoothly. With a mix of privately-owned tools from sub-contractors and the tools owned by the main contractor, keeping track of everything can be tough. Added to that is the need to keep a constant supply of freshly-charged batteries available, so that no-one is held back from completing a task by a flat battery.

    The DeWalt batteries provide a mix of facilities to help site managers achieve better efficiencies. This new line of batteries has been provided with an inbuilt Bluetooth-based system which enable managers to monitor the status of a battery. Each battery is "paired" with DeWalt's mobile app, running on a smartphone or tablet. The app then provides a menu of functions for controlling the battery.

    There are six basic functions provided by the app to control the battery: charging, "fencing", enable/disable, identification, lending and alerting.
    Charging

    The DeWalt app enables the manager to check on the charge status and general condition of any battery at any time. Factors that can be checked include:
  • Remaining charge
  • Is the battery currently charging?
  • Has the battery completed charging?
  • Battery temperature (is is overheating?)

  • Managers might, for example, notice that one particular workgroup is about to experience low-charge on most of its batteries, and dispatch a runner with a fresh set to avoid a break in work.
    Fencing

    The DeWalt app enables the manager to set up a "virtual fence" around the worksite. Typically, this means that if a battery leaves that worksite, it will be automatically shut down completely, rendered unusable, until it is returned to the site. The app can also alert the manager at the time the battery crosses the virtual fence.
    Remote enable/disable

    Managers can choose to disable a battery at any time, and re-enable a battery at any time. This can be applied to individual batteries, or to all the batteries on the worksite.

    A typical example of use might be to disable all batteries at the end of the workday, then re-enable them at the start of the next workday. This would prevent their use elsewhere, and also ensure that over-keen workers did not, for example, violate noise restrictions when commencing work in the morning.
    Identification

    It is frequently the case that the identity of a battery can be difficult to determine. Stickers, barcodes and even RFID systems can experience accidents that render then unusable. The DeWalt app enables the manager to identify a battery by causing its built-in identity light to flash on and off.
    Lending

    The DeWalt app enables managers to set up a battery to function for a pre-determined amount of time. Thus the battery can be loaned out for a day or two days safely, as at the end of that time it will shut itself down, and be useless until its owner re-activates it through the app.
    Alerts

    The DeWalt can be set to issue alerts whenever a battery needs to be charged, or when it leaves the Bluetooth range of its paired mobile device. There is also an alert for charge completion.
    Milwaukee Tool: direct management

    While DeWalt has taken the clever step of concentrating on the rechargeable battery as the key component of the power tool, Milwaukee has taken a slightly more comprehensive approach by concentrating on the actual tool.

    Its One-Key system is a computing cloud-based system. This means the information that relates to the fleet of tools is not stored on individual mobile devices, but instead centralised on internet-connected remote computers.

    Milwaukee Tool is progressively rolling out various features of One-Key. There are three core features that are planned at the moment: inventory management, tool reporting and tool control.
    One-Key inventory management

    This feature will become available during September 2015. This creates a central place where users can manage their total inventory of tools, including both Milwaukee and non-Milwaukee tools. As it is cloud-based, this central database can be accessed through Milwaukee's mobile app, but also through a browser interface on any laptop or desktop computer.

    As One-Key equipped tools are released, these will automatically synchronise with the inventory management system, making it easy to keep track of tools on a worksite.

    The platform is free to use, and enable the storage of comprehensive information about the tools, budgeting for the future, and assignment of location and "ownership" of each tool, ensuring there is accountability.
    One-Key tool reporting

    This feature will become available during October 2015. It will be activated in conjunction with the introduction of Milwaukee's Force Logic 6T Utility Crimpers. These will be closely connected to the overall system, providing data about the use of tool, and enabling management to track the success and timing of electrical terminations made with the crimpers. One-Key will also keep track of service intervals.
    One-Key tool control

    This feature will become available in January 2016. It will be launched in conjunction with the launch of Milwaukee's new M18 Fuel drilling and driving products. Managers will be able to build profiles for specific scenarios of tool usage, altering settings such as torque and speed. This will make it easy for the actual tool users to select exactly the right profile for a specific job, ensuring the work gets done to specifications, and that the tool is not over-stressed or damaged.

    These profiles can be selected on the actual tools themselves, with four different settings available.

    Tool Craze has posted a video showing the system in operation:

    Tool Craze website
    Milwaukee Tool batteries

    In a separate event, Milwaukee has announced it will soon release an even more powerful 18-volt battery to completment its current range of batteries with up to five-amp power. The new battery will be a nine-amp unit, which the company says will deliver more power and provide more battery uptime.

    The battery packs are, of course, slightly larger, and make use of six series of three batteries each to deliver the power. They are designed for use on larger power tools with greater demands, such as Milwaukee's "Hawg" line of hole-boring tools and large circular saws.

    [Continues in Full Text]
    Products
    HomeKit compatible switches from iDevices
    HomeKit devices launch
    CNET
    Thermostat provides multiple options
    iDevices Outdoor Switch
    Click to visit the HBT website for more information
    With the launch of iOS 9 on its mobile devices, Apple's home automation software, HomeKit, has launched as well. One of the first companies to provide a HomeKit-compatible system is iDevices, which is launching its product line in US-based big-box retailer Lowe's Home Improvement.

    A preview of iDevice's products was available at the Las Vegas Consumer Electronics Show in January 2015, but the company has now launched its final retail models. The three main products that are available are the Switch, the Outdoor Switch, and the Thermostat.

    The Switch is for indoor connection and control of devices, and the Outdoor Switch is a "ruggedised" version for external use. Beside offering automated control, both switches also enable the user to monitor current energy usage, and historical energy usage, providing a convenient weekly summary.

    The Thermostat is a more complex device that provides features such as a standard weekly schedule of heating and cooling, as well as user profiles which can be set up to adjust room temperatures to suit whoever is home at the moment.

    Combined with HomeKit running on a device updated to iOS 9, all of these products can be controlled through speech, utilising Apple's artificial intelligence-based speech analysis system Siri. For example, the system can be "taught" to respond to the command "Siri, lights out" by switching off all the connected devices at the end of the day.

    The mobile device app that enables the system will also work with a number of other Apple HomeKit-enabled devices. This includes the Schlage Sense Smart Deadbolt, providing a security option.

    The Switch will retail for US$59.99. All the products from iDevices will be available at Lowe's by the end of September 2015, and will also be sold online from the iDevices website.

    iDevices also manufactures a number of thermometers for use in grilling and cooking that are not currently compatible with HomeKit.
    News
    HI Weekly - your weekly HNN magazine
    HI Weekly download
    HI Weekly
    A sample page from HI Weekly
    Previous week's edition of HI Weekly
    Click to visit the HBT website for more information
    HNN is pleased to announce the launch of its weekly PDF magazine, HI Weekly.

    HI Weekly contains all the content from the previous week on the HNN website, along with a few extras.

    The PDF is formatted to A4 size, making it easy to read on screen, or to print out and share with others.

    To download the latest edition of HI Weekly, just use the link below:
    http:/hnn.bz/HI-Weekly-current.pdf

    The above link will be updated every week.

    The link to download the archived version of this week's HI Weekly is:
    http://hnn.bz/HIWeekly-sept-16.pdf

    The file size for these downloads is usually between 6MB and 8MB.
    News
    HI News Vol. 2 No. 1
    Download the latest HI News, issue number one
    HI News Vol. 2 No. 1
    Bunnings impending takeover Homebase could represent a slow start but strong future
    Woolworths' Masters folds
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/hinews-2-1.pdf

    In the first edition for 2016, Bunnings' entry into the UK market and its impending acquisition of Homebase is dissected and analysed. What initially seems like a puzzling move could be a sound strategic move by the big box retailer.

    We also take a look at Woolworths exit from the home improvement market with its Masters chain and what it means for the industry. Related to this story are a summary of store developments that will be abandoned and the impact on property companies. Hills will also maintain its royalty deal for its products that were distributed through Masters and Home Timber & Hardware stores.

    Our indie store update includes news about Mt Lawley Hardware in WA, the HTH Group Conference coverage and Mitre 10 New Zealand's latest web series. Other retail stories include Home Depot's involvement with a start-up gardening company; Lowe's partnership with Google; and the growth in online DIY sales in the UK.

    Plus the latest products to hit the market including the Axis Gear, a genuinely innovative home automation product for window shades and a round-up of additional home improvement stories in hot links.
    Bigbox
    Kingfisher conjures new transformation
    The long journey to renovate a bathroom, as seen by Kingfisher
    Kingfisher
    Roadmap for transformation at Kingfisher
    Changes to teams at Kingfisher
    Click to visit the ITW website for move information
    UK-based European-wide big box home improvement retail Kingfisher held a Capital Markets Day on 25 January 2016.

    The main purpose of this event was to release details of the company's five-year transformation plan. This plan is the outcome of the review process that Kingfisher's CEO, Veronique Laury, instigated shortly after she joined the company as CEO in early December 2014.

    In 2015 Ms Laury implemented the first step of what would become a comprehensive plan to rejuvenate and realign Kingfisher. That stage is called "One", or "One Kingfisher". Its primary goal was to take the tangled network of different IT systems that underpinned Kingfisher operations, and transform them into a single, unified system.

    Additionally, the company began work in 2015 on reducing the number of stock-keeping units (SKUs) that it has to serve product niches.

    The transformational steps outlined during this event were based on the review process. This review extended to Kingfisher's internal operations, its relationships with suppliers, and interactions with customers. Beyond that, it extended into the extensive European community that the company serves, seeking to determine the main drivers for home improvement and DIY.

    As Ms Laury noted in her opening remarks, a main driver of the need for transformations has been that the company has failed to take advantage of one of its principal advantages in the market: Scale. As a consequence, much of the focus of the report is on the unification of processes, product lines, internal operations and suppliers. Another consequence of scale is that the company has plans to move into producing and marketing "own brand" goods in a wide range of categories.
    Financing change

    The transformation program is expected to cost in terms of capital expenditure (capex) GBP360 million during 2015/16, and GBP500 million for each of the three subsequent years. It is projected that 36% of this capex will be spent on existing stores, 15% on new stores, 17% on IT and 19% on transformation process. Screwfix will receive 6% for its expansion.

    Cash costs are expected to reach GBP800 million, with GBP480 million spent on developing the unique and unified offer, GBP210 million on developing digital capability, and a further GBP110 million on improving operational efficiency.

    The expected return on this investment will be an annual profit increase of GBP500 million, consisting of GBP350 million for the improved offer, GBP50 million from digital, and GBP100 million from operational efficiencies. This is expected to last for some time.
    Context

    Ms Laury began her remarks by defining what the overall, external context the company operated in.
    Customers/DIYers

    She began with the customers, which she regards as the primary focus of any strategy.
    75% of the European populations have been visiting a home improvement store last year, and 60% of the population in Europe has done a home improvement project last year ... They are everybody, and sometimes I'm hearing, the 'young are not doing home improvement anymore, the old are not doing home improvement', so what are you doing?
    This is not true. Those people are everyone; they are 50 female, 50 male, 42% of the population is over 50-years old, and it is almost everybody who is doing home improvement.
    The only thing which is probably a little bit different from the average which has slightly more influence, because to do home improvement, you need to have a little bit of extra money.
    Talking about money, and I won't bombard you with numbers, but really few numbers that I do have in mind, because it's really important to understand our strategy.
    ...
    And what is important is 60% to 75% of people are doing DIY, not home improvement, to save money because they are short of resources, and sometimes it takes them months and years to complete their home improvement project.

    While she sees a large market for home improvement, Ms Laury also admits there are considerable obstacles, particularly when it comes to proficiency and skills.
    But thankfully, people are brave and they are putting themselves in having a go, because to improve their home is so important to them. And what they do is they are building a team around them. And this is where the third circle is starting to happen. It's what we call the helpers.
    Who are those helpers? First, because we have said that people are short in terms of money, resources, they are looking for the free work force.
    So, if the brother-in-law, father-in-law, that is skilled, the retired neighbour, which has done lots of home improvement in this life. And they are looking for that free work force to help them and they have a team around them.

    A natural extension of this, according to Ms Laury, is that people will seek further help from tradespeople. She is very clear that there is not a developed dichotomy between DIYers and people who employ trades, but rather a continuum:
    And then you have the pros that are entering the game. When you have big structural work, people don't feel confident to do, or if there is a part of the home improvement project that they can't really cope with, then they have the pros. They have the pro for what?
    For certain materials and tools, for their expertise and for their guarantee as well, and you will have seen the story of a customer that almost when the pro is getting it, it becomes part of that circle and there is a trust, relationship, that is starting to establish.
    The pros, and I want to insist on that, are part of that ecosystem. They are not on the side. And when you have them, 60% to 90%, according to the country, of the light trade businesses are shopping in home improvement stores. And when you are even asking the question, are you shopping on your own in those stores, they say no. We are bringing our customer with them. This word about those things are separate, they are not communicating to each other, is not true at all.

    What emerges from the above comments is something that is well known in the home improvement industry: even what are quite well-defined and very common projects, such as redoing a bathroom, contain endless complexities. Kingfisher research indicates that a bathroom project will likely require over 25 individual steps, and that it can prove so frustrating that 39% of those who start such a project give up at some stage.

    To be successful, Kingfisher believes it needs to provide direct help to its customers as they make these home improvement "journeys". The company has defined nine separate stages that occur in most projects:
  • Needs and triggers
  • Inspiration and visualisation
  • Planning and evaluation
  • Purchasing and delivery
  • Building and installation'
  • Use and enjoy
  • Maintain and improve

  • In terms of helping customers as they make their journeys, Kingfisher sees digital assistance as crucial to helping customers complete this journey, and intends to map digital processes against every stage:
    Digital assistance on the journey

    As Ms Laury put it:
    Those tools start with digital. Almost every home improvement journey is starting on digital. And whatever the age of the customer, whatever the country, it's true across the piece. Just as an example, the third of Pinterest's pins are DIY related, and 52% of Pinterest users are looking for DIY.

    What is being planned is a comprehensive, end-to-end system. As Kingfisher's chief digital and IT officer, Steve Willet, explained:
    A typical bathroom project is actually a wave of things. So, you've got to do tiles, you've then got to do white goods, you've got to do taps and showers and you've then got to do all the accessories that goes with that. It's not surprising, then, that people, 39% of people don't get through the process from end-to-end.
    I think the other key thing about this is, quite frankly, nobody in the home improvement industry has cracked it. What you've got is a lot of people have got point solutions, so you've got people who do tile calculators, you've got people who basically got how-to's, but nobody has put it together in an end-to-end process that is seamless for the customer, and that's where we believe that there's massive strategic benefit going forward.
    The products

    The Kingfisher strategy as regards its products references these same points. The first task of the new product strategy is to unify supply, so as to make better use of the scale of Kingfish. Kingfisher's chief offer and supply chain officer, Arja Taaveniku explains:
    The offer is today largely steered by our suppliers; meaning, also, that we are not particularly different. We are looking the same as other retailers. Our exclusive own-brands, because we do have exclusive own-brands, they stand for approximately 20% of the sales. But they sit within each operating company, and it's even like that, that if, for example, a Diall paint brush in customer hands is not the same as a Diall paint brush in B&Q.
    We have thousands of suppliers supplying Kingfisher, with relatively small volumes and we haven't created the conditions for those priors to set up highly efficient production times.
    This means that our buying scale of roughly GBP7 billion is largely untapped. So, we are heading into the new Kingfisher where we will have a unified offer; we will have the same products everywhere presented in the same way.

    To make a task such as bathroom renovation simpler and easier, Kingfisher is moving to developing its own products. Ms Taaveniku explains how Kingfisher is seeking a direct advantage through its intellectual property:
    And we have, during this past six months, really been doing all those home visits. We have also done a deep dive in customer insights on specifically our two ranges; bath and outdoor. And we have a very firm knowledge platform now on how bathrooms looks like, how outdoor environments in people's homes look like.
    ...
    We have also done that on those 20 categories, and for example, the investigation of the ergonomics of paint brushes and really understanding the customer needs. These knowledge platforms, they enable us to own our intellectual property: the design and the quality and the specifications.

    This use of their own research then brings added benefits in the production of the products:
    And that allows us to control our value chain. We will control the end-to-end process, all the way from customer needs on the drawing table, contracting the products, through the factories, through the distribution network, all the way to customers.
    And when you control that, and when you have full visibility into that value chain, you can together, with the suppliers, reduce all unnecessary costs that shouldn't be there.

    This, in the end, ties back into the main purpose: to make doing home improvement easier for customers:
    The bathroom journey today, it takes too long. It is too complex to manage, I'm sure a lot of you have experienced from this. It's too expensive for regular people's wallets. It has a lack of functionality, differentiation and design.
    And tomorrow, the Kingfisher bathroom will be easier; it will be more affordable, meaning reaching out to many more customers. It will be fit for purpose and it will be functional with adequate storage, because we know that one of the main pain-points for people in their bathroom is to fit in all the stuff they have at home.
    And it will be unique, again, with the design and quality owned by Kingfisher. There is no manufacturer that is doing this today, because suppliers are supplying sanitary taps, furniture, tiles, but none of the manufacturers are looking on the complete bathroom. And none of them are really basing that, or reading customer insights as we can do.
    ...
    We will design to cost, meaning that going forward, we are going to have a target retail price on every new product we stock. And then we will design that value chain that I talked about before accordingly to hit that target retail price, and that target retail price will always be based on customer affordability.

    One product she pointed out as demonstrating the benefits of this process already was the humble toilet seat.
    In terms of quality, we are working hard on both lowering the cost price reduction, but increasing quality. And when we say that we want to create conditions for good homes, for people's good homes, we mean in big and in small. And one example here is that we have unified toilet seats.
    And, you know, if you close a regular toilet seat, it would say either clunk or bang, depending on the material of toilet seat. We are selling lots of toilet seats in Kingfisher. And the majority of those unified ranges that are coming later this year, we will have a soft closing. So, it doesn't say clunk or bang, it just 'mmmm' quietly. It is good.
    We really mean this; it's in big and in small with the good homes. It's in everything in the home. [Its] those small things that just make it better.

    In answer to an analyst's question, Ms Taaveniku indicated that the first range of these new products will be seen in stores in March 2016.
    Analysis

    HNN has written in the past about how the centre of influence in the home improvement industry has steadily moved from manufacturers and distributors of products to retailers. Where once manufacturers determined what products retailers would stock, how much they would charge for them, and what discounts were acceptable, today it is retailers who determine their own terms of sale, and heavily influence the design of products for the market.

    The Home Depot and Lowe's in the US are well-known for working closely with their suppliers. Home Depot has, in the past, designed its own bucket, and Lowe's often gets involved very early in the production phase of goods it will eventually stock.

    In Australia, it is presumed that Bunnings has a high level of input into the goods that companies such as Ozito (power tools) and Kaboodle (flat-pack kitchens) produce.

    The transformation Kingfisher is undergoing over the next five years will take this influence one step further. They have come to understand that one of the major blockages for people who want to do their own home improvement is the difficulty of integrating different systems. HNN has also commented in the past about how kitchens seem to be the only integrated room in the house, and that bathrooms might benefit from similar set systems.

    What Kingfisher is doing is, of course, quite risky. It is also a process that is really inevitable, in terms of a 15-year timeframe. The risk is really that they are the first retailer to undertake this extension into design and production. However, that risk is balanced by considerable reward.

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    Subscribe to HNN weekly e-newsletter
    Hills will enforce an exclusive licensing deal for its Hills Hoist brand that it struck with Woolworths in late 2014. The company is now better known for its technology services but its portfolio of legacy brands includes the Hills Hoist clothesline.

    Hills signed a deal in December 2014 for Woolworths to take over the manufacturing, marketing and sales of more than 240 Hills products, including its iconic Hills clotheslines. The bulk of those items were to be sold through Masters and Home Timber & Hardware stores.

    After the company signed the 20-year distribution agreement, the Hills Hoist products were delisted from Bunnings.

    Under the agreement, Woolworths pays Hills a guaranteed minimum annual licence fee for at least the next seven years. This gives the supermarket group exclusive rights to the Hills brand both here and overseas on about 240 products including garden products, clotheslines and garden sprayers.

    But Woolworths' announcement that it would seek to sell or liquidate Masters could ruin Hills' distribution and sales expectations. If Masters and Home Timber & Hardware are sold, Woolworths will have less need for the Hills brand.

    Hills chief executive Grant Logan told The Australian that the decision to wind up the Masters and Home Timber & Hardware businesses would not impact Woolworths' obligations under its agreement.

    Logan said the contract ensured Woolworths would still have to make minimum royalty payments of about $2 million a year under their joint venture. He said:
    Woolworths takes the revenue for the products (they sell); our revenue is effectively the guaranteed royalty.

    He conceded Hills would benefit from sales driven by Woolworths in the future but this was "some distance out".

    A spokeswoman for Woolworths said the retailer was committed to the deal with Hills.
    Woolworths has said it will ensure we do the right thing by those we have agreements in place with, as we progress towards exiting from the home improvement JV.
    We will continue to be stock these products in Masters and Home Timber & Hardware throughout this process. It should be noted that Hills products are not exclusive to Woolworths group stores and are retailed through Mitre 10 and Bing Lee, among others.

    Logan said the royalty stream earned from the deal with Woolworths was tiny in comparison with its other business activities.

    Related:
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    Retailers
    Indie store update
    WA-based Mt Lawley Hardware stays open in the face of competition
    HNN Sources
    Andersons Hardware prepares for closure
    Glenfords Ipswich closing its doors
    Click to visit the ITW website for move information
    WA hardware store offers old-fashioned service with a smile; Andersons Hardware profiled in The Weekend Australian as it closes; and Glenfords Ipswich tool store is closing its doors.
    Hardware store bucks the trend

    Some independent retailers have survived by doing what they have been doing for decades. For Glen and Lisa-Jane Stagg, owners of Mt Lawley Hardware, survival has meant watching about 100 independent hardware stores close down, including four in the past year, in the face of Bunnings.

    The store is also operating in a time where basic DIY is disappearing and people don't fix things like they used to, according to Glen Stagg. He told The West Australian: "Furniture these days you don't sand back and repaint, you throw it out and buy a new one from Ikea."

    Stagg credits service, expertise and support from the community for keeping the lights on. He said: "We've got good products and we try not to sell the cheap junk that you get in some stores. We'll hang in there as long as we can.

    "There's not quite the loyalty there used to be. People don't go to the hardware store. They go to Bunnings - that's what they say. We're hardware. We're not a supermarket."
    Andersons Hardware reflects on closure

    Owner of Andersons Hardware in Naremburn (NSW), Wes Waldock, says changes to parking outside his store have dealt a killer blow to the shop, as well as the popularity of big boxes, which offer affordability, an endless range and, importantly, plentiful car parking.

    But he can also feel a revolution coming. Waldock told The Weekend Australian: "There'll be a resurrection. The big guys will stop carrying things that aren't profitable once they've got a monopoly, and I think the smaller hardware stores will come back selling more obscure things; better-quality stuff the others won't stock.

    "It's a bit like how good delis and good bakers were reborn when people got over what they could get at supermarkets."

    After 27 years running the business, Waldock is defeated after his own five-year battle with pricing pressures and changing consumer preferences in a sector facing structural change. He said: "I've had a good business, but it's just been strangled."

    The first Bunnings in the area opened in 2000, and the two stores coexisted happily enough for more than a decade, with Waldock deliberately stocking products and ranges that targeted Bunnings' weaknesses.

    Where they carried expensive products, he'd include a selection of affordable items, and where they had a narrow range, he'd offer the works. To this day, the store is known for its extensive offering of doormats.

    He's thankful he didn't follow Masters' lead. He said: "They went into white goods, and that was a mistake."

    Kitchens and cabinetry was another blunder, he said, as they are products requiring a level of product knowledge and customer service many store staff aren't equipped to give. They are also labour-intensive.

    But what advantages he had over Masters and Bunnings were not enough to make ends meet in the end. More recently, Waldock faced additional pricing pressures as suppliers charged independent store owners higher wholesale pieces to make up for losses sustained in bulk contracts to Bunnings, Masters and other chains.

    Other changes have been more unsettling, such as a "supermarket mentality" according to Waldock, in which customers have a habit of frequenting big box stores. He said: "The big guys sell what they want to sell rather than full range, but people won't accept that from me.

    "They'll say, 'why don't you have stock of such and such?' and I'll explain I only keep a limited number because it's not a high-turnover item. But they need it now and they don't come back because you don't have it. But if Bunnings doesn't have what you wanted, they'll always go back -- it's part of the supermarket mentality."

    And then came the parking changes that turned the suburban street into a near clearway. Staff at the store felt the shift almost immediately, but customers didn't mind -- after all, there was a Bunnings five minutes down the road with all the parking they could ever need.
    Tool store exits Ipswich

    Glenfords Ipswich part owner Tony Childs recently had the difficult task of informing his remaining staff that the 30-year-old Queensland-owned tool shop would be shutting its doors. The writing has been on the wall for some time, with the business reducing its staff by 50% over the last year due to a decrease in sales.

    Although the recent opening of Bunnings Warehouse directly across the road arguably had some detrimental effect on business, Childs said he aimed his product range at local tradesmen and it was a lack of construction work that had ultimately broken Glenfords Ipswich. He told the Queensland Times: "...All the development is happening at Ripley and Springfield and they are using out-of-town tradesmen. I've got Ipswich builders coming in here and crying poor because they've got no work.

    "We aimed ourselves at the trade market and Ipswich builders that were employing 20-30 people are now down to two."

    The West Ipswich business was first opened in 1985, with Childs and another part owner taking over in 1997. Childs owns another Glenfords outlet at Gladstone, which he said was still doing well.

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    Google parent company Alphabet Inc. has partnered with US home improvement retailer Lowe's to debut a new mapping technology that will make home makeovers faster and easier.

    The two companies say the technology will be ready and available by mid-2016, the same time that Lenovo Group has said it will put the first 3D smartphone on the shelves.

    Google has developed a 3D mapping technology, dubbed Project Tango, that uses depth sensors in order to recreate indoor spaces, and Lowe's is the first firm to take advantage of the tech giant's efforts.

    Lowe's customers will be able to use the 3D map to see whether specific items from Lowe's would fit within a particular space or room before ordering them online or having them delivered. The companies say it will do away with the hassle of having to input a room's dimensions and measuring out whether furniture and appliances will fit.

    The mapping capabilities will also give consumers a good idea of how the item will look within the room without much effort.

    According to the Wall Street Journal, Lowe's has already been working for months on its app with Google that would render the 3D mapping technology. It is an extension of the retailer's earlier efforts with virtual and augmented reality at its innovation labs.

    It has a home improvement simulator called the Lowe's Holoroom that lets shoppers essentially build 3D models of rooms. Lowe's work with holorooms attracted Google's attention for Project Tango, said Kyle Nel, executive director of Lowe's Innovation Labs.

    There are currently about half a dozen Lowe's stores in the US where customers can use holoroom capabilities using a variety of technologies including Facebook's Oculus Rift and Google Cardboard.

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    An additional round-up of home improvement stories. Baldwin Hardware releases its 70th anniversary door knob; investment company purchases OBI DIY stores in Germany; LG's new hub is a cylindrical speaker with an LCD display but no voice control; and Hive releases smart plug and connected home sensors.

    For further information, simply click on the images provided.
    Commemorative door knob

    Baldwin Hardware, a brand of the Hardware & Home Improvement division of Spectrum Brands Holdings, recently unveiled its 70th Anniversary Commemorative Knob. The knob design features an abstract design of seven engraved rings reminiscent of the age rings of a tree. Each ring represents a decade of Baldwin's history and encases a 70 in the centre of the knob.
    Baldwin Hardware's 70th Anniversary Commemorative Knob
    OBI DIY stores sold

    Rockspring Property Investment Managers LLP has acquired a portfolio of nine OBI retail stores in Germany for a total price of 150 million euros. The acquisition comprises over 112,000sqm of lettable area and includes OBI's 20,000sqm flagship store in Berlin-Zehlendorf as well as a second major store in Berlin, and outlets in Augsburg, Neuss, Siegen, Haiger, Schwelm, Vechta and Dresden.
    German OBI DIY stores sold
    LG's SmartThinQ Hub

    LG's new SmartThinQ Hub looks very similar to Amazon's Echo, the speaker-turned-smart-home-assistant. But unlike the Echo, it has a 3.5-inch colour LCD display. The screen can show users the weather, time, and calendar, and its speakers can stream music via Bluetooth. Its true purpose is controlling "washing machines, refrigerators, ovens, robotic vacuum cleaners, air conditioners, and a variety of sensors".
    LG's launches SmartThinQ Hub
    Hive releases smart plug

    When British Gas subsidiary Hive unveiled it's latest take on the smart thermostat, the company also committed to launching a new a range of motion sensors, light bulbs and a smart plug. It is finally ready to add its Active Plug and Window and Door Sensors to its connected home line-up, with all three products available to buy online.
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    The Masters stores in Canberra face an uncertain future
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    The Hardware Association of SA calls on the State Government to help independents
    The lights are going out at Masters stores around Australia
    Click to visit the ITW website for move information
    A summary of the status of Masters stores across the country. An overview of the stores at Majura Park (ACT); Bendigo (VIC); Chirnside Park (VIC); Bundaberg (QLD); Penrith (NSW); South Nowra (NSW); Ipswich (QLD); Mackay (QLD); Noosa (QLD); Perth and Adelaide.
    Masters at Majura Park

    The futures of Canberra's only Masters store at Majura Park and the five Home Timber and Hardware stores in the ACT and Queanbeyan remain uncertain. Magnet Mart founder Paul Donaghue is unsurprised Masters remained unprofitable, blaming Woolworths' decision to make large stores mirroring the model of American partner Lowe's.

    Donaghue's stores were rebranded to Home Timber and Hardware when he sold to Woolworths in 2010. He said the chain ignored his advice on Masters' strategy and store type during the negotiations, choosing instead to make stores 20 to 30% larger than Bunnings.

    He told Fairfax Media: "We told them to go to about three-quarters the size of what Bunnings have and they could put more stores up around Australia. Instead of having 25 hammers they'd have around 18 to 20 hammers and you'd still cover all the classifications of merchandise and also instead of paying $25 to $30 million for sites...you'd pay between $4 and $8 million...which is a hell of a difference.

    "They said they wanted the hardware to develop its own culture, it didn't. In the end they just put the supermarket people in there with their ideas and it didn't work."

    Donaghue predicts the Masters stores will close and Metcash's Mitre 10 will take over the HTH Group. He said: "There is still an opening for a good number two, but with about a half to three-quarter sized hardware store. But they are still inefficiently operated stores, Mitre 10 and Home, because they are mainly family-operated stores that have been kept small for so long it hasn't mattered."

    In the ACT and Queanbeyan, HTH Group has included three Magnet Mart stores in Gungahlin, Phillip, and Queanbeyan since 2010. There is also a Home Hardware Karabar in Queanbeyan and FAW Home Timber and Hardware in Mitchell since 2014.
    Proposed Bendigo site

    Woolworths has been ordered to pay more than $11 million to a Victorian property developer for breaking a contract for the construction of a Masters hardware store. Woolworths and Masters had struck a deal with North East Solution in 2010 to build a Masters store in Bendigo, and then for the retail giant to lease the site for 12 years.

    Victorian Supreme Court judge Clyde Croft has ruled that Woolworths unfairly terminated the agreement after deciding to build on a different site in Bendigo, and must compensate the developer for its losses.

    Woolworths has been ordered to pay $10.875 million to North East solution, plus interest.
    Masters in Chirnside Park

    Masters was to be part of the expanded Chirnside Park Shopping Centre, but it is now unclear whether the works will go ahead.

    On December 22 Yarra Ranges Council approved a planning permit for developer KFT to build a Masters and Dan Murphy's in the suburb of Chirnside Park (VIC). It was hoped the hardware store/liquor shop combo would be up and running by Christmas 2016.

    Cr Andrew Witlox, who strongly supported the development, said he had been in contact with KFT and at this stage, plans had not changed. He told the Herald Sun: "A new owner may come on for Masters and pay Woolworths out -- I think a new owner will do a better job than Woolworths."

    Cr Witlox also said if Masters was to pull the pin, the developer would not have to go back to council for another planning permit, provided an appropriate tenant moved into the site.
    Masters Mackay

    Staff members at the Mackay Masters Home Improvement store have been left in limbo along with 7,000 of its colleagues. Woodman's Mitre 10 manager Kerry Wooodman believes the competition from Bunnings and the selling of unfamiliar brands had spelled Masters' demise. He told the Daily Mercury: "They brought nothing new to the market. They also brought in a lot of American idea branded product which Australians didn't know anything about."

    Woodman said he would be happy to see Masters close as an excess of hardware stores had meant smaller stores had struggled. He said: "For the population left in Mackay, with the business confidence and the amount of building activity, we have got far too much square metres of hardware offering in Mackay. Like double what it should be."

    A spokeswoman for Porters said the announcement reinforced that the hardware industry had been going through an "incredibly challenging and competitive" time.
    Adelaide stores

    Masters opened near Adelaide Airport early 2015 and began work on a second store in Noarlunga in May last year. A month later, construction started on a 13,500sqm store at Parafield Airport, which was due to open in May this year. The chain built its first SA store in Mount Gambier.

    South Australia's Hardware Association has called for State Government support to protect Woolworth's smaller hardware franchises following the decision to drop Masters. The association points out Woolworths' home improvement business also includes 36 Home Timber and Hardware/Thrifty Link stores in the state.

    President Paul Stewart said the association would offer any support to these stores and would like the State Government to develop a program that would see the small independent hardware stores survive and grow. He told InDaily: "Job losses from the closure of Master stores can in part be balanced by new growth of the small/medium independent hardware stores..."
    Bundaberg Masters

    Woolworths confirmed that Bundaberg's proposed Masters Home Improvement store would not open. According to the NewsMail, Woolworths will complete the building but it will not trade as a Masters store.

    Kepnock Residents Action Group's Mary Walsh expressed her concerns. She told NewsMail: "Our concerns are...the council extended eligibility for a $1 million discount. The thing that this council needs to answer is does this development still attract the $1 million discount if it's not a Masters store and if so, why?"

    Cooper's Hardware owner Steve Cooper said his store, which is based in the same region and part of Home Timber and Hardware, was going nowhere. He said: "The one thing we want to make clear is that we are a profitable operation. We are a saleable business if that's what they opt to do..."
    Masters Penrith

    Two days following the grand opening of the Masters store in Penrith in Sydney's outer west on January 16th came the announcement that Woolworths will close or sell its home improvement business.

    Penrith Mayor Karen McKeown said a potential closure after such a short time was extremely disappointing. She told Fairfax Media: "Should the Masters store close, I would hope an astute operator could see the benefit of being part of the regional city of Penrith, which currently has an economic catchment of 500,000 people."

    Kerrie Reeder, the general manager of the Penrith Valley Chamber of Commerce, which oversees the interests of 350 businesses in the area, said people in Penrith generally have "habitual" shopping patterns and have been loyal to Bunnings, but there was also room for Masters in such a fast-growing area.
    Masters South Nowra

    The South Nowra Masters store will not open, according to the South Coast Register. Woolworths has confirmed the almost complete development just off the Princes Highway at South Nowra will not go ahead.

    The site, previously owned by a private development company from Sydney, sold for $32.5 million to APN Property Group in July 2015. The sale included the land, featuring the construction site of the Masters store, a Shell Fuel Coles Express convenience store, a Subway outlet, and a Hungry Jack's fast food complex, which have all opened.

    The Masters store was to have a gross floor area of approximately 13,134sqm. Work started late last year and it was expected to open in July.

    The future of a proposed $26 million Masters development at Tuggerah (NSW) -- approved last November -- is also in doubt.
    Masters in Ipswich

    A call has already gone out to US retail giant Costco to move into one of the two Masters Home Improvement stores in Ipswich (QLD). Springfield councillor David Morrison told the Queensland Times that Costco would be well suited for the area and has called for the company to investigate the possibility of moving in.

    Having only opened on March last year and October 2011 respectively, the Bundamba and Springfield stores look likely to close in the coming months.
    Masters in Noosa

    A Masters Home Improvement Centre for Noosaville (QLD) should be all but permanently shelved, according to Mayor Noel Playford. Cr Playford does not expect any new buyer of the financially troubled Masters chain to contemplate building in Noosa.

    Joint Masters partners Woolworths and US company Lowe's in 2014 won a Planning and Environment Court appeal against a development refusal by the former Sunshine Coast Regional Council in 2013.

    Noosa Council defended the action unsuccessfully. Cr Playford told Noosa News: "There's an approval granted by the court for a particular style of operation...so obviously if that's been ditched by Woolworths then it's not likely that will be constructed and operated."

    Mayoral candidate Councillor Sandy Bolton said if the Masters land was purchased as part of a retail chain or individually, the development approval would carry over, but any changes would need to go back to council. He said: "Ultimately it will come down to who purchases it and what their intent is."
    Perth stores

    The future of Perth's nine Masters stores is unknown. The retailer began opening outlets in WA in 2012, with the most recent stores in Mandurah and Landsdale opening less than a year ago. The other stores are scattered around metropolitan areas, in Bayswater, Bibra Lake, Ellenbrook, Forrestdale, Joondalup, Baldivis and Butler.

    Curtin University school of accounting Professor John Evans told Fairfax Media Woolworths would struggle to find a buyer willing to take on the entire 63-store company, and would likely move to re-purpose its warehouses or sell them individually to other businesses.

    As for the company's stock, Professor Evans said Masters would likely try and sell-on as much as possible to other hardware stores and overseas companies before holding an auction. He said: "They're still trying to maintain value for their shareholders. They'll be looking for buyers, ultimately it may go to an auction market where certain components are auctioned off."
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    Masters is exiting dozens of development sites around the country
    Financial Review
    Masters is no longer part of a new development at Parafield Airport near Adelaide
    Masters Macquarie Park will no longer open
    Click to visit the ITW website for move information
    Masters is no longer part of a new development at Parafield Airport near Adelaide, one of many sites that it is exiting around Australia. Cromwell Property Group acquired the airport site in June last year for a new fund with plans to complete a new $27 million Masters store by May 2016. A contract between Woolworths and Cromwell now means Woolworths has to come up with a new tenant.

    The site is one of dozens in metropolitan and regional areas that Woolworths had earmarked for future Masters stores, but which will no longer proceed as the retailer seeks to sell or wind up the business.

    Woolworths owned some sites through its Hydrox Holdings joint venture -- 2015 annual accounts show a site development value of $288 million -- but others were in partnership with Cromwell, APN Property Group and private developers. The retailer owns about 60% of the sites across the country and leases the remainder.

    A spokeswoman for Woolworths declined to say exactly how many projects were in the pipeline, but they would include a $60 million Masters Macquarie Park due to open in 2017, a $30 million Masters in Townsville and others in Lake Macquarie, Bundaberg and Orange.

    Another Masters store under construction in South Nowra, bought last year by APN, and two more being built in South Australia, will also not open.

    Steve Lerche, national director of retail investment at Savills Australia, said Woolworths could struggle to recoup some of its acquisition costs for sites, particularly where it had paid a "handsome price" to acquire a site in competition with Bunnings. He told Fairfax Media:
    Where they have bought sites in the past, they may have paid over the odds to get the right location and may not get that price now.

    Hardest hit could be sites in regional areas, he said, especially if there was already a Bunnings trading. But, he said some sites might appeal to owner-occupier retailers like Costco or Harvey Norman. Alternatively through rezoning, they could have a higher and better use.

    The most to lose could include nearby retail tenants, which relied on Masters for foot traffic, according to Tony Draper, national director of large-format retail at Colliers International. He said:
    A lot of them opened so they could be in close proximity to Masters.

    But Draper believes Bunnings was likely to be a winner. He said:
    They're back on their own without a competitor. There's going to be an oversupply of space so they will be able to pick up sites at better prices.

    It is said to be already targeting at least nine Masters sites in NSW and Victoria. Chris Parry, director of large format retail for CBRE said:
    The NSW market is undersupplied and this will provide the opportunity for other specialty large format retailers if Masters choose to vacate the stores.

    According to property agents, the well-located suburban stores such as in Toorak Road, Melbourne, would be easily released to other hardware chains, such as Mitre 10. The average store is about 13,000sqm.

    There are expectations that Woolworths will suffer some losses from breaking leases. Most retail leases are for five years with an option to extend a further five years. A Woolworths spokesman said:
    Masters is committed to doing the right thing by our landlords and developers and we will be dealing with sites where construction is planned or underway on a case-by-case basis.

    Heath Crampton, national retail director at valuation firm m3property, said a reduction in competitive tension might result in land values decreasing. He said that because many Masters stores were within a short distance of Bunnings, which was first to pick sites in most areas and thus had the best sites, it might be difficult to sell the entire network in one line.
    It may be that other large format retailers will be interested in the good sites. A sale may also provide an opportunity for overseas large format retail chains.

    Savills Australia head of research Tony Crabb said the preferable outcome for owner and nearby tenants would be for a swift sale of the entire portfolio, including the development sites. He said:
    Having it sit idle is the worst possible outcome.

    But, he said because the sites were so spread out, they did not stack up well from a logistics point of view.
    Retailers
    Mitre 10 NZ creates web series
    Mitre 10 New Zealand continues to bring DIY digital
    Stop Press NZ
    UK celebrity architect Clarke is known for his series "George Clarke's Amazing Spaces"
    Mitre 10 NZ has already found online success with its Easy As instructional videos
    Click to visit the ITW website for move information
    Mitre 10 New Zealand is continuing to take DIY digital by locking up a few punters in one of its stores with celebrity architect George Clarke and filming the results for a new web series called the "Mitre 10 Lock In". General manager - marketing Dave Elliott said:
    It's going to be tough, but we have great faith that our DIY experts will come through, completing the project before the sun comes up.

    And, Clarke who is known for his series "George Clarke's Amazing Spaces" will be there to assist (and hopefully attract bigger audiences).

    This web series is not the first for the hardware retailer. Mitre 10's Easy As instructional videos have already been successful. Elliot said in an interview last year that 11,000 people were watching the instructional videos each day in June last year.

    The videos add to the 135 million "how-to" videos on YouTube and tap into the 70% growth in "how-to" searches recorded in mid-2015. Elliott emphasises the need to move campaigns online. He said:
    Advertising is very important for us in terms of driving traffic to our stores, so therefore our advertising activities need to be effective in achieving that. And retailing is a response to culture. So, if you couple those two things together, you kind of see that we need to adapt and speak to customers where they are in an effective way. And, without a doubt, more and more people are moving online through their digital devices.

    Elliot also reported a 20-30% shift in advertising spend from traditional media to search engine marketing, YouTube, pre-rolls and display. He said:
    It's a matter of a brand being there right through that journey, and the online videos play an important part in giving them that information. More and more people are [relying on online videos]. You might've heard that the internet will have to double in size by 2017 just to accommodate the growth in YouTube, and you kind of see that that's where people are heading.

    The Lock In web series is set to be released later this year.
    Products
    Pro Pail for painting contractors
    Bercom has introduced the HANDy Pro Pail
    PR Web
    Designed to hold more than a litre of paint or stain
    Custom-fit liners are also available for purchase
    Click to visit the HBT website for more information
    Bercom, manufacturer of the range of HANDy Paint Products, has introduced the HANDy Pro Pail.

    Designed for both professional and do-it-yourself painters, the new HANDy Pro Pail was developed based on customer feedback. Bercom president, Jeff Given said:
    The Pro Pail is a direct reflection of listening to our customers and implementing their feedback to create the best product possible...[it] will make the painting jobs of our customers easier.

    The HANDy Pro Pail is designed to accommodate up to a 6.5-inch mini-roller or three-inch paintbrush and will hold more than a litre of paint or stain.

    To deter hand fatigue for painters tackling tough projects, the inclusion of a comfortable adjustable strap, as well as a mini-roller or paintbrush handle rest, was incorporated into the HANDy Pro Pail.

    It also has a custom-fit liner available for purchase. Manufactured in the United States from 100% recycled materials, HANDy Pro Pail liners are solvent resistant to allow painting contractors to work with any paint or stain. They make colour changes easy while eliminating unnecessary clean up time. Tim McKay is a 23-year veteran paint contractor and a satisfied customer. He said:
    I've been using HANDy Paint pails and trays for years. My crew loves them and they just tested the Pro Pail. The ability to use a larger mini-roller and brush at the same time has filled the void we have been dealing with for years...

    Bercom was recently named Sherwin-Williams 2015 Vendor of the Year and the HANDy Pro Pail and four-pack liners are set to launch in February 2016.

    A video of the Pro Pail can be seen here:

    News
    2016 HTH Group Conference reduced news coverage
    HTH Group show is now "internal only"
    HTH Group Conference
    Exhibitors' list and floor layout
    The Woolworths announcement
    Click to visit the HBT website for more information
    The Home Timber & Hardware Group has had to reduce some journalistic access to its 2016 National Conference. This comes as the company faces difficult decisions about its future.

    Most industry media outlets (including HNN) will not be attending the conference as a result. While HNN regrets the missed opportunity, we, like most other industry media, certainly understand the need for the HTH Group to concentrate this particular conference on its "family" of HTH Group members.

    This move follows from Woolworths declaring on 18 January 2016 that it plans to exit all of its home improvement businesses. These businesses include both HTH Group and Masters Home Improvement.

    That has sparked press speculation that HTH Group will join Mitre 10 in a new enterprise that will be spun out from Woolworths and Metcash (which owns Mitre 10), and listed on the Australian Stock Exchange.
    HTH Group/Danks and Woolworths background

    It is worth noting that the HTH Group, in its previous incarnation as Danks, functioned profitably for some years, and that it has, since that time, grown considerably.

    Woolworths announced its offer for the Danks Group on 25 August 2009. The offer was for $13.50 per share, which represented total equity of $87.6 million. This would buy Woolworths 205 Home Timber & Hardware stores, 312 Thrifty-Link Hardware stores, 66 Plants Plus Garden Centre stores and 939 independent hardware stores the Danks business had been supplying. In addition Danks owned and operated three distribution centres, located in Melbourne, Sydney and Perth.

    The takeover received approval from the Australian Competition and Consumer Commission in November 2009.

    The Danks/HTH Group operations continued to expand. For example, the company acquired Gunns Retail Division in Tasmania and Becks Timber & Hardware in May 2010. It also acquired Mittagong Timber and Hardware in New South Wales in November 2011.

    This was followed up by the acquisition of Tait Timber and Hardware in November 2011 and Mittagong Timber and Hardware in February 2012. The company went on to acquire a 60% stake in the six stores operated by Hardings Hardware in March 2013. HTH Stores Pty Ltd also purchased Hudson Building Supplies in 2014.
    Conference fully booked

    Meanwhile, HTH Group has released details of the exhibitors at the conference. The floor space is fully booked with over 160 exhibitors. Valspar is this year's Gold Partner, Sutton Tools is the Silver Partner, and Selleys, Bremick and Assa Abloy are Bronze Partners.
    Coverage of HTH Group National Conference

    While HNN may not be able to provide insights into the HTH Group's business at the event, this is clearly a reflection of the dynamic times the Australian home improvement industry is going through.

    HNN will nonetheless be bringing out a Special HTH Group Edition, to be published just prior to the HTH National Conference, which begins on 1 March 2016. We hope to be able to supply HTH Group members, and the industry itself, with clear, unbiased reporting on the circumstances in the industry.

    We will follow this up with a report on the conference itself, making use of a range of sources.

    Related:
    Hudson Building Supplies to be sold - HNN
    Retailers
    DIY sales surge at UK's Grafton retail arm
    Grafton had a strong second half growth in its Woodie's DIY business
    RTE
    Grafton's Selco network continued to expand in 2015
    Grafton Group's CEO Gavin Slark
    Click to visit the ITW website for move information
    UK-based builders merchanting and DIY group Grafton has announced a 6.3% increase in revenue in its preliminary results for 2015 and said it was expecting operating profit of up to GBP127 million. Revenue for the year came in at GBP2.2 billion, the company said in a trading statement. In constant currency terms, revenue rose by nearly 9%.

    Grafton said that its merchanting operations -- which accounts for over 90% of group revenue -- performed strongly, particularly in the Irish market.

    It noted that low interest rates, growth in house prices and a resurgence in consumer confidence among Irish shoppers gave rise to increased activity in the building and home improvement market.

    In its retailing operations, Grafton said that an increase in employment and disposable income supported the recovery in retail spending which spread into the DIY sector in the second half of the year.

    It said that the pick-up in demand and promotional activity contributed to a strong second half growth in its Woodie's DIY business. Grafton's CEO Gavin Slark said:
    2015 was a year of significant development activity for the group with the continued expansion of the Selco branch network, bolt-on acquisitions in the UK merchanting market and the purchase of Isero which now gives the group a presence for the first time in the Netherlands.

    UK merchanting revenues rose by 8.9% especially in the plumbing and heating categories. Irish merchanting revenues rose by 10.9% in the year to the end of December -- on a constant currency basis -- but dipped 0.1% when converted to sterling. The company said:
    The merchanting business in Ireland continued to perform strongly as record low interest rates and growth in house prices and housing transactions supported increased activity in the residential repair, maintenance and improvement and new build markets against the background of an acceleration in the rate of growth in the Irish economy.

    Consensus amongst analysts is for Grafton for an annual profit of nearly GBP131 million -- which would be up from GBP110 million in 2014.

    However, the competitive nature of the UK market and the ongoing weakness being seen in Belgium has led Grafton to reduce its profit growth guidance by 3-4% against market expectations.

    Related:
    Grafton Group acquires tool distributor - HNN
    UK may be shifting towards DIFM - HNN
    Bigbox
    Woolworths' Masters folds
    The announcement that ended it all
    Woolworths
    The results for Masters
    Lowe's bows out
    Click to visit the ITW website for move information
    The announcement that Woolworths will be exiting all of its home improvement businesses (both Masters and the Home Timber and Hardware Group) has been both unexpected -- and not surprising. While Masters managing director Matt Tyson did improve the performance of the big box stores, it was not enough to deliver solid results. His efforts did, however, indicate the direction in which development needed to go.

    It does seem important to identify what is likely behind this exit decision by the recently appointed Chairman of the Board for Woolworths, Gordon Cairns. There is little doubt that the home improvement industry remains one of the most vibrant and vital areas of retail in Australia. There is also no doubt that the "big box" approach does work in this sector.

    The reality is, however, that Woolworths as a business organisation was simply not suited to this type of endeavour. This was true right from the start, when the company grossly underestimated the risks and difficulties of the new business. It is even more true now, as Woolworths limps along with "lame duck" CEO Grant O'Brien, declining margins in its main supermarket business, and trouble in other retail divisions as well.
    The source of the problem

    While mainstream journalists and writers have concentrated primarily on specific actions that Woolworths made in managing Masters, it seems more profitable to dive down beneath that layer.

    When you really examine how Woolworths managed Masters, one particular fault becomes evident. This is the ability to make retail business decisions in areas where there is only a limited amount of data available.

    At an industry event, the CEO of Australia's trade-focused hardware supply/marketing service company Mitre 10, Mark Laidlaw, noted just how difficult he found it to make decisions without the detailed data he could access in his former executive roles in the supermarket industry. Where he could easily call up customer surveys and sales data for the past 10 years on a range of supermarket categories, nothing like that was really available in home improvement.

    Absent that kind of detailed information, companies tend to go in one of two directions. Some take the path of "gut instinct". Someone who sees him/herself as a "leader" takes decisions based on a kind of personal narrative, with only a cursory glance at the facts. That's pretty much the path Woolworths took with Masters.

    The other pathway is to realise that making decisions with only limited data is always going to be tough, and to set out finding ways to obtain better data. Usually this is done with various forms of trial and A/B testing -- running two alternatives and seeing which one works best.

    This was the path that Mr Tyson had started to lead Masters down. This is evident in his caution in trying out new store formats through a limited number of store formats, fine-tuning these, and then rolling them out gradually through the store network.

    The difficulty is that following this path requires different forms of expertise in a business. Where companies like Woolworths are good at applying scale to solve some business problems, A/B testing requires a significant descaling instead. Companies have to evolve the nimbleness to source limited amounts of products, test them in the market, then refine their selections based on the responses and data obtained.

    Woolworths has not been especially good at these nimble processes. Thus Mr Cairns' decision is not really based on market forces, but rather a hard-nosed and realistic assessment of the company's business capabilities. He has recognised that, for Woolworths, the home improvement industry was not just an extension of its retail expertise into a different area, but instead required the development of new capabilities.

    Woolworths' failure has less to do with specific business decisions and practices -- poorly planned store locations and development, poor choices in store stocking, ineffective marketing, simply bad cost tracking -- and more to do with its inability to find the best way in which to execute.
    Future consequences

    The above is likely to be one of the last analyses of Woolworths that HNN publishes. With its announcement of an exit from the home improvement retail sector, the company will simply cease to be all that relevant.

    Matters such as how much money Woolworths might make from the sale of the Masters assets, or what the "strike price" will be for the buyout of the Lowe's share of the hardware businesses will be only of passing interest. They simply will not really affect the home improvement industry.

    Of much more interest are the consequences for other businesses caused by the breaking up of these hardware businesses. It is a rarity to have what is a fairly major business, with around $1.2 billion in retail sales, just blink out and vanish from a retail sector. That, however, is the most likely scenario for Masters.

    The HTH Group is a different matter, as it is a highly viable business with a long history (through its past as Danks) and stable, forward-looking management.
    Real estate

    While Woolworths would likely rather see Masters sold intact, the possibility of this happening is very small. It would take a major overseas buyer to make such a move, and while the dollar exchange rate might make such an investment attractive, the projected slow growth of the economy and ongoing instability in the real estate sector are more dissuasive.

    That leaves the direct disposal of the actual Masters store sites. Bunnings has already indicated that it has a strong interest in buying a number of these sites, but there would be more than 45 left over.

    At the moment, suggesting any buyers would just be wild speculation. It is a story HNN will follow closely.
    Revenue

    Another interesting question is what happens to the revenue that was formerly captured by Masters? In its last reported quarter, the big box retailer made $294 million in pure sales. The winding down of its operations will likely take around another five to six months. During that period all that revenue will have to find new retailers.

    Bunnings is the obvious choice for much of the revenue. To guess at the numbers, it is probably that something like 60% of the revenue will go directly to the other big box retailer in the market. Another 30%, however, could return to independent retailers, including those operating in the Mitre 10 and HTH Group networks. The remaining 10% will be lost to the home improvement industry, finding its way to adjacent retail sectors.
    HTH Group

    There has already been some speculation about the potential future of the HTH Group. Late in 2015 it was suggested that the HTH Group and Mitre 10 could join forces, forming a combined company that would be spun out from Mitre 10 owner Metcash and Woolworths, listing on the Australian Stock Exchange.

    As HNN mentioned at the time, one flaw with this is that, while it certainly solves ownership and capital realisation issues for Woolworths and Metcash, it is hard to see how this gives the business itself any real advantages. There may be some cost savings generated through scale, but breaking away from the supply chains of Metcash and Woolworths would wipe out any such lift.

    Another significant flaw in this plan is simply that both Mitre 10 and the HTH Group have suffered from underinvestment over the past two to three years. Metcash has spent most of its funds bolstering its IGA grocery business, and Woolworths has underinvested in HTH Group while propping up Masters. Due to this underinvestment, any ASX listing during 2016 would reflect a reduced value for what are some quite decent assets.

    The alternative is for the two groups to consolidate, and to be acquired in part or whole by private equity interests. It would take two years or so to rebuild the brands to a market price closer to their true value.

    Again, though, this would mean that both Woolworths and Metcash would not get a reduced cashflow from the sale of these businesses, as the sale price would be shared.

    That said, both Mitre 10 and HTH Group do have much more potential for growth than is being currently utilised. One key to unlocking that growth is to concentrate on understanding the Bunnings business model. As we all know in retail, there are very seldom any entirely dominating market positions that can be held. Every position that is adopted that provides an advantage also exposes some weaknesses.

    A further outside chance would be overseas investment. About the only large group that has a similar operating model to HTH Group and Mitre 10 would be Ace Hardware in the US. Ace does have a substantial international presence, but it seems unlikely that it would be interested in investing in a relatively small market that is so completely dominated by one retailer.
    The long term

    Looking at the longer term, what will be the effect of Woolworths' exit from home improvement retail?

    Given not only the current strength of Bunnings, but also the likely consolidation of its gains over the next two to three years, it seems unlikely that any direct challengers will emerge, at least not before 2020.
    Online

    That said, Bunnings -- like every other retailer -- does remain vulnerable in some areas. The main area is in its online business, which it has steadfastly refused to invest much capital into, so far. With its recent move to acquire the UK home improvement retailer HomeBase, that could begin to change, as along with that acquisition it will also bring on board staff with considerable online expertise, in a market where online shopping rates are one of the highest in the world.

    The threat in this area is likely to come from a non-specific home improvement retail operation, such as the US-based Amazon. It seems a good bet that over the next ten years or so -- before 2025 -- Amazon will make a more serious play for the Australian market.

    That would mean building distribution warehouses and other operations in Australia. It is likely that will come, in part, as a consequence of the company developing further efficiencies in areas such as home delivery.
    Specialists

    The other possible avenue of challenge would use one of Bunnings' greatest strengths against it. The retailer manages to stock a very wide range of items, and is in many ways the ultimate generalist in home improvement retail. A competitor might look at this wide range, and pick out specific areas where both sales and margins are high, then specialise strictly in those areas.

    For example, the three most common and highest margin home renovation projects focus on kitchens, bathrooms and outdoor entertaining areas. A retailer could choose to become the foremost specialist in those three areas, offering great showrooms, and complete kit purchases to achieve specific "looks". This would be backed up help in managing these projects -- providing, for example, a site inspection to assess the task, a range of services such as plumbers and electricians, and so forth.
    Companies
    Sensors that find construction tools
    Primal Sensors has developed jobsite equipment tracking technology
    AustinInno
    It uses small, rugged sensors that users attach to equipment
    Primal Sensors is exploring integration with other construction tech companies
    Subscribe to HNN weekly e-newsletter
    Time is money. And it adds up fast when there are big construction crews and subcontractors waiting around while other workers locate equipment and supplies to stage the next phase of a building project. But radio frequency location and the Internet of Things is quickly changing the game, from tracking material shipments to finding the keys for the bulldozer.

    And that's the niche market Primal Sensors, a startup from Dallas, is focused on. It has developed jobsite equipment tracking technology.

    Primal Sensors' three-person team has been working with RFID and beacon technology for a couple of years. Co-founder Jerry King said most of the innovations in construction have been focused on the pre-planning and designing sides of the business. Now, there's more focus on operations. He said:
    The construction industry itself has been adopting new technology over the last 10 years. It's kind of late to the game when it comes to developing more efficient processes. It's people-driven. It's a human experience. But it's not one that is so gung-ho about replacing people that it's adopting a ton of technology. But it's going there.

    Primal Sensors uses small, rugged sensors that users attach to equipment -- be it a jackhammer, a bulldozer or even an employee -- and at least three beacons placed throughout the construction site track them and provide data to the software platform. It's all battery-powered and lasts days without recharging.

    On a construction site, Primal Sensors' product would most likely be used to coordinate general contractors that manage the entire project and numerous subcontractors that come on to major sites for a few months to complete their phase of the work. The general contractor can take goods that come onto the site, tag them with a sensor and see where things are on a laptop screen. King explains:
    What they're getting is the transparency to see anything that's on site. Where are the pallets, where are the tools. They'll know where things are and be able to prepare for what's happening next week and be ready to go without wasting time.

    Primal Sensors is in discussions with several major construction companies, but it hasn't yet deployed for real-world testing. The business sells its service to companies on a subscription basis. It provides the hardware and software, and construction companies can move them from one site to another.

    Primal Sensors is also exploring integration with other construction tech companies, such as PlanGrid and Procore.

    Going forward, King hopes to explore the military market, which has huge needs for tracking equipment. He said:
    Disaster relief, military use, drill weekends, Air National Guard... those are large operations that need some help when it comes to the tracking of its stuff, people and other assets.

    Related:
    PlanGrid, the construction app
    Procore, construction project management software
    Retailers
    Homebase owner rejects takeover bid
    A future bid be accepted could bring Homebase back into the Sainsbury's stable
    Telegraph UK
    Sainsbury's initial bid for Home Retail Group was rejected
    Sainsbury's interest in HRG stems from Argos' recent investment in its online and delivery services
    Click to visit the ITW website for move information
    Sainsbury's, Britain's second biggest supermarket group, confirmed it made a secret cash-and-shares bid approach for Home Retail Group (HRG), owner of DIY retailer Homebase. But HRG rejected Sainsbury's proposal believing that it "undervalued Home Retail Group and its long-term prospects".

    Shares in HRG, which also owns electronics retailer Argos, soared 41% as the food retailing giant said it was "considering its position", following the rebuff. Financial details were not disclosed but HRG had a stock market valuation of about GBP800 million before the announcement and just over GBP1 billion soon after.
    What will happen to Homebase?

    Should a future bid be accepted, it would bring Homebase back into the Sainsbury's stable.

    The UK's second-largest do-it-yourself business was once owned by Sainsbury's but was sold to the old Great Universal Stores group, which later de-merged HRG, back in 2000 for GBP969 million. Such have been HRG's fortunes since that the combined business, even after the jump in its share price sparked by the news of Sainsbury's interest, is now only valued at GBP990 million.

    It is also quite possible that Sainsbury's might choose to offload Homebase to a private equity buyer. This could give the brand the financial injection it needs.

    The DIY and garden centre retailer has attracted private equity interest in the last 12 months. Sources indicated to the Telegraph UK that Wesfarmers held talks in December 2015 regarding a bid for the business. More recently, Wal-Mart has been touted as a potential buyer.

    There is also speculation that Sainsbury's could continue to run a scaled-back Homebase, using the brand across its existing Sainsbury's stores, and reducing its current 320-plus stores in number.
    A break up of HRG

    A fresh bid could lead to HRG's two main assets being split up, given the supermarket chain's greater interest in Argos over Homebase.

    Sainsbury's interest in HRG stems from Argos' recent investment in its online and delivery services. The pair have been partnering in an experiment for the last year, with 10 Sainsbury's stores playing host to digital in-store Argos concessions.

    However investors have never really been sold on the synergy benefits. The real prize for Sainsbury's would be the high street store estate Argos has - many of which could be converted into its convenience formats. The convenience food business is where much of the growth in the UK grocery industry has been in recent years.

    At the same time, some the larger out-of-town stores owned by Sainsbury's could be used to fuel Argos's click-and-collect service while benefiting from the increased numbers of customers visiting its stores that would create.

    An Argos and Sainsbury's combination could bring cost savings and would most likely see a raft of Argos stores close if in the same location as a Sainsbury's. Argos has 840 shops in the UK and a fleet of trucks.

    The supermarket sector alone already has far too much excess property but co-locating the two brands could make financial sense.
    Future-proofing the supermarket business

    Many analysts regard the bid for HRG as a defensive move on the part of Sainsbury's in the face of growing competition in the grocery sector.

    Argos' investment in a same-day delivery service aimed at seeing off the competitive threat from Amazon and, coupled with Sainsbury's store network, could quite easily form the UK's biggest click-and-collect proposition.

    Speed of delivery has become a key selling point for firms, with Amazon now able to deliver within one hour in some parts of the UK.

    Sainsbury's also argues that a combination of the pair could offer a wider range of financial services than those available from its existing banking business.

    The grocer has until February 2 to make a firm offer for HRG or walk away.

    Related:
    Bid attention surrounds Homebase - HNN
    Homebase target of turnaround funds - HNN
    Homebase could be spun out of Home Retail Group - HNN
    Products
    Nucleus partners with Lowe's
    The Nucleus device offers home security, motion detection, instant video connectivity, privacy features and voice activation
    Vision Systems
    It is pursuing integration with the Iris by Lowe's smart home platform
    Nucleus will be available in 1,000 Lowe's stores and online in June 2016
    Click to visit the HBT website for more information
    Nucleus will be the largest debut of a smart home product of its kind to be promoted within dedicated endcaps across 1,000 Lowe's stores. The product will also be for sale, including pre-orders, on Lowes.com.

    The Nucleus device offers families home security, motion detection, instant video connectivity, privacy features as well as voice activation. In addition to pursuing integration with the Iris by Lowe's smart home platform, Nucleus supports integrations with other connected home platforms including Nest, SmartThings, iControl and Insteon.

    According to the 2015 Smart Home Survey, conducted by Harris Poll on behalf of Iris, when it comes to shopping for smart home products, home improvement stores (either in-store or online) were rated the number one place Americans are most likely to buy.

    Additional findings from the survey revealed that among those who plan to buy any smart home products in the next 12 months, security cameras are on the top of their list (56%). Parents with children under the age of 18 in their home are nearly three times as likely to purchase smart home products in the next year as those without. Mick Koster, vice president and general manager of Iris Home Systems explains:
    We are committed to offering our customers smart home products that combine ease-of-use with breakthrough technical capabilities. Consumers are seeking connected home products that deliver security and automation in engaging ways [as Nucleus does].

    With Nucleus, families can forgo expensive and outdated intercom systems and easily connect to family members for an audio or video conversation in the home, between homes, or with any iOS or Android device via the Nucleus app. Morley Ivers, co-founder and president of Nucleus, said:
    Nucleus was created by families to help other families instantly connect with loved ones, while keeping their homes protected. We are thrilled to announce our category exclusive retail partnership with Lowe's...and we are excited to offer Nucleus to simplify the connected home for customers.
    Products
    Products added to Lightify portfolio
    Osram Sylvania is growing the Lightify portfolio
    BusinessWire
    The plug enables users to group and control electronics via the Lightify app
    The Lightify Outdoor Flex RGBW is a 16-foot long flexible strip
    Click to visit the HBT website for more information
    Osram Sylvania is expanding the Lightify portfolio. New products include the Lightify Switch and Outdoor Flex RGBW. The company is also unveiling the Lightify Plug, which makes nearly any electronic device smart and connected.

    Lightify RGBW and tuneable white light bulbs are now available in a variety of forms. The RGBW lights are unique to the market because they can go down to a warm candlelight glow of 1900K at any brightness.
    Lightify Plug

    Featuring a sleek look, the plug enables users to group and control electronics via the Lightify app. For example, consumers can remotely activate window unit air conditioners shortly before arriving home to cool off the house without wasting energy having it on all day when people are not home. The plug can also turn off those items that may have been left on after leaving the house like a TV or radio.
    Lightify Switch

    Consumers now have the ability to dim their smart lighting regardless of what type of wiring they have in their home without needing mobile devices. Dimming via the Lightify app is always an option, but users can use the battery powered Lightify switches that are wire free and unobtrusive.

    The Lightify Switch can program up to four or eight different lighting settings, depending on the version, and features intuitive handling. It has fast toggling between predefined settings via two or four buttons that react differently from a short tap versus a long press.

    After a one-time set up via the Lightify app, settings become accessible without having to open the app or being connected to WiFi. Aaron Ganick, head of Smart Home Americas, Osram Sylvania said:
    Just because our products are becoming smarter, does not mean that consumers will need to be glued to their smart devices 24/7. The introduction of battery powered switches that do not require the use of a smart phone for daily operation, and the plug that can automate consumer electronic devices based on schedules and scenes, allows consumers to take a step back from their smart home...
    Illuminate the outdoors

    The Lightify Outdoor Flex RGBW is a 16-foot long flexible strip that can wrap around lamp posts, deck railings and under stairs. It offers colour changing, tuneable white and dimming capabilities.

    Lightify RGBW products now include A19 for traditional lamps as well as BR30 and RT5/6 for recessed lighting. Dimmable products offer versatile customisation from different colours and a range of colour temperatures from candlelight (1900K) to daylight (6500K). They also provide a true green lighting experience that creates a higher quality coloured and white light.
    Products
    Home Depot works with gardening startup
    Seedsheet is a kit for growing vegetables at home
    Fortune
    The product is being sold at Home Depot
    The company had a successful Kickstarter campaign
    Click to visit the HBT website for more information
    A US-based startup is bringing the DIY phenomenon to gardening, and Home Depot is getting involved. The company, Seedsheet, sells a kit for growing vegetables at home.

    The biodegradable sheet comes with seed pods affixed to it; each pod contains seeds and a small amount of soil. All customers have to do is lay the sheet on top of a soil bed like a blanket, and water it. Once watered, the pods immediately dissolve, and the sheet serves as a barrier to pesky weeds.

    The appeal for amateurs interested in gardening is obvious: do it yourself, without any expertise needed. They can set it up fast (30 seconds, the company says on its website), and Seedsheet offers six different sizes to fit even the smallest of spaces like a windowsill box. The kits run from US$35 up to US$250 for the biggest size, 10 feet by 16 feet.

    Will hipsters really spend US$35 or more when they could buy seeds for a few dollars and figure out on their own how to plant them? Home Depot thinks so. Beginning in January 2016, Home Depot is selling Seedsheet online at its corporate website. Seedsheet has already been selling the kits at its own website, but the platform of Home Depot is a major score for the small startup. Bethany Wood, an online buyer for the home improvement chain, told Fortune magazine:
    I was excited about it because of the growth with millennials in the container gardening space, and how simple it makes it for everyone to grow their own edibles. We are seeing urban-gardening trending. Millennials are becoming more interested in growing their own food and in sustainable awareness - that movement is what we're keying in on. Gardening starts as an intimidating thing to do, and Seedsheet takes all that guess work out.

    Indeed, Seedsheet founder and CEO Cameron MacKugler likes to say that with his product, planting a garden is as easy as making a bed. MacKugler came up with the idea in 2013, when he was house sitting on a dairy farm. At the time, he was working for an architecture firm as its LEED (Leadership in Energy and Environmental Design) project manager. While checking out the house's outdoor garden, he said:
    I had this epiphany: I love having access to this amazing food, in my backyard, that I can harvest in my boxers. So how can I take the awesomeness of this experience and condense it into something a recent college grad, with limited money and minimal space, can cultivate?

    MacKugler sketched out a version of what eventually became the seedsheet, a fabric layer that spaces out plants (so there is no need to worry about them encroaching on each other) and blocks weeds from sprouting up. At first, he tested various materials for the sheets: toilet paper, newspaper, paper towels, and craft paper. He said:
    Lo and behold, they all worked. It's not too difficult to get a seed to germinate once it's in soil and exposed to moisture.

    He settled on two layers of dissolving paper, placed atop soil and watered. Then he sent it out to be tested in different environments around the US.

    After the testing, Seedsheet took to Kickstarter last year and raised US$30,000 in funding. The company has since raised two more small rounds to get it retail-ready for Home Depot. To date it has raised US$600,000, including the Kickstarter funds.

    In the US, consumers spent US$30 billion on their lawns and gardens last year, according to the National Gardening Association. One in three households now grows its own food. MacKugler says that even though Seedsheet is focused on urban millennials, he hopes it can access outdoor gardening veterans too. He said:
    If you were to go outside, poke holes, and then meticulously weed around it, the cost-saving of our giant seedsheet is large.

    Home Depot, for now, thinks that younger gardeners are the sweet spot. Wood said:
    If you're 60 and an avid gardener, this probably isn't the product for you.

    MacKugler hopes that the online sales will prove otherwise.
    Products
    D-Link's Komfy smart home device
    D-Link's Komfy Switch with Camera is far more than just a light switch
    PR Newswire
    It can monitor temperature, humidity and air quality
    Komfy Switch controls will appear through the D-Link app
    Click to visit the HBT website for more information
    D-Link has released a smart home device under the new Komfy[tm] brand name. The Komfy Switch with Camera delivers a smart light switch for homeowners. Built to replace a standard 1 or 2-gang light switch, the Komfy Switch with Camera (DKZ-201S) allows users to not only keep an eye on their home with a high definition 1080p camera, but also monitor a range of environmental changes including temperature, humidity and air quality. It also comes in white and black colour options.

    You can see a video here:


    Most solutions require placing multiple devices throughout the home in order to view a room, control light switches and sense changes in the environment, but Komfy offers additional sensors and alerts so customers only need to access a single device.

    The free Komfy app for iOS devices can be used remotely to control lights as well as create on and off schedules and send automatic push notifications to their mobile device.

    The Komfy Switch with Camera offers a built-in HD 1080p camera with a 130-degree wide-angle lens. It incorporates an Ambarella HD camera System-On-Chip (SoC), to provide high quality video images, even in low light conditions. Along with sound and motion alerts, the camera can store unlimited video clips on an eight-day first-in, first-out basis to a personal cloud for free or record locally to a microSD card whenever motion is detected. Users can view and playback clips from anywhere directly from the Komfy app4.

    More about the Komfy Switch with Camera:
  • Komfy is not compatible with 3-way (multi-location control) switches, requires a neutral wire and only works with 1 or 2 gang light switch boxes
  • Only available with Apple devices using iOS 7.0 or above, at time of launch. Requires Bluetooth 4 / LE for initial setup.
  • microSD card not included
  • Komfy products and the Komfy app are not compatible with the mydlink, mydlink Lite or mydlink Home apps
  • Regions
    Granny flats gain different reputation
    Modern, modular granny flat by ACT firm VRD Design
    The West Australian
    Classic Granny Flats Eco Home can be built as a 2 or 3 bedroom unit
    Granny flat by Serenity Builders in Sydney
    Give to Amnesty International
    The humble granny flat is no longer being built just as independent accommodation for elderly residents. In 2013, WA Government planning legislation allowed for granny flats up to 70sqm to be built in suburbs across Perth and to be leased for rental return, rather than limited to occupation by a relative of the owner.

    Dominique Travers, managing director of Addstyle Constructions and West Coast Granny Flats, said while there had always been a steady demand for quality, customised detached or attached granny flats, homeowners now recognised the investment opportunities of ancillary accommodation. She told The West Australian:
    Students, FIFO workers and young couples starting out are all ideal granny flat tenants, who are willing to pay $300-$400 a week for accommodation. Many property owners are providing tenant access via rear lanes or erecting fencing and installing separate utility meters to create an informal division for independent rental accommodation in their own backyard.

    Travers said loan repayments on a custom-built granny flat costing about $110,000 were about $150 a week, with expected rental return of $250-$400 per week, for an ideal positively geared investment. She said:
    In a city where the median house price has risen above $500,000, it's more difficult than ever to enter the property market and many homeowners are adding granny flats to their properties for their young adult children to occupy.
    Our ageing population has also resulted in added demand for granny flat accommodation as the ideal 'lock and leave' home for retirees while they travel.

    Travers said granny flats also made ideal home offices or studios, with one of her clients recently adding a granny flat for a family day care business.

    Dale Alcock Home Improvement (DAHI) general manager Steve Grehan said an initial spike in demand for granny flats in response to the planning changes had led to ongoing steady numbers for the company.

    Grehan said DAHI had built five to 10 ancillary accommodation projects a year before the R Code changes in 2013 but would build 30 double-brick customised granny flats this financial year.
    We are still seeing a strong demand as a solution for extended families, and investors see granny flats as a great way to increase rental yields on existing investment properties.

    Two-bedroom designs were most popular but DAHI also had a range of one and three-bedroom designs from 50-70sqm, with options for raised ceilings and alfresco areas. The company was also exploring different shapes to suit tight blocks and recently launched a two-bedroom, two-bathroom option.
    Granny flats have had a revival in the last few years and they can serve a variety of purposes and offer a range of benefits. We expect they'll continue to be part of the housing mix, whether people are building them as independent living for grandparents or teenagers, using them as a home office, or creating a studio-style home for rent-paying tenants.

    Summit Granny Flats, established in the wake of the legislative changes, has capped the number of its projects at 50 for 2015, to maintain quality in service and construction in response to overwhelming demand, according to general manager Chris Johnston. He said:
    This change in laws has attracted a vast majority of people who would not have considered building a granny flat before. Granny flats aren't just for grannies any more - pretty much anyone at any stage of the home-buying cycle can benefit from this style of home.

    The builder has options for lightweight framing with Masterwall, for speed of construction and thermal qualities, or standard double brick construction. Summit also offered the option of a "move-in ready" granny flat, with painting, floor coverings and window treatments included in the contract price. Johnston said:
    Designs that optimise independent living are driving a new range of granny flats that incorporate fully enclosed single car garages and alfresco areas as standard. With multi-generational living continuing to grow in popularity, the boomerang generation leaving home and then returning, and the affordability of granny flats as an investment option, we foresee demand will significantly grow into the future.
    Retailers
    Team approach at Wesfarmers Industrials
    Customer feedback about the Blackwoods restructure has been positive, according to Rob Scott
    The West Australian
    Rob Scott was appointed managing director of WIS in August 2015
    Wesfarmers' industrials division includes the Blackwoods chain
    Click to visit the ITW website for move information
    It's probably not surprising that sporting analogies are used when former Olympic rower and managing director of Wesfarmers Industrials division (WIS), Rob Scott discusses the challenge of leading a business heavily exposed to Australia's struggling resources sector. He told The West Australian:
    Someone joked the other day...there's probably a fair bit of similarity between rowing and the industrial sector that you are in at the moment - very high lactic and pain is required to get through the current environment. High lactic acid, high intensity, high pain.

    A dual Olympian who stroked the eight at the Barcelona Olympics in 1992 before picking up silver with David Weightman in the men's coxless pairs in Atlanta in 1996, Scott has possibly the toughest job among Wesfarmers boss Richard Goyder's leadership team.

    In the position since August, Scott's responsibilities include coal mines in Queensland and NSW, a portfolio of industrial consumables businesses led by the Blackwoods chain, CSBP fertilisers, Kleenheat gas, Queensland Nitrates and 13.7% of domestic gas producer Quadrant Energy.

    In the year to June 30, the parts that make up WIS - the division was established in August alongside Scott's appointment - recorded earnings before interest and tax of $353 million, down 26.8% on 2013-14 because of a weak performance by the coal mines and industrial and safety units (such as Blackwoods, Bullivants). WIS contributed 9% to Wesfarmers' group EBIT of $3.8 billion.

    The division's return on capital was just 8.3%, down from 11.7% a year earlier and lagging the Bunnings-Officeworks juggernaut (28.2%) and Coles (11%). Wesfarmers' group return on equity was 9.8%. Few companies in Australia watch their divisional returns on capital as carefully as Wesfarmers. This is a major factor in the conglomerate's corporate success.

    Scott dismisses market speculation that WIS' struggles mean his role is to clean it up and prepare the individual parts for sale. The starting point, he says, is to reinforce a focus on cost-cutting, improving efficiencies and using innovation.

    And he is quick to point out that despite its challenges, many of its parts are market leaders, either in scale, product quality or cost performance. He said:
    Each of the divisions is quite well positioned in their respective markets...My job and my leadership team's job is to have a single-minded focus on what's good for Industrials and how we can make Industrials better within Wesfarmers. We do have an ambition to grow our industrial businesses but only if it delivers returns to shareholders, so with a very strict financial lens on it. Part of my job is to make the most of the businesses we have and find opportunities to invest for the future.

    Scott highlights that Kleenheat's take-up among household gas consumers "is in line" with its (bullish) expectations while customer feedback about the Blackwoods restructure has been positive. Its Curragh and Bengalla mines "are some of the lowest-cost mines and highest-quality coal in the world".

    It suggests Scott sees sufficiently strong building blocks in WIS, not to mention the experience of a seasoned workforce "who have been through many cycles in the past and that experience is very valuable".

    Scott is seen as one of the leading internal candidates for the top job when Goyder moves on. A pick-up in performance by WIS would only strengthen his case. Not surprisingly for a Wesfarmers executive, Scott brushes off talk about his CEO ambitions and emphasises the collegiate nature of the company's senior executive ranks.

    Like many of his colleagues, the Macquarie University and Australian National University graduate has completed the Advanced Management Program at Harvard Business School. He goes on to say:
    I know I can achieve a lot more when I work in teams than I can as an individual. And I guess I've learnt over the years you should always hire people who are better and smarter than you. And that's my focus, to try to assemble really high performing teams and try to create an environment for the team to be successful.
    Rowing is synonymous with teamwork. You might be in an eight and you can be the best rower in the world and the eight will go slow. It's about getting the best team and letting that team prosper in that environment.

    Scott is on the road most weeks - WIS' sphere stretches to New Zealand and Britain - but says it is vital as a leader to "get closer to customers and closer to the business". He explains:
    It's actually something I thoroughly enjoy. It can be easy at times to get stuck in boardrooms and meeting rooms. You just need to make the time available. Every time I get out to one of the businesses or meet with customers or meet with suppliers, I learn more.
    Something I have been trying to do a lot is to organise listening sessions with team members a few levels down in the organisation. I learn more from those sessions about the business than I do when I'm sitting in the executive committee.

    Moving around has always been a big part of Scott's life, even before he joined the Australian Institute of Sport's rowing program in Canberra.

    As the son of parents who were teachers, Scott spent his early days moving around WA, with stints in Kalgoorlie and Dumbleyung before completing high school at Rossmoyne. It was there that he caught the rowing bug when it was offered as a sport option. He later joined the Swan River Rowing Club. He said:
    When you are in high performance sport you wake up every day trying to be the best in the world. You may not always get there but your whole focus is to try to be the best in the world and to leave no stone unturned. And I think in business, and certainly in Wesfarmers, it's no different.

    Rowing still plays a role in Scott's life. He is president of Rowing Australia and while his days on the water are over, he keeps a rowing machine "locked deep away in the basement that I get on from time to time".

    Related:
    Wesfarmers restructures industrial division - HNN
    Companies
    Acquisitions continue for JELD-WEN
    TREND Windows & Doors is the second Australian acquisition for JELD-WEN
    BusinessWire
    TREND is based in Girraween (NSW)
    The transaction will be the fifth acquisition for JELD-WEN in recent months
    Subscribe to HNN weekly e-newsletter
    Global windows and doors maker JELD-WEN has entered into an agreement to acquire TREND Windows & Doors, a manufacturer and supplier of windows and doors based in Girraween (NSW).

    TREND produces aluminium, timber and thermal energy efficient windows and doors under a variety of brand names including Trend, Synergy, Quantum, Quantum XP Windows, Crestlite (commercial), Trend thermAL Energy Efficiency, Thermashield, SoundMizer and Xtreme Bushfire Protection Windows & Doors.

    Founded in 1968, TREND has a manufacturing and showroom network across the eastern seaboard of Australia. The addition of TREND will expand JELD-WEN's family of brands in Australia, which now includes Corinthian, Aneeta, Regency, Stegbar, Airlite, William Russell Doors, and JELD-WEN Glass.

    The transaction is expected to close in the first quarter of 2016, and is subject to customary closing conditions.

    Upon closing, the transaction will be the fifth acquisition for JELD-WEN in recent months and the second acquisition in Australia.

    Most recently, the company announced the acquisition of LaCantina Doors, a manufacturer of folding and multislide door systems based in California. Other recent acquisitions from JELD-WEN include Karona, a stile and rail wood door manufacturer from Michigan; Dooria, a provider of residential and commercial wood doors for the Swedish and Norwegian markets; and Aneeta, a manufacturer of sashless window systems in Australia.

    Related:
    JELD-WEN acquires Australian window company - HNN
    JELD-WEN buys Californian door maker - HNN
    Products
    Axis Gear automates window shades
    The Gear unit can be operated by its buttons
    Indiegogo
    The Axis Gear smartphone app
    Video showing installation of Gear
    Click to visit the HBT website for more information
    Axis Gear is a device that attaches to the pull cords of existing window shades, and provides the means to automate their opening and closing.

    The product launched as a crowd-funded project through Indiegogo in October 2015, and completed its project on 19 December 2015. The original funding goal for the project was US$100,000, and it managed to gain US$119,500 in funding. The company expects to launch its product on the market in time for the holiday season in December 2016. Indiegogo backers should receive their products before November 2016.

    For the funding launch, individual units were originally sold for US$95, which gradually increased during the funding to reach US$145 each, with packs of four for US$500. The projected price for the finished product is US$195 per single unit.

    How it works

    The Axis Gear could represent the type of product we will be seeing much more of during FY 2016/17. It's major difference as a product is that, instead of seeking to replace existing technologies - such as thermostats, smoke alarms, security systems, light switches, etc. - it presents itself as a no-fuss addition.
    Power source

    To begin with the issue of installation, the Axis Gear functions through an independent power source, which means there is no need to connect it to a dwelling's electrical system. Not only is that more convenient (especially in Australia where DIY electrical work is illegal), but it also opens up the market to people renting, as well as homeowners.

    Power is provided through two sources. The first, and cleverest source is the use of solar power cells that charge an internal Lithium-ion battery. These solar cells are engineered to work best in conditions of inside, indirect lighting. To back this system up, for installations which are low-light, conventional AA batteries can also be installed.
    Sprocket drive

    The sprocket drive in the Gear is the key to one of its best features: it is said to work with just about every blind and window shade that is made today. This includes roller blinds, vertical blinds, curtains, and "Roman" shades. The sprocket drive adjusts to a wide range of the typical beaded cords used on shades.

    Installing the cord into the gear is a simple operation of taking a small cover off, threading the cord around the sprocket drive, then putting the cover back in place.

    While the unit is quite small, its internal drive can exert around 9kg of force, making it more than a match for the majority of window blinds.
    Basic operation

    Even without any additional home automation systems, the Axis Gear provides some significant advantages. Every Gear can be paired up with other gears, which means that when the open/close buttons on the unit are pressed, all the Gears in the group respond. As most blind installations consist of several window installations, this saves considerable fuss adjusting each blind individually.

    Opening and closing curtains and blinds is controlled by an illuminated touch strip along the side of the Gear: top open, stroke this upward, to close, stroke downwards. Open and close can also be achieved by pulling on the beaded chain of the blinds. To return to fully manual operation, the Gear can itself be simply switched off.
    Basic automation

    One step up the automation chain is the use of the Axis Gear mobile app. The most obvious function is the ability to remotely control an individual Gear, or a group of Gears.

    The major advance the app provides is the ability to schedule blind opening and closing. For example, the blinds can be set to open just before the time you normally wake in the bedroom. Blinds elsewhere in the house might open earlier, giving the inside air a chance to warm in the morning sun. And, of course, scheduling the blinds to make sure they are closed while you are out of the house ensures that the dwelling will stay cooler during the day, adding to comfort and potentially conserving energy that would otherwise have been spent on air-conditioning.

    An additional app feature is setting scenarios. These are grouped settings for the blinds in the dwelling that correspond to certain standard events. For example, one setting might be for daytime TV watching, one for very hot days, another for entertaining.
    Full automation

    The Axis Gear communicates using many of the standard home automation networks, including Zigbee and Google's Thread and Weave networks. This means the Gear can be integrated with other systems, such as Google's Nest thermostat, or the FitBit activity tracker.

    The Gear could be set to open or close blinds depending on the interior temperature. Linked to the FitBit, the Gear could open the bedroom curtains when it senses the user has woken in the morning.
    Analysis

    What makes the Axis Gear a little unique in the home automation market is that it indicates how much thought has been given both to the device's functionality, and to the market it is seeking to enter. It is designed to be as "unthreatening" as possible, offering everything from very simple, very limited functions, up to highly advanced automation.

    This means that the Gear is accessible from both ends of the home automation market. For enthusiasts, it represents a great way to further build-out an existing system. For people with no home automation currently, it could be the first purchase that begins to build an interest in what could be possible.
    Reports
    B&Q, Homebase online sales surge for Dec 25
    Masters Home Improvement mobile app
    The Scotsman
    Devices used to access UK retailers' websites on "Black Friday"
    In the US during 2015, mobile began to dominate desktop access to online stores
    Subscribe to HNN weekly e-newsletter
    UK-based online traffic analysis company SimilarWeb has reported that online traffic at UK home improvement retailers spiked on both Christmas Day and Boxing Day 2015.

    Home Retail Group-owned Homebase in particular benefitted. It experienced a 138% increase in traffic. The Kingfisher-owned B&Q also had substantial gains, with an increase of 94%.

    SimilarWeb highlighted gains made by dedicated shopping apps for mobile devices, with Argos - also owned by the Home Retail Group - showing a 41% increase in its traffic via its dedicated app.

    This follows on from research findings released in early December 2015 by the company which indicated that US retailers had seen a 60% rise in app use during the post-Thanksgiving (end of November) online sales period, known as "Black Friday". (This term is a reference to the fact that many retailers "enter the black", ie., begin to show profit on overall operations for the calendar year, in late November.)

    These gains were considerably higher than the average traffic increase for large retailers in the UK, which was 16%. However, supermarkets also experienced a surge in web traffic of over 60%.
    Christmas Day versus Boxing Day

    Figures from UK-based PCA Predict indicate that in terms of sales, Christmas outshone Boxing Day in the UK, reversing the trend for the past five years. This shift is seen as being, indirectly, a response to the success in the UK of the somewhat artificially created Black Friday online sales day. With this gaining in popularity in 2015, UK retailers were led to discount more heavily in the immediate pre-Christmas Day period. According to Jamie Turner, chief technology officer of PCA Predict:
    As retailers started their sales early this year, we did not see the usual surge in online shopping on Boxing Day. Instead, consumers had the convenience of being able to browse online throughout the entire Christmas period to find deals and discounts. This demonstrates the monumental impact Black Friday has had on both the industry and consumers' shopping habits this year and it will be interesting to see if this trend will continue next Christmas.

    PCA's data backs up the findings of SimilarWeb in terms of mobile phone usage has gained considerable ground in ecommerce purchases. The company's data indicates that 42% used mobile phones to purchase goods on Christmas day, while 44% used desktop computers. Tablets had a much smaller share.

    High-end retailers have benefitted from the surge in sales as well, with London-based luxury goods retailer Selfridges reporting its online sales over Christmas and Boxing Day were double those of 2014.
    The Black Friday Phenomenon

    The rise in the prominence of the Black Friday artificial sales day in the UK has some importance for Australian online retailers. In the UK the day gained initial importance through online retailer Amazon. In line with its US offerings, Amazon began providing special sale items on the Friday after the US holiday of Thanksgiving, and this was soon picked up by other UK online retailers.

    There is the potential that, beginning in 2016, Australia will experience a similar phenomenon. The day serves the purpose of providing a pre-Christmas purchase sale, enabling online purchasers to buy presents with a strong assurance they will receive their goods well before Christmas, with additional time for returns or exchanges as required.

    Again, data provided by Predict indicates that mobile phone usage rose considerably for the Black Friday sales day in the UK:
    Devices used to  access UK retailers' websites on "Black Friday"
    News
    HI Weekly Vol. 1 No. 15
    Download the latest HI Weekly, issue number 15
    HI Weekly No. 15
    The Home Depot revolutionises logistics
    The next major development in cordless tools
    Click to visit the HBT website for more information
    Each week, the HNN weekly e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/HIWeekly-1-15.pdf

    In the last edition for 2015, we report on The Home Depot Investor & Analyst Conference and look at how the largest home improvement retailer in the world is focusing on logistics to gain better productivity returns. We also explore the Internet of Things (IoT) in an industrial environment and the significant role of cordless power tools.

    HNN extrapolates the relevant retail statistics for hardware, garden and building supplies for the month of October 2015. We profile Makita's latest 12-volt range and single out a number of construction technology trends from the past year. In other seasonal news, Lowe's has developed a Santa tracker through its smart home system app.

    As part of this bumper edition, we have included some of the stories that have had a major impact on readers during 2015. They include John Dahlsen's commentary on Bunnings, seven market forces to consider in 2015/16, kitchen trends and upcoming strategic challenges.

    Plus some regular features: big box update; HNN Home Improvement Index; and hot links.
    Statistics
    ABS hardware retail sales October 2015
    ABS hardware retail statistics for Australia, October 2015
    HNN Sources
    NAB Online Index
    NAB Online Growth estimates
    Click to visit the HBT website for more information
    Overall hardware retail sales in Australia performed strongly during October 2015. The only state to record negative growth was the Australian Capital Territory, which fell from $30 million in sales for October 2014 to $29 million in October 2015, a loss of 5%.

    South Australia had the strongest performance, posting a 15.1% lift over the previous October, followed by Tasmania with an over 14% increase, and Queensland with a close to 10% increase.

    Victoria continues to post slow rates of growth, coming in at close to 3%, while New South Wales posted growth of 6.6%, close to the national Australian growth rate of 6.31%.
    ABS retail statistics for Australia
    Online retail

    The NAB Online Index fell by 0.6% for October 2015 as contrasted to September 2015. On a year-to-year comparison, NAB estimates that sales are 5.7% higher.

    Total online retail expenditure is estimated at $17.9 billion for the 12 months to October. This indicates that online now has a 7.2% market share of total retail spending.

    Media, fashion and grocery & liquor all recorded good sales growth, with media posting an over 20% increase. Homewares and appliances fell by 2%.
    Statistics
    HNN Index for week ending 18 December 2015
    The HNN Home Improvement Index closed the week at 939.15 points
    HNN Sources
    CSR will be selling Tesla's Powerwall system to Australian households
    The ACCC launches action against Woolworths
    Click to visit the HBT website for more information
    After falling steeply last week, the HNN Home Improvement Index has recovered strongly, and seems set to finish the year close to the level of the underlying ASX 200 index.

    The Index closed the week at 939.15 points, up nearly 36 points on the previous week, and close to the level it was at on 20 November 2015. Meanwhile, the underlying ASX 200 index also rallied, but not as strongly. On the comparative scale, it rose by nearly 15 points to close at 950.1. In unindexed terms, the ASX 200 rose by 77 points to close at 5106.7.

    The strongest performer in the index stocks for the week was James Hardie, which increased its share price by 7.9%. CMIC also did well, lifting by 6.9%. Wesfarmers and Downer EDI recorded price increases of over 5.2% for the week.

    HNN will be revising the basis and weighting of the Index for 2016, and will be publishing a comprehensive summary of sector performance in January 2016.
    Adelaide Brighton linked to $3bn play

    Building materials provider Adelaide Brighton is believed to be working with investment bank Credit Suisse, as speculation continues about a potential $3 billion sell-off of the Australian and New Zealand operations of LafargeHolcim. Speculation remains that a divestment of the division is being considered by its Swiss head office as part of a global review of non-core operations, with a decision to be made within the first quarter of next year.
    Adelaide Brighton linked to $3bn play - Business Spectator
    CIMIC Group to buy back 10% of shares next year

    Australian construction major CIMIC Group will buy back 10% of its stock over the next year as the shares are said to be at an attractive position now. This decision was made despite the group's share price crashing more than 20% in the last six weeks. CIMIC is majorly owned by Hochtief, which is further controlled by Spanish builder Actividades de Construccion y Servicios SA.
    CIMIC Group to buy back 10% of shares next year - International Business Times
    CSR seals Tesla Energy deal to sell Powerwall

    CSR has expanded into home batteries, sealing an alliance with battery maker, Tesla Energy, to sell the Powerwall system to Australian households through its Bradford division. Anthony Tannous, executive general manager of CSR Bradford, said the move to broaden the product range came after keen interest from home-building developers and consumers. It is a logical add-on to the company's solar business.
    CSR seals Tesla Energy deal to sell Powerwall - Fairfax Media
    Lendlease factory to spearhead $1b construction disruption

    Lendlease will open a factory in Sydney next year with plans to manufacture $1 billion worth of pre-fabricated building material over the next five years. The start-up manufacturing business, to be called Design Make, will have a $15 million investment. It represents the most significant step taken so far by Lendlease to stay ahead of the next wave of innovation in the sector, which is shifting more building production from the construction site to the factory floor.
    Lendlease factory to spearhead $1b construction disruption - Fairfax Media
    ACCC launches action against Woolworths for alleged unconscionable conduct towards suppliers

    The ACCC claims Woolworths sought to make up for an expected profit shortfall in December 2014 by seeking what it referred to as "Mind the Gap" payments from more than 800 suppliers. It is alleged that the supermarket sought approximately $60.2 million in Mind the Gap payments from the suppliers while in a stronger bargaining position than them.
    ACCC launches action against Woolworths - ABC
    Bigbox
    Big box update
    A Masters store is proposed for the Melbourne suburb of Chirnside Park
    HNN Sources
    The Bunnings store in Yarrawonga (VIC) will be built on the Murray Valley Highway
    Bunnings Yeppoon is staffed from the former Capricorn Coast Hardware
    Click to visit the ITW website for move information
    Yarra Ranges Council will vote on building a Masters store in Chirnside Park (VIC); Bunnings Yarrawonga will be the third store in North East Victoria; Bunnings Yeppoon opens its doors with familiar faces; and Bunnings state office is moving to new premises in WA.
    Decision on Masters Chirnside Park

    A Masters store could be built in the Melbourne suburb of Chirnside Park before next Christmas if the local council approves a planning application at a special meeting. Councillors will meet under to vote on the application after deputy mayor Andrew Witlox requested the project be heard before the end of 2015.

    Cr Witlox told the Herald Sun: "The applicant has had a long hard slog with our planning department to get this through and hopefully this will go through and we'll have some competition for Bunnings." He said the project could have significant benefit for Chirnside Park by providing jobs and stimulating economic activity.
    Bunnings in regional Victoria

    The 6900sqm Bunnings store in Yarrawonga (VIC) will be built on the Murray Valley Highway on land that has been earmarked for redevelopment for almost a decade. It recently gained planning approval from Moira Shire with developers poised to announce a builder just before Christmas.

    Bunnings Yarrawonga is expected to open in August next year and will join others in Wodonga and Wangaratta with another store located at Shepparton. Bunnings has committed to a 10-year pre-lease that represents an investment of $10 million. The development will include a main store, indoor timber trade sales area, building materials and landscape supply yard, outdoor nursery and parking for more than 140 cars. The total Bunnings' site will occupy 14,500sqm.

    Bunnings' general manager of property Andrew Marks said the company was committed to supporting regional communities. He told the Border Mail: "Bunnings' investment in the Yarrawonga area will provide great job opportunities for the local community, with over 60 new positions expected to be available in the Bunnings team..."

    Related:
    Big box update - HNN
    Bunnings Yeppoon officially opens

    Bunnings latest store in Yeppoon (QLD) is staffed from the former Capricorn Coast Hardware. The business was recently sold to Bunnings and the rebadged store has now opened.

    Bunnings Yeppoon store manager Nathan Ridley told the Morning Bulletin: "Our team members have worked hard to prepare the store for opening and are looking forward to welcoming the local community. The seven existing members from the former Capricorn Coast Hardware store have joined the Bunnings team in addition to four new team members..."

    Related:
    Big box update - HNN
    Bunnings WA office move

    The Bunnings WA support office will relocate to the Springs Rivervale complex that is under construction. The tower will be the new home for Bunnings' store support office and core information technology functions for its Australian and New Zealand operations. Staff will move from Welshpool into three levels of the Rivervale building. The offices will occupy 4321sqm of the nine-level office building.

    The office tower is part of a mixed-use development being built by BGC Development that will also include a 41/2 star Aloft Hotel, which is due to open in early 2017. Bunnings plans to relocate in February 2017.
    News
    Hot links
    A Dare Gallery store will open on the Sunshine Coast in Queensland
    HNN Sources
    Four Fiskars products have been given the GOOD DESIGN 2015 Award
    Newell Rubbermaid has taken over Jarden Corp.
    Click to visit the HBT website for more information
    Melbourne-based furniture and homewares store Dare Gallery will open its first Sunshine Coast shopfront; British hardware store Robert Dyas creates a quirky viral Christmas video highlighting sexuality; Fiskars has been awarded the GOOD DESIGN[tm] 2015 Award; and Newell Rubbermaid is acquiring Jarden Corp. and its products for US$15.4 billion.

    For further information, simply click on the images provided.
    Dare on the Sunshine Coast

    A new Dare Gallery store will open as part of the Maroochydore Homemaker Centre on the Sunshine Coast in Queensland. General manager Patrick Doyle said the company had conducted research into consumer trends to find out what people in the region were looking for in interior styles. The store will be Dare Gallery's 12th in Australia and its third in Queensland.
    Dare Gallery to open on the Sunshine Coast
    Hardware store's gay/straight ad

    A Christmas video created by UK hardware store Robert Dyas suggests that straight, gay and bisexual people all love the store and its products. It shows customers and employees declaring their sexual orientation as they tout particular products. The results are strange - and confusing to many viewers, who can't quite grasp why that should matter when shopping for hardware. You can check it out here:
    Video from the Robert Dyas hardware store
    Fiskars' innovation recognised

    Four Fiskars products have been given the GOOD DESIGN 2015 Award. The award is conferred annually by the Chicago Athenaeum: Museum of Architecture and Design together with the European Centre for Architecture, Art, Design and Urban Studies. The museum received several thousand entries in 2015 from corporations in over 47 countries.
    Fiskars have won a number of GOOD DESIGN 2015 awards
    Newell Rubbermaid buys Jarden

    Newell Rubbermaid's purchase of Jarden Corp. will create a consumer-products giant with a sprawling portfolio. The new company, called Newell Brands, will have US$16 billion in sales, according to a statement. Jarden's more than 100 far-flung brands include everything from First Alert to Breville. Newell Rubbermaid CEO Michael Polk, will run the combined entity.
    Newell Rubbermaid has acquired Jarden Corp.
    Products
    Makita lifts its 12-volt max game
    Makita 12v circular saw
    HNN Sources
    Makita impact driver
    Reciprocating saw
    Click to visit the HBT website for more information
    After initial rumours in mid-2015, Makita has finally released its new line-up of 12v max tools. As expected, the tools feature slide-on batteries in 2.0 amp-hour and 4.0 amp-hour sizes that replaces the previous plug-in haft battery in Makita's 12v line-up. And yes, these batteries do have a built-in charge level indicator.

    The charger for the tools has also been improved, incorporating its own cooling fan. That means that batteries can now be rapidly charged, with the 2.0 amp-hour battery charging fully in just 22 minutes, according to Makita.

    There are six tools currently in the new line-up: an impact driver, drill, screwdriver, hammer drill, circular (trim) saw, and a reciprocating saw.
    Makita CXT impact driver

    Weighing in at just one kilo, this driver has two speed settings of 200rpm to 2600rpm, and 0rpm to 3500rpm. It has a single light directly underneath the chuck. Its torque rating is 110 newton-metres.
    Makita impact driver
    Makita CXT drill

    This features a 3/8-inch single sleeve drill chuck, a two-speed gearbox, and an LED worklight. It weighs in at 1.1 kg.
    Makita CXT screwdriver

    This is virtually identical to the drill, except for the chuck, which is a 1/4-inch hexagonal quick-release design. It weights slightly less than the drill, at 940g.
    Makita CXT hammer drill

    Almost identical to the plain drill, this tool can deliver up to 25,500 beats-per-minute in hammer mode. It weighs 1.1kg.
    Makita CXT circular saw

    This is essentially a "trim" saw, featuring a 85mm blade, with a 20mm arbour hole. It weighs in at 1.5kg. Makita claims the saw can make 110 cuts through 25mm x 100mm timber on a single battery charge.
    Makita 12v circular saw
    Makita CXT reciprocating saw

    Very similar in design to the 12v saw this unit replaces, it offers both a trigger switch and a paddle switch. With a 150mm blade, the saw has a cutting capacity of 50mm. It produces up to 3300 strokes per minute, and weighs 1.3kg. According to Makita, the saw can make 30 cuts through 50mm x 100mm timber on a single battery charge.
    Reciprocating saw
    Analysis

    This move by Makita manages to be both somehow expected and a little puzzling. Where Milwaukee Tool has redeveloped its 12-volt max line-up to get as much power out of the smaller format as possible, the Makita tools fit into a market niche that is just under them.

    Is it possible that Makita sees these tools as one way to access more of the consumer market? Or does the company want to make sure that this smaller line does not in any way touch the market for its well-regarded 18-volt line?

    There is a growing sense that while the developments in power tools over the past 12 years or so have quite suited the historical Makita approach of constant and respectful progress in tool development, in the past two or three years the market has changed, and that approach may not be optimal for the future.

    If that turns out to be true, it is almost certain that the market will give Makita considerable time to adjust its approach. The brand's reputation for decent, high-value, highly repairable tools will carry it for another year or two. However, even with one of the best (deserved) reputations in the business, if it cannot keep pace with market changes, it will eventually be relegated from an almost automatic first choice by a wide range of professionals, to being considered as the second or third possible option.
    Reports
    Construction technology trends
    Video of Asmbld Robots
    Construction Dive
    The Apis Cor 3-D printer can create a 1,000-square-foot building of any height in one day
    Topmix Permeable concrete system
    Subscribe to HNN weekly e-newsletter
    The Construction Dive website takes a look back at the most interesting technological advancements in the industry throughout the last year. In 2015, there were many developments that could have a major influence on the industry. Here are just a few from the past year.
    Construction robots revamp building process

    Startup company Asmbld, based in Brooklyn, New York (USA) is working on a robotics system that can reconfigure a room in minutes. Co-founder Petr Novikov explained to TechCrunch that it is "like 3-D printing upside down".

    The "Project Dom Indoors" process involves tiny robots living inside cubes created from 5-inch tiles and aluminium studs that make up the floor of a room. Those cubes can rise out of the floor to create walls, surfaces and tables, and then slide back into their original position in the floor.

    The robots have the ability to assemble the cubes into new configurations, transforming a conference room into a lounge or open workspace, for example. Asmbld said it would cost approximately US$12,000 to install the system in a 500-square-foot room, and would involve re-flooring a space to make the floor five inches higher than the current floor. Asmbld's technology could reduce construction and demolition waste, as reconfiguring and redesigning rooms wouldn't need to result in any waste. And replacing construction workers with the tiny robots offers the opportunity for major time and labour costs, the company said.
    3-D printer builds 1,000 square feet per day

    Russian engineer Nikita Chen-yun-tai developed a 3-D printer that can create a 1,000-square-foot building of any height in one day. The Apis Cor printer, shaped like a tower crane, sets up in the middle of the building and can print a house layer by layer, at high speed, with a commercial extruder rotating in two planes.

    The Apis Cor has a printing zone of up to 630 square feet, can print sloping walls horizontally and vertically, produces no construction waste, and provides a cost savings of up to 70% over frame construction.
    The future of concrete?

    Interest in permeable concrete - primarily its ability to prevent devastating damage caused by stormwater runoff - has skyrocketed due to a video demonstration in which a parking lot paved with a product called Topmix Permeable absorbs more than 1,000 gallons of water in a minute.

    According to Lafarge Tarmac, manufacturer of Topmix Permeable, stormwater routinely overwhelms older US wastewater systems, causing untreated sewage to be dumped into local waterways and onto public beaches, creating a significant source of pollution for rivers, streams and reservoirs.

    Products like Topmix Permeable are applied over a base layer of gravel and, depending on the permeability of the substrate, the water is allowed to either permeate the ground below or is diverted elsewhere, over a period of time, through a series of pipes.

    However, the empty spaces in the permeable concrete that allow water to flow through have limited the product's use in more rigorous applications, such as heavily-travelled highways, and have raised questions about possible damage from freezing water.
    News
    HI Weekly Vol. 1 No. 14
    Download the latest HI Weekly, issue number 14
    HI Weekly No. 14
    Exploring the new women's DIY market
    Metcash-Mitre 10 first half 2015-16 results
    Click to visit the HBT website for more information
    Each week, the HNN weekly e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/HIWeekly-1-14.pdf

    In this week's edition, we provide an overview of the advertising market in the home improvement sector. There is growing evidence that it is continuing to move towards digital. HNN also looks at the new women's DIY market that could be a growth source for home improvement retailers in 2016.

    We examine the 2015-16 first half results for grocery wholesaler Metcash and its hardware subsidiary, Mitre 10. Although its profit has declined, its share price increased.

    Additional news stories include an investment market update featuring News Corp Australia taking a stake in tradies marketplace, hipages.com.au. The trend in modular homes in Perth is explored and HNN attends the event for kitchen and bathroom designer, Royston Wilson.

    International stories include Mitre 10 New Zealand's search for the best female DIYer in the country; potential bids for UK home improvement retailer Homebase; Kingfisher's investment in renewables; and Bosch's new smart home business.

    Plus all our regular features: a selection of the latest home improvement jobs from around Australia; HNN Home Improvement Index; new products; and hot links.
    News
    Investment market update
    News Corp Australia has purchased a 25% stake in hipages.com.au
    HNN Sources
    Reliance Worldwide Corporation is considering a $1 billion initial public offering
    Arrow Storage Products has been acquired by ShelterLogic
    Click to visit the HBT website for more information
    The latest mergers, acquisitions and investments in the home improvement sector. News Corp Australia bets on hipages.com.au; Reliance Worldwide prepares for a potential listing; and Arrow Storage Products has a new owner.
    News Corp invests in hipages

    The Australian reports that News Corp Australia has purchased a 25% stake in Sydney-based hipages in a deal to gain exposure to the growing online marketplace for home improvement. It is understood the investment, which values the start up at more than $100 million, comes ahead of a possible IPO on the local stockmarket within the next two years.

    News Corp Australia chief executive Peter Tonagh told The Australian: "The investment is part of a wider plan to further develop and grow the property and home services category in Australia. Hipages is a leader in this market and has consistently demonstrated innovation and strong management..."

    It is understood talks between News Corp and hipages began in September amid strong interest from Fairfax Media and Seven West Media.

    Founded in 2004, hipages aims to make hiring tradies in Australia, including plumbers, electricians, painters and builders, as easy as buying a book on Amazon.com. The platform is a free service for householders seeking quotes to get repairs or renovations done, and generates income by charging participating tradespeople to use the website.

    The firm has increased fiscal revenue 44% year-on-year, and directly employs 200 people and helps more than 65,000 verified tradespeople find work and get access to $1.35 billion worth of jobs generated each year.

    Funds will be used to accelerate growth in product development and marketing activity as part of an ambitious plan to make hipages a household name.

    To read more, go to
    News Corp Australia grabs stake in hipages startup - The Australian

    Related:
    hipages.com.au attracts $6m investment - HNN
    hipages raises another $6 million - HNN
    Reliance targets $1b IPO

    The Street Talk column in the Financial Review revealed that privately-owned plumbing fittings and water valves manufacturer Reliance Worldwide Corporation (RWC) is considering a $1 billion initial public offering. The deal would value the company at about $1.5 billion.

    Investment bank JPMorgan is expected to kick-start the float preparations by introducing RWC and its management team to Australian and Asian investors. The Melbourne-based Munz family has owned RWC for the past 30 years and taken its "behind the wall" plumbing products global.

    The business has grown from an Australian-only company to become the largest manufacturer in the world of safety valves for hot water tanks and brass push to connect plumbing fittings. It's understood RWC now has more than 800 employees globally, with a manufacturing footprint spanning Australia, New Zealand, Europe and the United States of America.

    The company also has operations in Canada and the United Kingdom and sells into those countries and other parts of the world including Asia, South America and the Middle East. RWC's biggest market is the US, which has grown strongly over the past 10 years to now represent more than 60% of the company's sales.

    Investors are likely to compare RWC to the already-listed $3.5 billion Reece Ltd, the plumbing and bathroom products importer, wholesaler, distributor and retailer. Shares in Reece have more than doubled in the past four years and trading at about 21-times forecast profit.
    ShelterLogic buys Arrow

    Outdoor products company ShelterLogic, which is backed by RFE Investment Partners and Charter Oak Equity, has acquired Illinois-based Arrow Storage Products, a maker of outdoor steel storage solutions and is known for its garden sheds. No financial terms were disclosed.

    The acquisition of Arrow expands ShelterLogic's product offering of steel framed, fabric covered sheds and garages to now include all steel storage products. Zubin Avari, general partner at Charter Oak Equity said: "This acquisition broadens ShelterLogic's product offering and capabilities in the sheltering and storage category, and brings together two of the leading brands in the industry."

    ShelterLogic is a global manufacturer and marketer of fabric-covered, steel frame shelters and canopies for consumer and commercial applications, including sheds, garages, greenhouses and pop-up canopies. The company is headquartered in Watertown, Connecticut USA.

    For over half-century, Arrow has established a strong brand and leadership position in the consumer storage category.

    Related:
    USA Market for Storage Products - HNN
    Careers
    Seeking opportunities
    An FMCG manufacturer requires a manager to grow sales through its Bunnings account
    HNN Sources
    Paint Place is seeking a business development manager
    Masters needs a buyer for the bathroom category
    Visit the Mecca Website
    A selection of home improvement and hardware retail roles around Australia. An account manager is needed to increase sales through Bunnings; Paint Place is looking for a business development manager; and a buyer for bathroom products is required at Masters.

    For further information, simply click on the images provided.
    "High impact" account manager

    An FMCG manufacturer requires a manager to grow sales through its Bunnings account. Creative flair is also needed to promote the product range. Candidates should have at least two years experience managing key and major accounts, specifically Bunnings.
    Account manager to manage Bunnings needed
    Paint group BDM role

    Paint Place is seeking a business development manager (BDM) for NSW and ACT. Working closely with group members, the BDM will support and advise members on marketing, visual merchandising, sales management, store operations and supplier relationships.
    Business development manager for Paint Place
    Buyer for bathroom

    At Masters, previous experience in a retail buying position is vital and specifically in the bathroom category would be highly regarded. The ideal candidate will also have excellent communication skills, business acumen and proven experience in building long term relationships.
    Masters is searching for a bathroom buyer
    News
    Hot links
    Zara Home has launched the Australian version of its website
    HNN Sources
    The Griffin Pocket Tool XL is having a successful Kickstarter campaign
    Pantone has named Rose Quartz and Serenity as its colours for 2016
    Click to visit the HBT website for more information
    Homewares and home decor chain Zara Home has launched its online platform in Australia; Pantone chooses colour trends for 2016; the Griffin Pocket Tool XL is having a successful Kickstarter campaign; and Stylyze helps drive sales for home decor retailers.

    For further information, simply click on the images provided.
    Australia gets Zara Home online

    Zara Home has revealed the Australian version of its website for the local market. The product catalogue for online store will have the same items that are available in the physical stores. Customers will also be able to purchase from the chain's official app that is available in iOS and Android format. The rollout of the virtual store coincided with the opening of its flagship store in Sydney's Pitt Street Mall.
    Zara Home online launches in Australia
    Two colours of the year

    Influential colour trend forecaster, the Pantone Color Institute has named its Color of the Year for 2016. For the first time, it is a blend of two colours: Rose Quartz, a light pink, and Serenity, a blueish hue. Executive director Leatrice Eiseman explains: "Joined together Rose Quartz and Serenity demonstrate an inherent balance between a warming embracing rose tone and the cooler tranquil, blue, reflecting connection and wellness as well as a soothing sense of order and peace."
    Pantone chooses two colour for 2016
    Fifteen tools in one

    The Griffin Pocket Tool XL is 50% bigger than the original with over 15 functions. New features include a nail prying tool inset in the chisel, rulers on both sides of the tool in inch and millimetre increments, a bit retainer and the choice of US or metric sized hex wrenches. Its Kickstarter project has already passed its US$4,000 goal.
    The Griffin Pocket Tool XL is attracting strong interest on Kickstarter
    Stylyze "recommendation" platform

    Stylyze has launched its product discovery technology for online home decor retailers who want to offer data-driven, styled recommendations for their customers. It has coded the brain of an interior designer to recommend cross-merchandised styleboards for every product.
    Stylyze creates online styleboards
    Retailers
    Mitre 10 NZ searches for top female DIYer
    Mitre 10 New Zealand has launched its inaugural Women's DIY Challenge
    Scoop NZ
    Ladies Nights at Mitre 10 New Zealand stores are popular
    Mitre 10 NZ is one of the sponsors of the Rural Games
    Click to visit the ITW website for move information
    Mitre 10 NZ recently announced its inaugural New Zealand Women's DIY Challenge as part of its sponsorship of the Hilux New Zealand Rural Games.

    The first ever Hilux New Zealand Rural Games were held in February this year and attracted more than 7,500 spectators to Queenstown. The event consists of two days of traditional sports and live entertainment staged on Queenstown Recreation Ground.

    Billed as a showcase for "Sports that built the nation", nearly 200 competitors took part in a series of national and trans-Tasman championships including coal shovelling, wood chopping, speed shearing, speed fencing and gumboot throwing.

    Mitre 10 general manager - marketing Dave Elliott said the Rural Games are a celebration of New Zealand spirit. Heartland-based women commonly lead the charge with DIY at home so it seemed a natural fit to introduce the Women's DIY Challenge at the games. He said:
    We're launching the New Zealand Women's DIY Challenge to showcase some of the best female DIYers New Zealand has to offer. Earlier this year we did some research about gender and DIY, and the results showed Kiwi women are very confident about their DIY skills. But men still think home improvement is a masculine domain and they're not quite ready to move over yet.
    Women are a growing force in DIY, particularly in the provinces, and our stores' Ladies Nights are testament to this. They regularly attract up to 500 women per event. We know there are many very skilled women out there and we want to showcase their ability and celebrate DIY for everyone. What better place than at the Hilux Rural Games to do this.

    Nominations for the Mitre 10 New Zealand Women's DIY Challenge were open through Mitre 10's Facebook page. Contestants were invited to submit photos to demonstrate their ability and why they want to compete.

    Two women will be selected from these entries as finalists and flown to Queenstown to compete in the games along with a female assistant of their choice. They will be joined by a Mitre 10 MEGA Queenstown wildcard entry. The finalists will be given a number of DIY jobs including putting together a playhouse-sized barn and constructing a fence.

    Related:
    More women doing DIY in New Zealand - HNN
    News
    Home improvement ad market shifts to digital
    The latest season of The Block did not do as well
    HNN Sources
    GroupM's media/marketing analysis for 2015
    Could products such as roof tiles be marketed through fashion?
    Click to visit the HBT website for more information
    To understand what is going on with advertising and promotion in Australia's home improvement industry, it's necessary to take a peek back in time and see how the industry has developed over the past 20 years or so.

    One of the basic rules of the home improvement industry is that whichever transaction provides the largest net margin is generally the part of the market that has the most control.

    We can take the power tools sector of the industry as an example. Back in the 1990s, the way the industry worked is represented by Figure 1:
    Brand model from 1990s

    Manufacturers determined much of the way the market worked. They effectively controlled prices, and set (indirectly) the kinds of margins retailers were likely to earn. The most profitable link in the chain was that between the manufacturers, wholesalers and the retailers.

    By 2005 the industry had altered radically, and it looked more like Figure 2:
    Brand model from 1990s

    Where manufacturers had been central, retailers moved into control. They developed the clout to lock manufacturers into exclusive deals, and even to dictate design and pricing details (within limits) to the ranges of some manufacturers.

    Bunnings, of course, provides the best example of this kind of dominance. They entered into a deal with Techtronic Industries (TTI) to be the exclusive distributor of TTI's Ryobi brand of power tools. Through a very close relationship with Ozito they gained more control over the types of tools and the price-points of the tools on sale at the lower end of the price spectrum.

    Added to that are about a half-dozen other power-tool deals (with companies such as Makita) which, while not as comprehensive as the above two, nonetheless gave Bunnings more control over the products it chose to sell.

    As Bunnings has developed, it has increased the overall focus of the industry on the store and the retail space it represents. This model became general throughout the industry.

    Today that actual retail space, the store/warehouse/outlet, has become the prime engine of the entire industry. Chains such as Bunnings and Masters Home Improvement - as well as many independents - have invested very large sums into these spaces. The store, through its size, complexity and wide range of products offered, has now become the focus of the consumer's interest.
    Advertising in the era of the store

    While from the 1950s through to the 1990s it was common for manufacturers of power tools to advertise their wares both directly to consumers and to retailers through trade publications, this slowed substantially in the early 2000s, and by 2010 or so had almost completely come to a halt.
    Vintage 1950s Black & Decker ad

    The surviving advertising, in fact, has tended to be from brands such as Ryobi, which, because it is so firmly locked into Bunnings, is in effect really just a slightly different form of store advertising.


    Even store advertising, however, has been modest at best. While ads from Bunnings are carefully engineered to seem inexpensive, while actually possessing some decent production values, and a good deal of strategic thought, they are also quite limited in their scope and frequency.

    Mitre 10, through its sponsorship of TV shows such as Channel Nine's "The Block", and use of home improvement presenter Scott Cam as its media spokesperson, probably has a higher media profile than Bunnings, despite its much smaller size.

    That is, of course, deliberate on both sides. The managing director of Bunnings, John Gillam, is on record as saying he does not see much value in TV home improvement shows for promotion (at least in Australia; Bunnings New Zealand is more involved in TV). From Bunnings' perspective, that kind of involvement would just be a distraction from its central message of getting customers to focus on the store.

    Interestingly, the Woolworths-owned Home Timber and Hardware Group (HTHG) has taken a very different approach. They've invested in developing a set of original and entertaining TV commercials (TVCs) that focus in a humorous way on one of the company's strengths: providing tradie-strength help and advice to regular consumers.



    While the initial TVCs were not entirely effective, HTHG has persisted with its approach, and is now developing (and re-developing) some very effective advertising.

    The other Woolworths-owned home improvement entity, Masters, has been far more cautious in its TV expenditure. It has produced one basic add for spring 2015, which is little more than an encouragement to go visit a Masters store. No doubt, the advertising budget has simply not been a priority as the retailer struggles to turn its existing fleet of stores into worthwhile destinations for DIY consumers.

    The Block

    For Mitre 10, the sponsorship of this once-popular TV series has in the past given it a degree of media "cut through" it would likely lack if its advertising spend were more diffused in the medium. However, as the CEO of Mitre 10, Mark Laidlaw, remarked at a recent hardware industry event, "The Block" is also a format that seems to be close to its expiry date.

    The most recent series was not as well thought-out, due both to poor casting of contestants and some difficulties with the competitive concept itself. (An early segment essentially awarded the best space to the best competitors - and guess what? They won. Ratings slumped considerably.)

    There were also problems with the degree of participation of Mitre 10 in the TV show. While it began with a strong presence, offering contestants the chance to mix their own "signature" paint colour, which effectively highlighted Mitre 10's Accent paint range and its in-store services, the level of involvement then declined rapidly.


    Indeed, if you were to give one company the award for the best use of "The Block" for promotional purposes, it would without doubt go to German supermarket company Aldi. Despite being slightly "off topic", Aldi created a number of sponsored events that effectively highlight its retail offering.

    Equally, if you were to give an award for "best blurry presence by a hardware brand" on "The Block", it would go to Bosch tools. There seemed to be frequent out of focus shots of a rack of Bosch Green tools in the background, and at least one confirmed sighting of a builder wearing a Bosch Blue T-shirt.
    Is that a Bosch...?

    And a glimpse or two of Senco:
    Senco? (After all those Hilti boxes...)

    Planning and execution are just some of the problems home improvement "reality" shows such as "The Block" face. One of the major problems is that the TV audience is rapidly becoming less representative of "mainstream" Australia, as more and more younger and also tech-oriented people opt for digital alternatives.

    The new, the cutting edge, is now taking place in digital channels, and the free-to-air broadcasters are faced with the dilemma of either trying to woo back that audience, and thus alienate the people who continue to watch the telly no matter what, or continue satisfying its current audience and watch the next generation audience decrease still further.

    This gap is particularly evident when it comes to the home improvement industry. "The Block" has become a show that is all about fixing up apartments in a prime location to a $2 million standard of "luxury" that looks more at home in 1999 than today.

    That might appeal to the middle bulge of the baby boomer generation. For today's Generation X and the Millennials, struggling to put together the deposit on a small apartment in a suburb between the inner and outer regions of a major city, it's not. In fact, it's about as relevant to them as the social traumas suffered by Edward Melba "Ted" Bullpitt and his son Craig on the "Kingswood Country".
    The digital

    Which brings us to the subject of the digital. While other forms of advertising continue to decline in terms of spending, digital seems to be steadily taking over. Both Bunnings and Masters have expanded their use of digital ads, while Mitre 10 lags significantly behind.

    Once again HTHG has been something of a surprise in this area. Leveraging the great start they had with their "Putting the hard back in 'hardware'" campaign, they brought out two longer-format web videos, one for Father's Day and one for Christmas. Both of these successfully carry through the marketing theme. The strong narrative structure HTHG and its advertising agency easily carry the two-minute digital video spots.


    Bunnings, of course, has much more planned for digital, as its parent company, Wesfarmers, revealed at the most recent annual general meeting. True to the spirit of DIY, Bunnings is set to develop its own, community-boosting website, which will help its customers better connect with each other. It has also boosted its video tutorials. Bunnings renovated an entire house from start to finish, and plans to produce over 500 videos to help guide its customers through similar DIY projects.

    Masters has made good use of digital over the past year, with its online advertising presence backed up by the effective online ecommerce features of its website. Masters is also the only one of the majors to really have a formal and effective presence on eBay, though Super Cheap Auto also sells hardware directly through the site.
    The Masters eBay store site

    Mitre 10 does have a presence on eBay, but it is maintained by one Mitre 10 store, Kingsford Timber Mitre 10.
    Global advertising overview

    To switch to a broader view of the advertising scene globally, the general trend now is indisputably towards digital. The UK analysis company, the M Group, has provided the following helpful graphic that illustrates this trend and how it played out in 2015:
    Group M's media/marketing analysis for 2015

    Commenting on the growth potential for digital, GroupM offered this analysis:
    In terms of investments across media types, the shift of advertiser investment to digital, of course, remains the biggest trend. GroupM maintains its midyear forecast and anticipates digital growth of 14 percent in 2016, commanding 31 percent of global ad budgets. This is a deceleration from the 17 percent growth predicted for 2015. The slower but ongoing strength of digital springs from many sources including organic take-up, technical innovation, advances in value, viewability and validation, automation and efficiency, better creative work, and the mastery of data.

    Dominic Proctor, global president, GroupM said:
    "Facebook is addressable and targeted at scale with requisite tools and automation that make it easy for advertisers to understand and use; so it is reaping advertising growth of 50 percent globally, including Instagram. Organic Google website revenue is growing remarkably fast too at 25.5 percent, and they have streamlined YouTube into a complement to broadcaster VOD, even if it is not yet a real challenger on price or quality.
    We see that digital's data and automation capabilities are inspiring the evolution of all media -- in all markets across the globe -- but digital will continue its powerful growth and market share gains. This is despite the challenges in the digital space such as viewability, fraud, measurement and currency, all of which we expect to be solved by market forces.

    Looking ahead to 2016, advertising analytics company ZenithOptiMedia has provided the following chart to describe ad spend growth:
    ZenithOptiMedia's ad spend growth predictions

    Writing about the potential for growth in what it terms the "Advanced Asia" area of the world, which includes Australia, ZenithOptiMedia states:
    We estimate growth here at a disappointing 1.9% in 2014, after weakness in the property market damaged consumer confidence in Singapore and Australia suffered from low prices for its key commodity exports. As these problems recede we expect growth in Advanced Asia to pick up to an average of 2.7% a year through to 2017.

    In terms of the shift between different forms of advertising on a global scale, ZenithOptiMedia has this to say:
    Desktop internet advertising will continue to grow, but will lose market share for the first time this year [2015], dropping from 19.8% of global adspend in 2014 to 19.4%. By 2017 ZenithOptimedia forecasts desktop internet to account for 19.1% of global adspend. Meanwhile mobile internet advertising's share of the global ad market will rise from 5.7% in 2014 to 15.0% in 2017.
    Overall, internet advertising will account for 34.0% of global adspend in 2017, slightly behind television's 35.9%. The market share gap between the two media will narrow from 13.3 percentage points in 2014 to 1.9 in 2017. At this rate of growth, internet advertising will overtake television in 2018.
    Mobile advertising to overtake newspapers in 2016

    Certain forms of print media stand to be hit harder than others. Group M's forecast for the business-to-business print magazine advertising spend for the UK indicates it will fall from 6.3% of total spend in 2007, to less than 1% in 2016. It is a decline that has taken place in Australia as well.
    Changes in the future?

    While it is unlikely we will see particularly big shifts in advertising itself during 2016, outside of the progressive move from print and TV to digital, 2017 may end up being a different story.

    HNN can see two potential areas for change in the years to come: an increase in the importance of brands, particularly for cordless electronic/electrical devices, and the rise of fashion as a major influence on home improvement.
    The cordless brand

    We began this discussion of advertising by noting changes from the 1990s to the current day in the way brands are used by home improvement retailers. Focusing on the power tool market, we can see that what has happened is that strong retail brands, such as Bunnings, have in a sense subsumed certain power tool brands, using them to build aspects of their own brand identity. Thus part of the Bunnings brand, for example, is that it is a place where you can buy Ryobi, Makita and AEG tools.

    HNN has written previously about the increased importance of brands as they apply to cordless tools. Where in the past consumers were free to mix and match a wide range of corded tool brands, the need for proprietary cordless battery systems means consumers have to "buy into" a specific brand. As a consequence that brand's identity becomes more important.

    A typical strategy to enhance the brand image of cordless tools is to make a point of the range and variety of tools the brand offers. TTI's Ryobi and Milwaukee Tool have done this, as have Makita, DeWalt and Stanley FatMax.

    One development we could see by 2017 is that some of these brands reach outside of their present power tool categories, and enter into others where there is some demand for cordless technology. One of the most accessible of these adjacent categories is homecare, specifically vacuum cleaners.

    This might seem just a bit of stretch, it is worth remembering that TTI also has a vacuum cleaner division - in fact, that is the industry in which it made its first own-brand products. Its Dust Devil brand does produce a number of cordless vacuum cleaners, but none, so far, with replaceable, independent batteries.

    If this kind of expansion does take place in calendar 2017, it would be likely to spark a great deal of competition, as competing brands struggled to become "the" brand for the home. This would likely see a sharp spike in brand-based advertising.
    Fashion

    Fashion is beginning to have more of an effect on a wide range of goods that were previously immune to its influence. For example, the sales surge in the iPhone (especially in Australia) really happened when the design was changed from the practical shapes of the iPhone I, II and III, to the more fashionable, camera-like design of the iPhone IV.

    Since that time the Apple has pursued fashion in all its mobile devices, and moved into the very fashionable areas of watches as well. Its customers may be buying technology, but the means by which they move themselves into a purchase tend to have some basis in a fashion sense as well.

    When we think about items such as building products, while we are ready to admit that fashion does have some influence, generally we think in terms of a special, "slow" form of fashion. Householders are usually reluctant to go with "the latest thing" lest in another two years the tiles, floorboards or cornices seem very out of date.

    That may be true, but it is still the case that a fashion approach might work when it comes to selling some building products. What if, for example, the notion of fashion marketing was applied to something like roof tiles?
    Roof tiles marketed through fashion

    Probably not going to appeal to your average gruff builder, but who is it that usually has final say on the choice of tile colour?

    If this seems just a little out there, it really has been done before.
    Levis Paints print ad
    Levis Paints print ad

    Until next time,

    Betty

    You can contact me directly via email betty@hnn.bz or Twitter @HNN_Australia

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    Retailers
    Metcash-Mitre 10 H1 results
    Metcash results for FY2015/16 H1
    HNN Sources
    Mitre 10 results for FY2015/16 H1
    HNN's original chart detailing its turnaround strategy in 2014
    Click to visit the ITW website for move information
    Australian grocery and hardware wholesaler Metcash Limited has released its results for the first half of its FY 2015/16. In a departure from past practice, Metcash has made little commentary on these results publicly available. As a result the information the company has offered is somewhat meagre.

    Metcash overall saw sales revenue reached $6600 million, a 1.4% increase over the previous corresponding period (pcp), which was the first half of FY 2014/15. Earnings before interest and taxation (EBIT) fell by 12.7% over the pcp to $133.7 million. Underlying profit after tax also fell, by 6.1% over the pcp to reach $86.9 million.
    Metcash results for FY2015/16 H1

    However, the company recorded a profit after tax on the sale of its automotive division to Bursons of $35.1 million. This lifted its overall reported profit after tax to $122.0 million, a 20% increase on the pcp.

    Sales for the company's food and grocery division rose by 0.7% on the pcp to reach $4540 million. Like-for-like sales for those IGA-branded stores reporting this data increased by 0.6% compared to the pcp. However, the division's EBIT fell by 22.9% on the pcp to reach $91.9 million.
    Hardware

    In the company's hardware division, led by Mitre 10, sales increased by 1.2% on the pcp to reach $530.7 million. EBIT for this division increased by 22.1% to reach $11.6 million. Hardware contributed 8% of the company's overall sales revenue, and 9% of its EBIT.

    The division reported a total of 383 stores operational during the recent half, down from 396 in the prior half. Six stores joined Mitre 10 during the half, while 19 chose to depart. Of the 383 stores, 314 are Mitre 10 and 69 are True Value Hardware.
    Mitre 10 results for FY2015/16 H1

    Despite what were mediocre company results at best, the share price of Metcash (MTS) rose steeply, up by as much as 22% in the days after the results announcement.
    Analysis

    How you read the most recent results from Metcash depends on whether you are convinced by the company's suggested narrative or not. What that narrative suggests is that, even though these results clearly show a declining position, the company is "stabilising", and heading towards future growth.

    In a normal market and an economy with growth rates like those of the early 2000s, this strategy would have had a good chance of success. However, the grocery/supermarket market in Australia today is anything but normal. There is the ongoing intense competition between Woolworths and Coles, plus the expansion of Aldi. Added to that is the possibility of further discounters such as Lidl entering the market. Further along, in another two to three years, it is likely that internet e-commerce will play a larger role as well.

    These factors make an alternative narrative just as likely. That alternative narrative is simply that the market share available to Metcash and its IGA members is steadily shrinking, and will, inevitably, continue to shrink. While there will always be a place for independent grocers in Australia, it's just not going to be as big as it is now in another six or seven years.

    What should give analysts pause in deciding between these two versions is that the Metcash team seems to not be very good at strategic forecasts. In March 2014, the company's CEO, Ian Morrice, launched a turnaround program that he said would take 12 months to implement. Just six months later, he noted that the program would take 18 months to complete. That particular deadline passed in December 2015.
    Mitre 10

    The fate of Mitre 10 continues to largely depend on how well the food business of Metcash fares. Metcash would be in a far worse place today if it had not sold off its automotive business in the first half of calendar 2015. It seems entirely possible that Metcash will divest itself of Mitre 10 during 2016 if its strategic plans fail to perform as expected.

    There has been considerable commentary in the mainstream media and elsewhere during the second calendar half of 2015 about the possibility of Woolworths spinning off its Home Timber and Hardware Group (HTHG), and this combining with Mitre 10 to form a separate entity that would list on the Australian Stock Exchange.

    Perhaps the best question to ask about this rumour is simply: "What problem does would it solve?" It would provide both Metcash and Woolworths with additional capital at a time when each could use it, but there would seem to be few gains beyond that.

    What holds back both Mitre 10 and HTHG is not scale, but more a matter of market focus and market position. Such a merger would not solve those problems, but would likely create a number of difficult supply-chain issues.

    Related:
    Metcash seeks to expand market share - HNN
    Metcash FY2015 first half results disappoint - HNN
    Metcash full year 2014-15 results - HNN
    Is it too late for Mitre 10? - HNN
    News
    Mecca Events host Royston Wilson
    Royston Wilson holds forth
    YouTube
    A busy evening at the Royce Hotel in Melbourne
    Mark Gledhill from Mecca Events introduces Royston Wilson
    Click to visit the HBT website for more information
    In a rambunctious evening event punctuated with his trademark humour, Australian interior/kitchen designer extraordinaire Royston Wilson entertained a lively crowd at the Royce Hotel along Melbourne's St Kilda Road with a presentation on the state of kitchen design in Australia.

    The event has hosted by well-known Melbourne events company Mecca Events. Mr Wilson was introduced by one of Mecca's principals, Mark Gledhill.

    Mr Wilson voiced his concerns at the degree to which the interior design profession is finding its expertise diluted, both by amateurs who do not understand the challenges of design, and by designers who have not taken the task of design seriously enough themselves.

    HNN has made available an edited video of the evening, which readers can access below:

    Retailers
    Bid attention surrounds Homebase
    Takeover interest in Homebase has increased
    Financial Times
    French DIY chain Leroy Merlin is said to be leading a number of bidders
    Nicholas Marshall turned round the UK-based Wyevale Garden Centres
    Click to visit the ITW website for move information
    French DIY chain Leroy Merlin is said to be leading a number of bidders for UK retailer Homebase, the home improvement arm of Home Retail Group.

    Leroy Merlin is part of the Adeo Group and controlled by France's secretive Mulliez family. It has over 370 DIY stores in 12 countries. The potential bid for Homebase could trigger a break-up of its listed parent company.

    The Financial Times also recently reported that a retail executive, who turned round the UK-based Wyevale Garden Centres (formerly The Garden Centre Group), is eyeing a bid for Homebase. Nicholas Marshall, who formerly headed the garden store chain, told the newspaper that he had been looking at Homebase for the past couple of years.

    He said he was talking to private equity groups but no approach had yet been made to Home Retail, which recently issued a profit warning, prompted by problems at its Argos chain. Since the pre-Christmas profit warning, interest in Homebase has stepped up.

    Bankers believe Homebase's earnings are improving under the leadership of former Tesco executive, Echo Lu, so Home Retail might be tempted to wait until it could secure a higher valuation.

    People close to the situation said Marshall was likely to want to transform Homebase from a DIY centre into a softer, more family friendly retailer, with more extensive garden centre outlets, pet products and concessions.

    Marshall was brought into the Garden Centre Group by Lloyds when it purchase the company from HBOS in 2009. The business was sold to Terra Firma for GBP276 million in March 2012.

    His interest in Homebase comes as several private equity groups are circling Home Retail, enticed by the possibility of a break up bid.

    Home Retail said it did not comment on speculation and it was concentrating on its peak trading season in the run up to Christmas and over the new year. It is closing up to a quarter of the Homebase store estate.

    Analysts estimated that a potential bidder for Home Retail would have to pay about GBP1 billion, compared with more than GBP3 billion five years ago, the last time there was significant break-up speculation.
    Bigbox
    Kingfisher makes renewables investment
    Solar panels going on the roof at Screwfix Trentham Distribution Centre
    edie.net
    A B&Q distribution centre will be installing 9,000 solar panels on its roof
    A rooftop solar PV system has been installed at Screwfix's head office
    Click to visit the ITW website for move information
    Home improvement firm Kingfisher, whose brands include B&Q and Screwfix, has unveiled an GBP50 million investment into renewable energy. The investment will see the roll out of photovoltaic (PV) solar panels across selected stores in the UK and France.

    The investment forms part of a plan to reduce Kingfisher's energy consumption from the grid by 10% in the next two years. Kingfisher sustainability director Richard Gillies said:
    This renewables investment is part of our Net Positive journey to transform our business to be a force for good. There's plenty more we can do but business needs stability and certainty to make these types of long-term investment decisions...

    Future renewables will include air-source heat pumps, combined heat and power boilers and new fuel cell generation. These renewables follow on from the success of the PV installation at the Screwfix head office in Yeovil, which has seen more than a third of the centre's power generated through solar.

    This announcement follows on from the Net Positive movement in 2012, which Kingfisher led. The movement urges companies to redesign how they operate in order to have a positive impact on the world.

    Highlights from the 2015 Net Positive Report include reaching 92% responsibly sourced timber and paper products last year, 2% ahead of Kingfisher's 2016 target and on-track to hit the 100% target by 2020.

    Kingfisher has aspirations for every store and customer home to be at least zero-carbon by 2050. It has already reduced property portfolio energy intensity by 17% - a milestone reached one year ahead of schedule.

    Related:
    Kingfisher's Net Positive progress - HNN
    Kingfisher, IKEA discuss sustainability - HNN
    Regions
    Trend in modular homes
    Seventy-five per cent of projects at Nexus uses a modular component
    The West Australian
    TR Homes is an award-winning modular construction specialist
    Cube Modular Homes locally manufactures modular residential homes
    Give to Amnesty International
    The latest materials and technology have pushed modular housing to become a sophisticated product with drastically reduced build times.

    The biggest benefit of this style of construction is the time saving but it also offers cost efficiencies, safer workplaces with controlled manufacturing at dedicated facilities and reduced environmental impacts. This is what Matthew Keogh believes as a director of Nexus Home Improvements, which does much of its modular work in Perth's the renovation and extension market.

    Keogh said that while modular housing technology had moved fast, attitudes had not. He said:
    The biggest headwind we find is people's perception that [modular housing] is a cheap product. We offer high-end renovations and new homes that far exceed client expectations continually. But the major advantage is definitely convenience.

    Nathan Hollis, sales and business development manager at MRN Group, agreed that people in Perth and big country towns were stuck in the "brick and tile" mindset. MRN's residential modular construction arm TR Homes is an award-winning modular construction specialist. He said:
    TR Homes is trying to break the 'cheap' and 'low- quality' misconceptions about modular, prefab housing. It only takes one visit to our display village to appreciate just how far modular housing has come in the last 10-15 years and see the quality in our designs and homes first hand.
    The mindset people possess of modular, prefab homes is really disappointing, especially when you see the technology, innovation and design coming out of Europe, Asia, North America and even on the east coast of Australia.

    Hollis said the younger generation was more accepting of modular construction methods and were well researched and willing to challenge the brick-and-tile status quo.

    He said the change over the past 10 years to modular housing could be largely attributed to technology shifts, with modern building materials offering design flexibility.
    I often come across designs that incorporate shipping containers as a new housing material and the designs that can be achieved are just incredible.

    Cube Modular Homes locally manufactures modular studios, residential homes and commercial buildings from shipping containers. It believes recent changes in attitude towards modular housing could be partly attributed to exposure to international building television productions.

    Nexus Home Improvements mainly works in the renovation and extension market, with 75% of its work having a modular component. Starting the company five years ago, Keough saw an opportunity to save valuable building time by going modular. He said:
    We can install a second-storey addition onto a home in a matter of weeks, reducing on-site build time by months and saving the client the added inconvenience of having trades in their home for months on end.

    Keogh said modular housing had become more viable over the past 10 years with the introduction of lightweight and thermally efficient materials. He said:
    Examples of this is the Masterwall (polystyrene cladding) and K5Kooltherm (insulated external wall board) which have thermal benefits and are rendered to look like brickwork.

    Besides the reduced costs, time and building material waste, Cube Modular Homes managing director Danny Cornwell said modular housing also had advantages on difficult sites.
    Modular homes can be placed on any terrain and ground conditions and any gradients with the correct design and engineering and without needing big amounts of ground work, therefore reducing building costs.
    Products
    Milwaukee Tool brings out thermal imager
    Milwaukee Tool's M12 7.8KP Thermal Imager
    From Plumbing + Hydronic Contractor
    It is compatible with the entire Milwaukee M12 system of professional power tools
    It has new Dual Sense pixel technology for superior definition
    Click to visit the HBT website for more information
    The M12 7.8KP Thermal Imager from Milwaukee Tool has the highest pixel density in its class and new Dual Sense[tm] pixel technology for superior definition of hot and cold details within the same image.

    Ideal for service professionals, this imager provides an affordable solution for predictive maintenance or troubleshooting applications. It takes high quality images in a more compact and easy-to-use design.

    Designed with the professional tradesman in mind, the 7.8KP Thermal Imager gives users unmatched detail to view the quality of construction, inspect hard-to-evaluate systems, and understand the extent of damage instantly. Exclusive Dual Sense technology allows the imager to individually optimise pixels to eliminate the blurring of hot and cold details in complex scenes.

    Equipped with 83:1 distance-to-spot performance, dual lasers, and hot/cold spot locators, users are able to quickly scan, target and capture temperature readings from long range or small areas.

    The imager is fully compatible with the Thermal Imager Report Software available online, which makes analysing images and generating reports quick and easy. Users can download images from the Thermal Imager with the 8GB SD card or Micro-USB connection port that is included. Every image capture creates a versatile .PNG file format image that can be e-mailed for added convenience.

    The entire unit can withstand a 6ft drop, and also comes with a protective cover that wraps around the LCD screen and front sensor.

    Powered by REDLITHIUM[tm] battery technology, the M12 7.8KP Thermal Imager leverages Milwaukee's M12 battery system's runtime and easy field replacement to eliminate downtime. By using the M12 battery, the tool is compatible with the entire Milwaukee M12 system of professional power tools.
    Companies
    Hitachi Koki acquires Germany's Metabo
    Hitachi's great little cordless circular saw
    Hitachi Koki
    Metabo's LiHD technology
    Metabo history
    Subscribe to HNN weekly e-newsletter
    On 13 November 2015 Japanese power tool company Hitachi Koki announced that it had put in motion the acquisition of German power tool company Metabo Aktiengesellschaft.

    The move is widely seen by industry commentators as granting Hitachi access to advanced Lithium-Ion battery technology, something it has not yet fully developed for itself. Metabo has recently launched what it calls "LiHD" for "Lithium High Density". This technology makes use of high performance battery cells, and technologies that limit current losses. The company claims a gain of 67% power and 87% more runtime for this development.

    Many see this as an ideal competitive move. Hitachi has made its name for the exceptionally well-designed electric motors in its products, particularly its cordless circular saws. Marrying its home-developed technologies with the German-developed battery technologies of Metabo could see Hitachi move from its current niche status to compete more broadly with tool brands such as DeWalt and AEG/Rigid.

    As Hitachi already has exclusive distribution deals developed with Masters Home Improvement in Australia, and Lowe's Home Improvement in the US, it already has a path to market for newly developed technologies.

    Hitachi also plans to use the Metabo connections to establish its brand in Europe. Metabo has sales offices established in 25 countries, and has a particularly strong presence in Europe.

    Hitachi states in its press release that the acquisition of Metabo is part of the company's plans to reach a goal of an operating margin above 10%.
    Acquisition details

    Metabo, which is located in the German town of Nurtingen in the country's south near Stuttgart, is 80% owned by a holding company, Power Tool Invest, which is based in the Netherlands. The remaining share of the company is owned 10% by the company's founding family, and 10% by the company's employees.

    Hitachi intends to acquire Power Tool Invest, and also acquire the remaining 20% at the same time. The French investment firm Chequers Capital Partners is assisting Hitachi with this acquisition.
    Metabo history

    Metabo has a long and interesting history. Founded in the 1920s, it made its first electric drill in 1934. The company was responsible for developing the first impact drill in 1957, and then went on to develop a series of innovative products such as drills with electronic speed regulation.

    The company entered the Lithium-Ion battery technology field early, in 2005, and has been developing Li-ion cordless products ever since then.
    Companies
    DuluxGroup 2015 full year results
    Dulux results for FY 2015
    Dulux Investor presentation
    Chart of GDP growth quarterly with change in renovation activity quarterly
    Patrick Houlihan talks about his career
    Subscribe to HNN weekly e-newsletter
    Australia's independent DuluxGroup (Dulux) delivered reasonably strong results for its FY 2014/15. Sales improved by 4.7% over the previous corresponding period (pcp), which was FY 2013/14, reaching $1687.8 million. Excluding non-recurring items (-nr), earnings before interest and tax (EBIT) was up 4.7% to $192.4 million, and net profit after tax (NPAT) was up 11.5% to $124.7 million, compared with the pcp. Statutory NPAT (including non-recurring items) was $112.8 million, up 7.9% over the pcp.
    Dulux results for FY 2015
    Overall commentary

    Market conditions during its FY 2014/15 were not ideal for Dulux, but due to its diversified market spread, the company was able to return a reasonable result. Dulux's respected CEO, Patrick Houlihan, pointed out several times during the presentation to investors that the strongest growth segment had been the construction of new housing. While Dulux has a decent representation in this market, it is a particularly low-margin market as compared to renovation/refurbishment consumer sales.

    Despite this, Mr Houlihan is confident that Dulux did gain market share, in particular through the launch of some new products. He commented on some elements of this during his introductory remarks at the presentation to analysts:
    Whilst our focus on marketing and innovation, sales and distribution effectiveness and customer service may seem simple, as a combination they have been very effective.
    ...
    In summary, our markets grew pretty strongly at 5%, with new housing in Australia the strongest component. Our share outcome was positive. In particular we gained share in our core renovation and repaint market, particularly late in the year, following the launch of our new Dulux Wash & Wear range.

    Dulux consists of five internal segments: paints & coatings ANZ (PCANZ), consumer & construction products (CCP), garage doors & openers (GDO), cabinet and architectural hardware (CAH), and other businesses. This last category includes garden product company Yates. Chart 1 indicates the share of overall business EBIT each of these represent.
    EBIT proportion for divisions
    Paints and coatings ANZ

    Sales for this division improved by 6% over the pcp, coming in at $870.8 million. EBIT (-nr) increased by 5.7% to $146.8 million, while EBIT margin (-nr) was flat at 16.9%.

    One factor that did affect the outcome for this division was the change in arrangements for Mitre 10 New Zealand (which is completely separate from Mitre 10 Australia). Dulux has withdrawn its stock from Mitre 10 New Zealand, and is now offered exclusively by Bunnings stores there. This had an initial impact of limiting its sales there for FY 2014/15, which had a flow-on effect for the overall division's results.
    Markets

    According to the full-year results:
  • Core premium renovation and repaint markets, which represent 75% of Dulux PCANZ market volume, grew by around 5%. However, the company believes that additional "stock build" by retailers, related to the release of its new Wash and Wear products, contributed up to 2% to this number, meaning that the underlying number is closer to 3%.
  • New housing, which represents 20% of PCANZ market volume, grew by 15%.
  • Commercial (trade) paint sales, which represents 5% of PCANZ market volume, is estimated to have grown by around 3.5%.

  • The company is confident that it has increased its market share in key sectors, such as the consumer-based renovation and refurbishment market. Mr Houlihan went into further detail about the market for its core market, decorative paints for consumers:
    Look, the big picture around this market is that it's tended to grow over the long run about 1% to 1.5% which is about half the rate of GDP. Now clearly when you get movements like interest rates that are positive or housing prices or housing churn those things are all collectively positives. But when we've gone back over the years I often share with you guys -- we can't get strong correlations to any one of those factors.
    The best thing we model our business off and using actual data looking backwards there are two variables we use. We use GDP firstly. If you think about it 75% of the decorative paint market is existing homes. But roughly two thirds of that is do it yourself; one third of that is do it for me.
    That's been pretty consistent growing at roughly about half the rate of GDP; doesn't have big peaks or big troughs. Even during the financial crisis Bunnings will say their weekday sales of a whole lot of home improvement products including paint went up because people went from full time to part time employment. They still did jobs around their homes. So in our models we use GDP.

    As Mr Houlihan pointed out elsewhere, statistics prepared by the Australian Bureau of Statistics (ABS) and other sources do not typically include renovations that do not required permits and cost under $10,000. This means that much DIY painting does not get picked up in the standard statistics.

    The chart below provides an overview of Australia's GDP mapped against one of the ABS's measures of renovation expenditure. This is the renovation data used to develop national account numbers, and it attempts to backfit renovations costing under $10,000 by referencing information from the ABS household expenditure data.
    Chart of GDP growth quarterly with change in renovation activity quarterly

    Mr Houlihan also described Dulux's overall approach to its paint market:
    Our view is, as we look to improve the value proposition for the consumer and impacts that can have on price, impacts that can have on share -- and we think there's still plenty of share growth for us -- we've got on average share in the mid to high 40%s but if I take the retail channels in Bunnings, our big box partner, we've got over 60% of their business, maybe even two thirds of their business.
    In Mitre 10 our independent hardware partner we've got about 70% of their business. At Inspirations, our paint specialist partner, we've got 90% of their business. So if we help our key retailers win our weighted average share goes up. So that's really the strategy we're playing.

    Later, responding to an analyst's question, Mr Houlihan offered this summary of Dulux's ongoing strategy and position:
    I suppose it's like a giant game of Monopoly. I'm not sure who's going to try and play where on the board or whatever but I feel confident that we're working absolutely on the right things. My comments that again we've got the best products and the best brand and the best people and the best customers I think sum up my state of mind at the moment.
    New product: Wash and Wear

    One reason why, despite mildly unfavourable conditions, Dulux still managed reasonable growth, was its introduction of the new formula Dulux Wash and Wear paint. Introducing this product to the analysts, Mr Houlihan said:
    Many of you will have seen the MythBusters advertising campaign associated with the new Dulux Wash & Wear. Whilst we are happy with the campaign itself, it is in fact a product which is the breakthrough, representing our most significant step change in performance in 20 years. We have not used lightly the term, the best we've ever made and we've received strong endorsement from both the trade and our retail partners.


    Later, in response to an analyst's question, Mr Houlihan went into some detail about what is actually not just one product, but an entire product mini-range. According to his comments, this is how the product range breaks down:
  • Standard Dulux Wash and Wear low-sheen. Four litres of white paint retails for $72, up from $69.
  • Wash and Wear Super Hide. This had advanced coverage characteristics. Dulux claims that two coats of this paint in white will effectively cover a black undercoat. This retails at $90 per four litres.
  • Wash and Wear Kitchen and Bathroom provides mould protection, and retails for $86 per four litres.
  • Wash and Wear Super Tough is a two-pack paint product that remains application-stable for 10 days after it has been mixed. This is seen has having commercial applications, though it may be suitable for some home uses as well. It retails for 100 per four litres.
  • Wash and Wear Matt. Mr Houlihan stated that this used a new advanced formula to provide stain resistance in a matt paint. He believes that this will also appeal to trade customers. (Pricing details were not provided.)

  • One of the main points that Mr Houlihan made about these points is that by providing advanced capabilities to customers, the overall price of its paint can be lifted, resulting in better margins.
    Competitors

    Mr Houlihan was also asked about Dulux's response to competitors, in particular the introduction of the US-brand Sherwin-Williams to the Australian market. This is a question that gets asked at most Dulux reports, and Mr Houlihan's response tends to be similar. First, he points out that Dulux has one of the best brand reputations in Australia. Currently it is the second most trusted brand of any Australian brand, and is first in its category.

    Secondly, he points out that a number of international competitors have entered the market in the past, and not lasted for very long. Mr Houlihan believes this is because the paint business is inherently local, and that people prefer to use a trusted brand with which they have some kind of history.

    Commenting directly on Sherwin-Williams, Mr Houlihan stated:
    In terms of Sherwin they've launched into Masters. They are in Lowe's in the US. Sherwin is primarily in the US. There's no paint company really like us because we play in both retail and trade. If you thought just about trade business largely that's what Sherwin are in the US. They've got 3000 of their own stores. Increasingly they play a little bit now in Lowe's - in the likes of Lowe's. So presumably there's some link there with the Lowe's and Masters relationship.
    They've launched product in Australia. Their super paint product is retailing at $72. Just for the record that's for 3.66 litres. So if you turn it into four litres it's at AUD$80 a can. They've got another product that's up in the - that's even higher priced than that.
    Consumer and construction products

    This division returned a mostly flat result. Sales rose by a very modest 0.1% over the pcp to reach $266.2 million. EBIT (-nr) actually fell slightly, coming in at $29.2 million, a loss of 2% over the pcp.

    The two main components of this division are Selleys and Parchem.
    Selleys

    Revenue from Selleys grew slightly, the company reports. It also increased its profit and EBIT margin, due to careful cost control, and a product mix that suited the current market. Marketing expenditure on the product line has been increased. Selleys has also released a new product, the Ezi Press range, which is familiar products packaged in a self-applicator container. The company describes this product:
    Selleys Ezi Press is a new easy to use application system that doesn't require a caulking gun. Simply press the lever to apply and deliver a precision finish. Ezi Press comes in 4 variants to cover any filling, sealing or sticking home improvement applications.
    The Ezipress line

    Mr Houlihan also noted that the Selleys' product line was playing a key role in the company's ongoing expansion into south-east Asian markets:
    We're revving up Selleys. We've got good momentum in Selleys Vietnam this year where we moved away from having a local distributor to setting up our own entity a few years ago. That's started to bear some fruit this year.
    Parchem

    While Selley returned decent results, Parchem was a less positive story. Its sales were affected by a decline in infrastructure spending in Australia. Commenting on this in its review of operations attachment to the annual financial results, the company states:
    The immediate market outlook for Parchem is challenging, particularly given the construction chemicals business has been historically focused on the energy and resources sectors, which are in decline. The growth in future civil and commercial infrastructure projects is unlikely to offset the decline in energy and resources projects in the near term.

    Balanced against this is the statement in the same document that:
    Parchem sales were adversely impacted by a decline in resources infrastructure spend. In the core construction chemicals segments (55% of revenue), share gains partially offset market declines.

    The company has declared that it does expect Parchem to deliver growth in EBIT for FY 2015/16, though it adds this will likely occur in the second half of that period. This was balanced somewhat by a cautious statement by Mr Houlihan in his introduction to analysts:
    Our Parchem and protective coatings businesses have exposure to engineering construction markets, with Parchem in particular exposed to energy and mining sectors. These sectors, and the market overall, have been weak in FY15, and the outlook is that they will remain weak for FY16, with the emerging pipeline of several construction projects unlikely to fill the gap in the near term.

    Mr Houlihan was more optimistic in describing the potential for Parchem:
    For Parchem we've been progressing on two fronts: growing revenue into new markets and restructuring the business in difficult markets. From a revenue perspective, the launch of the Avista range in decorative concrete is an important step to taking what has been a relatively commoditised range to a premium branded range. Distribution for this product is building with trials now in place at a growing number of Bunnings stores.

    The report also notes that sales declined for decorative concrete, as the company shifts its focus to these Avista products, which carry a higher margin.
    Garage doors and openers

    This division saw sales fall slightly, down 0.2% over the pcp to $169.5 million. EBIT fell by 6% and EBIT margin fell by 0.6% over the pcp. The company states that sales were weak during the first half of its FY 2014/15, but recovered in the second half.

    Commenting on the B&D garage door and garage opener business, Mr Houlihan said:
    Our split for B&D is approximately 50% existing home, 35% new housing and 15% non-residential, compared to the market, which is 45% existing home, 45% new housing and 10% non-residential.
    We spoke at length at the first half about the transitional issues associated with the launch of new products late last year and the implementation of the dealer distribution strategy. We believe that we've made good progress in addressing these issues through the second half, and the revenue on profit growth we achieved reflects this. We do, however, acknowledge that there is more to be done.
    We've appointed a new Executive General Manager to this business, following an external search, and he will start shortly.

    Later, Mr Houlihan went into some depth in describing the B&D business. He said the market is largely controlled by the three main companies, with B&D on the top, followed by Steel-Line and then the troubled Gliderol business. He described the business:
    Forty-five per cent of the market and 50% of B&D's business relates to the existing home, an end market that has proved to be resilient over the long term for DuluxGroup other businesses...Finally, as a market leader with both premiumness and scale, both the doors and openers parts of our business are profitable.

    Mr Houlihan went on to describe the opportunities he sees B&D presenting:
    We have outlined over the past couple of years that our task has been focussed on the frontend of the business, to rebuild the B&D brand, innovation, sales capability and distribution network, and we've made a lot of progress. Clearly the transitional issues that impacted the first half of FY15 were disappointing; however we do believe that the opportunity for growth in this business remains very strong, and that we are well-placed to deliver. Furthermore, it presents some interesting growth opportunities in the adjacent home access market.
    Cabinet and architectural hardware

    This division produced a mixed result. Sales rose by 8.3% over the pcp to reach $172.8 million, but EBIT was much flatter, increasing by 0.1% to reach 9%. EBIT margin declined.

    Sales of the high-end Blum hardware led the upward tick in sales. However, the Lincoln line, while recording good sales, continued to provide low EBIT. Mr Houlihan commented that:
    There is clearly work to be done with Lincoln to reduce the cost to serve and improve its EBIT margin, and systems will play a role. However, this was a business with a declining revenue and EBIT base when we acquired it, so we are happy that we have now turned around the revenue line for the last two years as phase 1 and have grown EBIT from the AUD7.1 million two years ago to AUD9 million. We now need to move to phase two to substantially improve the flow-through of revenue to the bottom line.
    Other business

    This amalgam of smaller businesses posted a surprising 30% uptick in EBIT (-nr), improving to $15.9 million. This came on top of a 6.7% increase in sales to $221.7 million. Yates was a good contributor to revenue, as it grew market share in a vibrant market. DGL Camel, which is based in Hong Kong and manufactures power coatings, produced essentially flat sales results, but improved EBIT through better margins.
    Analysis

    The phrase that Mr Houlihan repeated several times throughout the presentation to analysts was "Do it once and do it right". This could be taken as a primary message that Dulux seeks to convey to consumer purchasers of its products.

    It's also a message that aligns nicely with the essentially segmentless approach that Dulux's main retailer, Bunnings, takes to the home improvement market. Bunnings' marketing approach could be said to be based on two basic questions: 1) Who is not coming to our stores? and 2) Of the people who do come in our doors, what are they not buying from us?

    The equivalent Dulux question would be "Why would you use anything else?" There are quite literally some markets in Australia where a DIY or professional painter would need a very good excuse not to use Dulux. Like the Bunnings approach, it is essentially segmentless.

    That said, if there was ever a company that could provide a good reason to try something else, it might well be Sherwin-Williams. It is an all-paint company that is seven to eight times the size of Dulux, and its products are highly regarded by both professionals and amateurs in the USA.

    One does have to wonder if "local" quite means what it used to in the paint world. An indication of that has been the Dulux marketing for its new Wash and Wear range itself, which relies on imported American talent for its impact.

    Which is not to say that Sherwin-Wiliams poses any real threat to Dulux today. In the future, though, even a small loss to Sherwin-Williams could effect Dulux earnings, as it would come at the expense of the highest margin portion of the market.
    DuluxGroup produces strong 2014 results [update] - HNN
    Companies
    Bosch creates smart home subsidiary
    The Bosch smart home system is one system, one app and one user experience
    Installation
    The Bosch smart home controller is the system's central control unit
    Products from Bosch smart home range
    Subscribe to HNN weekly e-newsletter
    Robert Bosch Smart Home will launch on 1 January 2016 and focus on producing solutions for the smart home. The new company will bring together Bosch's smart home activities, including related software and sensor system products.

    Customers will be able to order Bosch smart home products online including a controller, thermostat, and a contact for doors or windows.

    The official unveiling of the subsidiary will take place at the Consumer Electronics Show (CES) held between January 6 to 9, 2016 in Las Vegas. Board member Dr. Stefan Hartung said:
    Setting up the Bosch smart home subsidiary is an important strategic step toward pooling and expanding on our range of solutions for the smart home...

    Bosch smart home system solutions mean that a single platform is sufficient to connect the heating, lighting, smoke alarms, and appliances in a home. They can then be operated using a smartphone or tablet. The core of the system is the Bosch smart home controller, a central unit that connects the components with each other and links them to the internet.

    In the future, users will be able to use the Bosch smart home app to combine the basic functions of unrelated devices. For example, the door and window contact solution reports whether a window is open. When this happens, the system can automatically turn down the heating in the relevant room, in line with the user's preference settings. Users will be able to check their smartphone to see whether doors and windows are open or closed.

    Bosch is also working on the next version of the door and window contact where the system will sound the alarm if a window or door is broken into when the occupant is absent. So there will no longer be any need for a separate alarm system.

    Related:
    Bosch part of smart home platform - HNN
    Editorial
    Forecasting: understanding drivers and influencers
    Adding the ASX 200 as a background influence
    House Prices in Australia
    Right-shifting house prices
    The simplest possible graph
    Give to Amnesty International
    Predicting retail sales for the Australian home improvement industry is one of the more difficult tasks in retail-related forecasting. While any kind of retail-related forecasting can be tough, home improvement tends to involve a very large range of economic factors.

    It has become a common, accepted practice within the industry to regard some simple statistics as a good general guide to how retail sales will do in the future. The most commonly used measures are house prices (as a reflection of the housing market in general) and building approvals plus building completions.

    While these have often proved to be good general guides, they do not always deliver reliable results. HNN has taken some time to delve a little deeper into some of these stats, and we've tried to develop some better general guidelines, without making matters too complicated.
    Retail sales and house prices: some basics

    To begin with some industry basics: home improvement retailers often look to the sales prices of residential property as a helpful hint about how well their own retail sales will perform.

    Looking at the Australian Bureau of Statistics (ABS) actual numbers for hardware retail sales and the ABS price indices for dwellings in major Australian cities, there does seem to be some substance to this view.

    There are some interesting tools that can be used when working out how statistics might fit together. Most of these are really a simple extension of what anyone would do when comparing graphs to see if they match up.

    If you think about it, when you examine a couple of graphs to see how they might fit together, what is it you look for? You pick a couple of consecutive dates in the time series - two years, or two months, for example - and look at one graph to see whether the graph goes up or down, then check out the second graph to see if it moved in the same direction. You then do this across a number of different date ranges. What you are looking for, of course, is consistency, whether both graphs go in the same direction or in opposite directions for most of the date ranges.

    A slightly more formal way to do exactly the same thing is to graph not the raw information in each graph (such as the amount of retail sales for each financial year), but to instead graph the percentage change between each data point on the graph. So if sales in 2010 came in at $400,000, and in 2011 sales were $500,000, you would calculate the percentage change as 500,000 - 400,000, divided by the older data point which is 400,000, yielding the result 100,000 divided by 400,000, which is 25%. That number goes at 2011, and it represents how much sales grew between 2010 and 2011.

    The important thing to remember about this kind of graph is that a straight line on the graph indicates a constant rate of growth, not the absence of growth. Similarly, a line that has a positive slope, climbing to the right indicates not just growth, but that the rate of growth (the growth of growth, you could say) is increasing.

    When you graph the percentage changes for two or more sets of data, it becomes much easier to see the relations between them. There are, of course, much fancier and more technical ways to develop what is known in statistics as the correlation between two sets of numbers, but with fairly simple data this one technique can often yield good results.
    Chart 1

    This is what we've done with Chart 1. The first datasets used in this graph is the total retail sales for the hardware retail category for Australia. This has been first annualised to the standard financial year (July to June), and then converted into a graph of the percentage change from one year to the next.
    Simple chart of house prices to retail sales

    The second dataset we've used is also provided by the ABS. The ABS over the years has worked very hard to develop a reliable price index for housing. The version of this we are using here is the Residential Property Price Index using a weighted average of eight capital cities. This provides perhaps the best overview, in a single number, for what Australian property prices are doing at any particular time.

    Looking at this graph, you can see that there is some kind of a partial connection in the data. At times when residential property prices have increased, hardware retail sales have also increased. At other times the lines really don't match up.

    If you look at this graph for some time, you might begin to get a funny feeling about it. It's like you can't quite put your finger on it, but there is a better relationship somewhere between these datasets.

    Chart 2 takes a closer look at what that better relationship might be.
    Chart 2

    Chart 2 shows a greater correspondence between these two sets of numbers. In this chart, we have moved the retail figures ahead by one year, so that the retail numbers for the year 2006 are contrasted with the dwelling price index for 2005, and so on.
    Right-shifting house prices

    This seems a little better fit. It's not perfect, of course, and we are going to get to some possible reasons why it is not perfect, but first let's look at why such a shift might actually make some sense. To do this, we need to dig a little deeper into these statistics, and what they might be representing. In doing that, we might turn up some interesting ideas.
    The connections

    The use of house prices as an indicator of retail sales has been accepted for some time, but how do these two sets of numbers work together?

    On the top layer, we can see two main ways in which changes in house prices affect hardware retail sales. The most direct effect is simply that higher house prices tend to encourage greater building activity, which leads directly to more sales of building materials, tools, and other associated products. This, of course, would be largely in the trade area.

    A second influence is that as house prices rise, so does the estimated valuation of other, mortgaged buildings. This can have the effect of making more credit available to the holders of those mortgages. It is not uncommon for this credit to be spent on renovation projects for the mortgaged house, as the rising house price makes this seem a good investment. This leads to increased hardware sales.

    Both of these influences would tend to lag the actual increase in house prices. Builders will wait to see if house prices are stable before committing to further projects, and those commitments will take some time to put together. In particular, house valuations will lag some considerable time, as an increase in value must be sustained for some time before it leads to revaluation, and the release of further credit.
    Deeper connections

    In addition to the above fairly direct influences, it is also possible to think in terms of more indirect connections. House prices are themselves an indication of underlying economic factors. To name just one, the influence of lending rates directly affects how much money home buyers can borrow, and thus has a strong effect on house prices. Lending rates are likely to directly affect hardware retail spending as well. Higher interest rates, for example, would mean that home owners on variable mortgages will have less money available for projects, and home owners seeking to borrow money for renovations will be discouraged by the increased cost of borrowing.

    When we really think about it, there is a range of similar factors that do influence house prices and hardware retail spending, but somewhat independent of each other. Luckily for us, some very good work has been done to work out what factors influence house prices. This makes a good starting point for us to consider which factors might also directly influence hardware retail sales.
    The academics

    In 2005 Peter Abelson, Roselyn Joyeux, George Milunovich and Demi Chung wrote an influential academic paper entitled "House Prices in Australia: 1970 to 2003 facts and explanations". This outlined a series of factors they believed affected house prices, and made some attempt to quantify those effects. Many of this paper's basic precepts continue to be widely accepted.

    The paper can be downloaded at the following link:
    House Prices in Australia

    The key factors the authors saw as affecting house prices are these:
  • Real disposable income
  • Consumer price index
  • Rate of unemployment
  • Real mortgage rates
  • Equity prices
  • Housing supply

  • Just glancing through these, it is possible to begin to see why the house price index might be a reliable indicator for hardware retail sales only some of the time.

    An increase in housing supply (according to the academic paper) turns out to make of house prices go down, as buyers have lots of auctions to go to. "House Prices in Australia" (HPIA) predicts that for every additional 1% of housing supply, prices are reduced by 3.6%.

    From the standpoint of hardware retail spending, increased housing supply may have the opposite effect. It leads to more houses being sold, thus more activity. It might also create a situation where more funds become available to homeowners for renovations, due to the drop in house prices, which reduces their debt burden.

    Of course, this could be balanced by a drop in home building activity, as lower house prices remove some of the incentive to build new ones. It is likely that something of a balance is achieved between these influences.

    More clearcut is the effect of an increase in equity prices. While a strong result from the ASX 200 will see house prices decline as households shift their investment money from housing to stocks, good investment results from the sharemarket will tend to boost spending on hardware. Families which have invested in the sharemarket will find their incomes boosted, and where better to spend that money than in investing more in their major asset?
    Chart 3: looking for reliability

    These two variances alone - housing supply and equity market performance - may explain why housing prices seem to be a reliable indicator of hardware retail sales at some times and not at others.

    This is illustrated by Chart 3, which overlays the ASX 200 and over the shifted data in Chart 2. You can see that the ASX 200 index performs well up to 2009, and then enters a steep decline (as the GFC took hold).
    Adding the ASX 200 as a background influencer

    In line with this, housing prices are not a great way of determining hardware retail sales prior to 2009, but become a good general predictor after that year. After 2009, the year-shifted hardware retail sales and house prices show more of a connection.

    Part of what is wrapped into this set of conclusions is that the performance of the stock market also has a one-year lag when it comes to affecting hardware retail sales.
    Chart 4: housing completions

    This chart is probably a little too complex for it to work as a kind of handy reference, but it is still worth considering. We have added housing completions to the picture, again making use of ABS data.

    In general terms, in times where housing completions climb significantly, the increase in house prices will tend to diminish, while gains in hardware retail sales will continue to climb.

    Unlike house prices, completions have an immediate effect on hardware retail sales. Thus in this diagram, we can directly visually relate the retail sales and the housing completions, but not the house prices and the housing completions. This makes interpretation quite difficult, and means we have really pretty much exhausted the usefulness of graphing.
    Adding housing completions begins to over-complicate the graph

    At this stage we really need to start thinking about mathematical formulae instead. As this is a simple introduction to looking at these statistics, that's a little beyond the scope of what we want to cover.
    Forecasting

    Our goal in developing these guidelines to what seems to influence hardware retail sales has been to provide a simple tool that people in the industry can use to get some ideas of the range of future sales. To develop these guidelines into a forecasting tool would mean having to include more variable. We could need to consider the mix of detached and multi-unit dwellings, total value of work completed, building approvals versus building completions, spending on renovations, the secondary effects of public building construction, and so on.

    We would also need to more formally factor in consumer-sensitive statistics, such as the consumer price index, consumer confidence, mortgage interest rates, and the Australian dollar exchange rate. We do think this is a "good enough" introduction to modelling hardware sales.
    Products
    Smoke, CO alert for smart homes
    HomeKit-enabled Onelink by First Alert Wi-Fi Smoke + Carbon Monoxide Alarm
    Mutivu
    It is currently available at Lowe's and Amazon.com
    The alarm is designed to work with most existing interconnected hardwired alarms in the home
    Click to visit the HBT website for more information
    The HomeKit-enabled Onelink by First Alert(r) Wi-Fi Smoke + Carbon Monoxide Alarm is a safe, secure and simple to use product for connected homes.

    The intuitive, easy to install two-in-one alarm protects against threats of smoke and carbon monoxide (CO). It conveniently notifies users on their iOS devices (iPhone, iPad and iPod touch) or Apple Watch. The alarm can also be easily tested or silenced using the Onelink Home app.

    Siri voice commands mean users can check the status of their detector and ask if an alarm was triggered. Since the Onelink Alarm is HomeKit-enabled, privacy is built in and data is encrypted, allowing users to feel secure while benefiting from the convenience and safety of a connected home.

    The Onelink Wi-Fi Smoke + CO Alarm is the first on the market to feature a 10-year sealed lithium battery that lasts the life of the alarm. By utilising photoelectric broad-based technology in conjunction with the patented smoke entry system, it is efficient at detecting both smouldering and fast-flaming fires. At the same time, it is less prone to nuisance alarms.

    Unlike other smoke and CO alarms in the connected home space, the Onelink by First Alert Wi-Fi Smoke + CO Alarm is designed to work with most existing interconnected hardwired alarms in the home. Users do not have to replace all existing functioning alarms at once. All Onelink alarms are designed to wirelessly interconnect through a unique Bluetooth mesh system with other Onelink alarms in the home when an emergency is detected.

    It is being made available at home improvement retailer Lowe's and Amazon.com. Future Onelink products will include a Wi-Fi Environment Monitor, Safe and Thermostat - all designed to work collaboratively with the Onelink Home app.
    News
    HI Weekly Vol. 1 No. 13
    Download the latest HI Weekly, issue number 13
    HI Weekly No. 13
    Impact driver enduro test
    Woolworths chairman Gordon Cairns discusses Masters at the AGM
    Click to visit the HBT website for more information
    Each week, the HNN weekly e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/HIWeekly-1-13.pdf

    In this week's edition, we describe and analyse what was said about Masters at the recent Woolworths. We believe the new chairman Gordon Cairns may see life in the home improvement chain. HNN also attends the Roy Morgan State of Retail event in Melbourne where consumer data and modern shopping behaviour were discussed. We put a range of construction statistics together to see what they mean for hardware and specialist tool retailers.

    Other news stories include third quarter results for major overseas retailers including The Home Depot, Lowe's, Kingfisher and independents such as Ace Hardware and True Value. On the local front, Wesfarmers restructures its industrial division.

    Also in this edition: a selection of the latest home improvement jobs from around Australia and an impact driver test using DeWalt and Milwaukee tools.

    Plus all our regular features: big box updates; HNN Home Improvement Index; and new products.
    http://hnn.bz/HIWeekly-1-13.pdf
    Bigbox
    Masters at Woolworths AGM
    Gordon Cairns, newly elected chairman of the Woolworths' Board
    Woolworths AGM Webcast
    The priorities for Woolworths
    Grant O'Brien at his final Woolworths AGM
    Click to visit the ITW website for move information
    Listening to the recorded version of the Woolworths 2015 Annual General Meeting (AGM) will convince most people of one thing: the new chairman of the Woolworths' board, Gordon Cairns, is a consummate performer.

    Mr Cairns worked hard from the very first moments of the AGM to ensure that the assembled shareholders were, if not actually on his side, at least willing to give him a chance. He was witty, but also very considerate. In particular, he was careful to be respectful of all questions asked.

    Mr Cairns weathered with patience and consideration the Great Plastic Bag question, a gentleman who believed there was an accounting mistake in the Woolworths' documents, and a long, interminable story by a person of mature years, the point of which HNN sadly admits it has failed as yet to fully discern.

    Which is not to say he was at all a "patsy", either. When required, Woolworths' recently anointed chairman of the Board whipped out an acerbic, cutting intelligence. It was, above all, the performance of a man who, while struggling at times with a difficult situation, was very at home with the issues he faced - and also very aware of how important the impression he made would be.

    His communication of the approach the Board is taking to Masters was surprisingly positive, in that it was free of the kind of prejudice common in current analyst and press commentary.

    It was also very balanced. Masters is less an emotional issue for Mr Cairns, one suspects, and much more an investment issue.
    On Masters Home Improvement

    The commentary on Masters began with these introductory remarks of Mr Cairns. After describing Woolworths' first priority as being about getting the Woolworths business back on track, he moved on to Masters:
    Our second priority has to be Masters. The opportunity in home improvement is compelling. It is a growing market with a high degree of fragmentation. There is plenty of room - plenty of room - for a strong number two. We have identified our competitive advantage, but unfortunately execution has let us down. It is clear we cannot afford as a business to continue losing over $200 million a year. When I joined, I said we had an open mind on Masters, and the Board would be informed by the numbers, and from the five-year plan that management are producing, and the options that ensue from that. That is what we as a board are currently working on.

    This was an approach that, unsurprisingly, in his sole speech at the AGM, the outgoing, interim CEO Grant O'Brien echoed:
    We are working to deliver on the home improvement opportunity. As the market continues to consolidate, there is clearly an opportunity for a second big box hardware retailer in Australia. We are working to improve the store format and range, and pleasingly, the stores that have that new format are trading significantly above the old format stores.

    Mr Cairns returned to the subject of Masters in answering what he claimed were the four most pressing questions submitted by shareholders.
    The third question that we were asked, and frequently canvassed was: "Are you going to sell Masters and Big W?"
    The board, as I stated earlier, will take decisions based on facts, based on the data, and based on a portfolio approach to our businesses. You can be assured that at all times we will act in your best interests to maximise the value of the company.
    On Masters, we need to be careful. Our ability to compete for our share of the attractive and growing home improvement market, [needs to be weighed] up against the cost and risk of doing so as we go forward.
    We have acknowledged publicly that we cannot keep incurring $200 million of losses. But we remain open-minded on Masters. We will be informed by the numbers from the five-year plan that we are considering as a board, and with our joint partner, Lowe's.

    Perhaps the key phrase in this declaration is "based on a portfolio approach". Portfolio theory states that investments which cover a range of diverse options, rather than being concentrated on a single area, tend to provide better returns in the long term. That would indicate a positive attitude towards the diversification Masters represents.

    In amongst questions which were not always well thought out, one question about Masters from a shareholder actually raised a few interesting points:
    If Woolworths is to abandon its Masters strategy, what hope is there for it to embark ever again on a growth strategy that meets shareholders expectations?
    As you would be well aware, the current market leader, Bunnings, has about 20% market share. Its margins are attractive. I could say it enjoys a price umbrella, and the market is fragmented -- all these are comments you have previously made yourself today. If in such a rich and benign market segment, Woolworths accepts defeat...what hope is there that Woolworths' P/E reappraisal will be substantial?
    I could postulate that without a successful growth strategy, perhaps in supermarkets, the P/E differential between Woolworths and Wesfarmers will continue to exist. Woolworths will be at 14, in current circumstances, and Wesfarmers at 18.
    The other issue is goodwill. Corporations readily pay goodwill for an established business. Wesfarmers as an example has much more intangibles than Woolworths. And yet when businesses grow from green shoots trading short term losses are cast as failure. In some respect, Mr Chairman, you are actually making those comments yourself. Surely there is a disconnect on this issue that needs to be explained.

    What is being pointed to here is that growth always brings with it an element of risk. Wesfarmers has a finely calculated understanding of this relationship, but Woolworths seems to be less refined in its understanding of this relationship. Mr Cairns provided a careful response:
    Thank you for your very thoughtful question. Let me see whether I can address it as fulsomely as your question.
    The first thing is that at no stage has the Board said that we would abandon Masters, so I would like to clear up that misunderstanding.
    The second thing is that we have said publicly that we cannot continue to sustain $200 million to $250 million of losses a year. I think I speak on behalf of the shareholders both here in the audience and not here today that this is not something they would like us to continue doing.
    The third thing I would say is that you can rest assured that we are as a Board focused on the long-term, the long-term interests of the shareholders and not only the short-term interests of the shareholders. I agree with you that the home improvement sector is a wonderful opportunity, is an opportunity where there is the opportunity for a strong number two, where it is a market that is fragmented and growing rapidly. So I agree with you on the opportunity. The challenge for us is to execute that opportunity profitably.
    The final thing I would say is that the Masters opportunity should be seen in the context of a supermarket business that has outstanding opportunity. We shouldn't look at Masters as the "default" opportunity because supermarkets is "ex-growth". We should be able to do both.

    Again, this last comment can be seen as a reference to a portfolio approach to company management and strategy.
    The O'Brien question

    While Mr Cairns was adept at communicating the Board's open and direct approach to Masters, the question of Mr O'Brien's ongoing tenure and remuneration was something he handled well, but perhaps not entirely successfully.

    The first question he was asked about the O'Brien situation was this one:
    On Mr O'Brien, as I know and you have said before, that initially the announcement in June was that it appeared he was going to leave in November, he is obviously still there, he is the CEO, I understand that he is going to be the CEO until a new CEO is appointed...How long after that period is it envisaged that he will stay on to go on and make sure there is a smooth handover?

    Mr Cairns took more than one attempt to really answer this question:
    OK, so, the answer to that question, I think will be determined between him and the [new] CEO.
    [Audience is restless]
    That answer seemed not to meet with universal pleasure. So let me explain why. When I was the CEO of a company and a new CEO was appointed, the agreement I had with the Board was that I would stay on for as long as the new CEO needed me for the handover. The expectation was that could be anything between a week and six months. It was a mutual agreement. It lasted a week. So my expectation is that the new CEO and Grant will sit down and have a respectful conversation about how long the new CEO would like him to be there to do an effective handover.

    Later Mr Cairns was asked very directly about the exact payment arrangements that had been made for Mr O'Brian. He responded:
    Let me be crystal-clear that we have to put Grant O'Brien's salary into context. And let me try to give the context here.
    First of all, I think he has very nobly accepted responsibility for the result and offered to resign. I think that is commendable in corporate Australia, as I'm sure you would agree.
    The Board then asked him to stay. It was the Board's request that he should stay, because quite frankly we had no internal candidates. The level below consisted of all new people in position, and therefor we found ourselves in a position where we couldn't promote from below because we had new hires in place. The Board asked him to stay on, and in particular take carriage of two critical relationships, which are pivotal to the company, and which we have prosecuted today.
    The first was our relationship with Masters [possibly meaning Lowe's instead], where Grant has the pivotal relationship. The second was our relationship with ALH and with the Mathieson family where again he was crucially involved.
    In return for doing that, the Board negotiated a commercial agreement with Grant. The commercial agreement was that instead of him getting his short-term incentive, instead of him getting his long-term incentive, instead of us buying him out of his 33-weeks of holiday pay which he was due, he would give up all of those in return for staying on.
    The commercial decision the Board took was to consider if that was a viable compensation for the fact that he had agreed to stay on. The Board took a commercial view which I am very happy to endorse, having reviewed it, that that was absolutely the right decision for the company. We could not have continued without him in place.
    Now the final question is that we have been asked on a number of occasions to tell people what his pension package actually is. I don't think that is appropriate. I don't think that is appropriate because, first of all, we have never done it [before], and secondly it is a private matter between him and the pension fund. It is not a company cost. It is between him and the pension fund.
    So I would suggest to you that we should look at what he has given up, and the fact that he has agreed to stay on as the primary consideration.
    Analysis

    Given the sometimes blistering appraisals of the Masters situation in the general press, it is something of a relief to see that the Woolworths' Board is open to a well-reasoned and thoughtful approach to the company's investment in home improvement retail.

    That said, Masters finds itself in a very tough situation to get out of. To put the original business plan in as simple a form as possible, it was to build a lot of "better" home improvement stores adjacent to Bunnings warehouses, and draw traffic away from them. Bunnings - as anyone who has ever actually looked into the cooly appraising eyes of its managing director, John Gillam, would have known it would - responded vigorously and forcefully, managing to both build out its store network, and to radically improve the quality of its stores.

    Masters with its "Masters 2.0" stores has now developed a market approach that is differentiated from that of Bunnings. Bunnings has a strongly unsegmented market approach, that is driven by two simple questions: "Who isn't coming to our stores, and how do we get them in?", and "What is it that the people who come to our stores do not buy from us, and how do we change that?"

    The new Masters approach is highly segmented, with an emphasis on the high-margin, medium-volume "achiever" market, driven by a premium brand strategy.

    There are two, interconnected difficulties with this strategy in terms of Masters implementing it at this stage of its development. The first is that the strategic advantage of being located near Bunnings warehouses is radically reduced to almost nothing. The best Masters can hope for is that it gains as many customers as it loses through that proximity.

    Connected with this, the role of that proximity in the original business plan was likely to take care of much of the promotional needs of Masters. As that is not going to be the case, Masters now needs to make a considerable investment in marketing. In other words, it has already made a very large investment in prime real estate positions, which was supposed to supply a promotional boost, which didn't happen.

    Now it needs to spend big sums to make up for that promotional deficit. This is a particular concern as Woolworths has not demonstrated any prowess in marketing recently.

    The only other real option that is available is for Masters to develop an add-on, alternative strategy. This might be the development of smaller, urban store formats, or an increased emphasis on online sales. The difficulty with these approaches is that it will make the business much more complicated and difficult to manage.
    The O'Brien situation

    Perhaps the most balanced interpretation that can be made of the situation surrounding Mr O'Brien himself and the position of the CEO in general at Woolworths, is to see that the Board's past management of the CEO position has been deeply flawed.

    To begin, that the Board apparently had given little or no thought to possible succession over a period of years is surprising. It's worth noting that at the time Mr O'Brien gained the position of CEO there were in fact other candidates available. Several potential candidates for the CEO position have left Woolworths over the past two years.

    Secondly, it is quite astonishing that any modern company would allow a single individual to become utterly critical to at least two key commercial relationships. There is no good operational reason for this to be allowed to take place. It is a severe management flaw, and indicative of a Board that was either inexperienced, or simply unable to assess and act on personnel-based risks. It is very wrong.

    The key word in Mr Cairns' description of the package Mr O'Brien secured was that it is a "commercial" decision. Put simply, the circumstances placed Mr O'Brien in a very superior negotiating position. It's likely he has secured a good deal, but given the circumstances, as a commercial negotiation, it is probably not unreasonable.

    One suspects, however, that the appointment of Mr Cairns to the chairman position will rapidly bring this sort of risk-taking and reliance on single individuals for crucial business relationships to a rapid halt.

    Until next time,

    Betty

    You can contact me directly via email betty@hnn.bz or Twitter @HNN_Australia

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    Reports
    The State of Retail: Roy Morgan data
    Michele Levine, CEO Roy Morgan Research
    Roy Morgan
    Development of diffusion models
    Mobile is eating the world video
    Subscribe to HNN weekly e-newsletter
    As Christmas bears down on us all, and many retailers undergo their most profound experience of their customers for the year, now is a good moment to consider what Australians are thinking about when they go shopping.

    Roy Morgan, the well-known Australian market insight company, holds regular "State of Nation" briefings. Its most recent one in late November 2015 covered the State of the Nation for retail.

    Delivered by the respected industry figure Michele Levine, the talk provided a glimpse into the retail world that Roy Morgan has seen emerging from its Single Source data service. This is one of Australia's most comprehensive sources of data about consumers, relying on 50,000 interviews a year to build a comprehensive, near real-time picture of what Australians are doing, how they think about themselves, and their dreams for the future.
    The economy

    Ms Levine began her talk by pointing at that at the moment Australian consumers are mainly interested in things economic:
    Everything for Australian consumers at the moment is about things economic. It is about costs, it is about unemployment, it's about rates, all sorts of things - everything to do with the economy.
    If we look at the broad bundle of economic factors, there are so many of them that it is hard to get your head around them. Basically, in Australia today we have low levels of inflation, relatively low GDP growth, low interest rates, we have the retail sales actually up...and we have the Australian dollar playing around US$0.70. Way down from where it was, but it has come up just a little bit.
    As I said, these things are complex, some of them affect some people, and affect other people in different ways, so it is really hard to get your head around what this all means.

    She went on to detail what elements Roy Morgan regards as being of prime importance:
    At Roy Morgan what we believe actually when it comes to the economy is that you need to keep your mind focused on a couple of things. Number one is consumer confidence. Consumer confidence, how people feel about things is much more likely to drive their behaviour. Much more likely to drive shopping behaviour and retail sales, the choices they make. We have consumer confidence today at 114.5, down 1.5. So consumer confidence took a flying leap when Malcolm Turnbull took over [as Australian Prime Minister from Tony Abbott]. It has come off a little bit in the last couple of weeks, really, I think that is to do with concerns about terrorism and those sorts of things, rather than economic considerations.
    Business confidence is at 119.3, that is actually again up since Malcolm Turnbull took over. Anything over 100 is more optimistic than pessimistic. Anything under 100 and you have more people who are concerned and pessimistic. Unemployment is sitting at 8.8%, real unemployment, and under-employment at 8.6%. So although these figures are lower than we have seen in the last few months, coming down, these are still very high levels of unemployment.
    ...
    Very important metric is government confidence, which is 119.5. That is the one that tells us that more people, more Australians, think the country is going in the right direction than the wrong direction. And that is why I say consumer confidence is probably wobbly, more because of security threats than to do with the economy because party support is still strong, government support is still strong, and the belief that the country is going in the right direction is also still strong. So, broadly, economic things not so crash-hot, but consumer confidence, and confidence in government is looking fairly strong.

    Roy Morgan doesn't just focus on consumers, it covers businesses as well. Ms Levine had some interesting insights to offer on how retail businesses were developing as well:
    One of our interesting surveys we do is on business. We survey businesses, about a thousand each month. Each quarter we ask these different businesses what is happening in their world, and the things that are influencing their business performance. When we ask people in the retail market, here is what they say.
    What is most influencing business performance is the economy, or the level of demand - 46%.
    The next most important thing is change in consumer expectations and demands - 40%.
    Followed by things like the cost of suppliers and raw materials, competition, a whole range of other costs like transport, labour costs.
    And then technology. So one in five mention technology.
    It is really interesting because when we look at all these things...most of them they say are affecting their businesses negatively. Only with technology, many more of them, twice as many say technology is affecting their business positively rather than negatively.
    The kind of growth strategies that retailers are likely to be implementing in the next 12 months are mostly about developing new products and services. Of course retail is always about innovation. We are seeing a whole range of new products, and many of them are things like supermarkets starting to sell telephones...There is always an issue around internal efficiencies that will continue to dominate. Only 19% are looking at organic growth, and then 18% are expanding into new geographic markets...
    That is how retailers are actually seeing their world.
    The rise of digital

    Some of the most interesting insights Ms Levine had to offer involved the way that the adoption of digital by consumers was shifting how businesses themselves needed to behave.
    Every industry now is digital. No one cannot be digital. The exponential growth of digital, mobile, video, and the extraordinary extent of automation and online buying, and increasingly data, big data and lots of it, is having a huge impact on the direct business of the retailer.
    There is so much happening in the technology space...I think we all have a bit of "FOMO" - that is "Fear of Missing Out"...So there is so much going on, we are taking up technology at a rapid rate in Australia, there is more technology flooding in, anyone in a business is thinking how do we keep up, where do we spend, what do we do, how do we make sure we don't miss out. So FOMO is a really big issue. Technology is being watched with both fear and excitement. But as I said earlier, retailers in general are seeing technology as a positive rather than a negative.
    ...
    There are a couple of key things that say it all. Broadband, at 82% is now ubiquitous. Some 59% now have a computer tablet, 73% have a smartphone, 52% are "into" apps. What this means is, number one, we are all connected. All the time and everywhere. That is what these things moving to mobile, and the ease with which people operate have done.

    To help itself, and its customers, cope with the rapidly evolving world of technology, Roy Morgan has developed a bell-curve based chart. This is closely modelled on the diffusion process chart originally developed by Joe M. Bohlen, George M. Beal and Everett M. Rogers at Iowa State University, and first published in a paper on social adoption of new agricultural technologies in South America in 1957. (The brochure for this product credits the original source.)

    This work was later adopted and adapted by Geoffrey Moore in his marketing book Crossing the Chasm, first published in 1991. This work detailed the way in which technology spread through consumer and business populations.
    Development of diffusion models

    The model adopted by Roy Morgan has a few significant differences from these other, better-known models. It would seem to combine some elements of the persona-based system of customer segment description with the adoption flow:
    We at Roy Morgan developed this concept around technology adoption. It is like an innovation curve, but it is related to technology. What you have, is your early adopters, those people who are both willing and able to take up technology and have the dollars to spend on it. Through to professional mainstream - they are the people who don't love technology and look for the new thing just for the sake of it, but they have to be up-to-date. Then you go right through to digital life, the youngsters, who are into all sorts of technology, but essentially freeware, everything has to be free, as they do not have the dollars to spend on it. Right through to people who are technophobes.
    Essentially, what we are able to do is to actually see where do these pieces of technology actually sit, which of them are becoming mainstream, and what is actually happening.
    So we have seen traditional media, things like TV, have moved right over into the late adopters and the laggards. You have things like smartwatches, like streaming and Apple TV, still in the realm of the early adopters. Things like LinkedIn are in the early majority. Smart TVs, only about two years ago smart TVs were with the early adopters. So we see them move. Once they become mainstream, we have to keep an eye on them to see if they are going to stay there.
    Rise of the omnichannel consumer

    One of the stories that has not received enough attention is the way in which more traditional retailers have developed their own online presence and taken back some of the online e-commerce revenue from the pure-play internet retailers.
    Looking at data from June 2010 to June 2015 to see whether online purchases are made from pure online retailers, or from bricks and mortar retailers with online stores, what we are seeing is that we have online stores only in 2010...by 2011 93% of online sales were made by the online only stores. What we see is that retailers have fought back. Retailers have developed their own online retail channel...until now a third of online sales are now coming through the online channels of regular retailers. So it is omnichannel, consumers are making their own choice, as to how they shop, how they find their information, and they will use whatever channel they choose, and there is not much we can do about it, except be there.

    Ms Levine's point is, of course, that while many retailers look at online sales to see if they can fit in their business model, the fact is that this is not really so relevant. In the end, the consumer and where she/he wants to buy things, and how she/he wants to buy things will determine the extent to which retailers choose to go online.
    The Roy Morgan surprise

    Roy Morgan frequently manages to surprise with the innovative ideas the team comes up with there. HNN was certainly surprised by one of their most recent ideas, treating retail outlets as a form of media.
    Our retailers, those retailers Roy Morgan does business with, are increasingly seeing themselves as media channels as well as stores. Their customers coming in, are also, potentially, other people's audiences. The media space today is all about audiences. Their physical and virtual footprints are often really large, and they offer mass and targeted advertising, thereby generating a separate and complementary revenue stream. They can get a whole new revenue stream just by the footfall traffic they get.
    So we seeing shopping centres as massive and indoor sites, both static and digital. Telstra - this is really interesting - they have commercialised its massive telephone box network into new media businesses. They are like posters, but they can be digital, so they are almost like TV. We worked with Red Rooster to profile hundreds of its locations, and created six major groupings, so it could offer targeted messages relevant to the local foot-traffic. So it is not just a Red Rooster shop selling chickens, it is actually a spot, an outdoor advertising space clearly able to identify the audience that it is wanting to attract in the relevant space, and it becomes its own advertising vehicle.
    This is only the beginning.
    The latest Roy Morgan product

    As it seeks to modernise its operations, Roy Morgan has been busy developing some interesting partnerships and integrations. It now has on offer what at least sounds like a very interesting product that provides a 360-degree approach to digital marketing campaigns.

    Data from Roy Morgan is used to design the campaign, and that data drives the choice of advertising media using companies partnering with them. Results are then fed back into the system, including not only links clicked and actions taken, but also actual sales data from credit card transactions.

    Ms Levine explained the product like this:
    We have developed a complete toolkit for retailers to plan, buy and evaluate their digital marketing campaigns. So step one, use Roy Morgan Single Source, that is the data set I have been talking about today, 50,000 interviews each year, to profile your customers, your competitor's customers, market share, the store's trade area, and ultimately, work out what you are going to do and plan your campaign.
    Then execute that campaign. Using our extensive partner network to buy the appropriate medium and maximise return on investment. So our partners are covering the full gamut from traditional media, like catalogues and outdoor, through to digital, programmatic and email lists...
    Each of our partners in this space understands our data, so what they will be doing is taking the data that was thought through, the plans that were done in the planning stage, and running the campaign, converting it into an absolute campaign.
    So now that you have actually run a campaign to use the Roy Morgan tools, such as our website and digital campaign evaluation, you can understand whether your target market has actually seen that campaign and taken action. Such as, have they clicked on the advertisement, or downloaded a brochure. Our campaign evaluation platform is actually in partnership with Telstra, or powered by Telstra, and it provides industry-leading technology and insights into the new world. So major partnership of data and technology, all coming together.
    Finally, we are able to now quantify your campaign sales, and campaign sales uplift, using the new sales evaluation platform that combines credit cards, third-party transaction data with Roy Morgan Single Source data. So you have always been able to sort of watch the cash register ring up sales, now what we are able to do is to say who is buying, when and you will be able to actually understand what to do with the campaign in real time.
    So this is due to a partnership with Data Republic, probably Australia's data marketplace, majority-owned by Westpac, and that enables us to analyse transaction data, with time, location, and really sensitive data at that level, from hundreds of sectors. Including things like specialty shops through to doctors and utility companies.
    What it is doing for us is to take our broad-brush framework which enables us to understand context, and bring all of this rich, real-time data down to very finite levels of detail, to enable you to actually monitor your campaign.
    Analysis

    Roy Morgan remains one of Australia's more interesting companies operating in the consumer research area. However, it is also true that it is a company that seems to be struggling with its own modernisation, even as it preaches a similar modernisation to many of its customers.

    One area where this slightly uncomfortable layering of the old and the new could be most clearly seen was in its use of what it has termed "Technology Use Segmentation". In the diagram which accompanied the talk, Roy Morgan had "hard wired" a range of technologies, including such things as "smart" TVs and the Apple Watch and so forth, mixed in with software/social products such as LinkedIn, to distinct places on the diagram. While this is in some ways understandable, it also seems to less than really insightful.

    A more up-to-date and insightful approach might be to integrate some of the ideas of Andreesen-Horowitz partner Benedict Evans into this diagram. To put it as simply as possible, in the technology adoption cycle currently underway, TVs may exist, but they really won't be important. To quote from one of Mr Evans' most recent blog posts:
    That is, even if Apple or Google finally 'win', and get their device connected to every TV in the developed world, it's something of a sideshow. The TV isn't the end point for consumer technology anymore, in either sense of the term. The consumer computing revolution went and happened anyway, without ever touching the TV. First the web, not 'interactive media' on the 'information superhighway', drove the PC into every home in the developed world, and now smartphones take a truly personal computer into every pocket on earth. And it turns out that smartphones and tablets are the way computing gets into the living room, and the way that the tech industry gets hold of video content, whatever that will mean.

    Mr Evans' basic contention is that - as he titles one of his riveting presentations, "Mobile is eating the world".
    Mobile is eating the world video

    What he means by this is simply that mobile-based computing technology is taking over every other possible computing category. Thus if you are looking at technology adoption cycles, those cycles need to not be about where, when and if mobile is being adopted, but rather, already assuming mobile has been adopted, how it is being adopted by each segment of the diffusion graph.

    If you are looking for current day datapoints that support this viewpoint, one need only look at the device data gathered for the most recent "Black Friday" and "Cyber Monday" buying events in the US. For the first time, most of the online traffic observed was actually through mobile devices, rather than laptop and desktop computers.

    This is a very different, but also a very necessary point of view to adopt if you are going to really understand what is happening with technology, and how this will affect online retail. To illustrate just one simple difference, in the diffusion diagram supplied by Roy Morgan, something like LinkedIn is seen as a software/social product with multiple types of access which are selected based on the performance of that product.

    In the mobile-centric view, LinkedIn is essentially a mobile phone accessory, and its adoption by an individual depends on how that accessory fits into her/his mobile phone use patterns.

    In the end, what we could say about Roy Morgan, as we can say about a range of similar data provision companies, is that while the actual data and analysis they provide contains a great deal of value and can be an absolute "game changer" for many retail marketing campaigns, the companies do remain to some extent locked in the past.

    As has been remarked by many commentators, the struggle today is between two forces: the hierarchies of the past, and the networks of the present. The difficulty with many data analysis/marketing companies is not so much that hierarchies are winning, but that they do not even accurately perceive this tension.
    Bigbox
    Big box update
    Bunnings will be part of Leopold's Gateway Plaza in Geelong (VIC)
    HNN Sources
    Masters gains another $90 million
    Bunnings New Zealand reported an annual net profit of NZ$12 million
    Click to visit the ITW website for move information
    Bunnings will be part of a major expansion at Leopold's Gateway Plaza in Geelong (VIC); Senior executives exit Masters; additional investment in Masters; the Bunnings Panorama store in South Australia has its detractors and supporters; and annual profit more than doubles at Bunnings' New Zealand operations.
    Bunnings anchors shopping centre

    Leopold's Gateway Plaza shopping centre located in Geelong (VIC) will have a Bunnings Warehouse. The centre will be five times bigger through a $72 million redevelopment. The new Bunnings store is scheduled to open in the middle of next year.

    The redevelopment will also include an Aldi and a Kmart. The major retailers will be joined by 40 new specialty stores opening in stage two of the redevelopment, due to be completed late next year.

    Vicinity Centres senior fund manager Jason Ferris said the enlarged centre was planned to offer the right mix of retail and services for residents now and into the future. He told the Geelong Advertiser: "With the addition of Bunnings Warehouse, Gateway Plaza Leopold will be the key shopping destination on the Bellarine Peninsula."
    Executives depart Masters

    Fairfax Media reports that Masters director Melinda Smith has resigned from the home improvement chain. Smith, who is due to depart at the end of December, was chief operating officer of Masters from 2009 to 2012 and was promoted to director in July 2013 after Master's first managing director, Lowe's executive Don Stallings, returned to the US.

    Smith was responsible for the day-to-day operations of Masters before Woolworths hired UK hardware expert Matt Tyson to replace Stallings in January 2014.

    In July 2013, Smith was forced to front investors and admit that Woolworths had made crucial mistakes in home improvement such as overestimating sales and gross margins, underestimating labour costs and the impact of seasonality, and getting wrong parts of its product range. At the time she said: "We didn't know a lot about this business when we set the budgets for 2013. We didn't know much about seasonal curves, and we didn't have the right stock in some instances. Labour costs are different in Australia to the US. Christmas in the US is in the middle of winter, which is different to Australia."

    Before joining Masters, Smith worked for Woolworths for more than 24 years in a variety of roles at Safeway in Victoria and at Big W. A source told Fairfax: "Whilst she was a clever lady, running a mature supermarket/liquor/BIG W business is one thing, it's different running a customer intensive startup."

    Smith is the second senior Masters executive to resign in the same week. Masters head of marketing, Dion Workman, left after 13 months in the role. Workman joined the company in October 2014 as general manager of marketing after three and a half years at Kmart. He has been replaced by Luke Dunkerley, Woolworths general manager of corporate marketing.

    A Woolworths spokeswoman said Workman's departure did not signal any change in strategy and rejected suggestions it could be the start of a gradual wind down of the chain.
    Fresh funding for Masters

    Woolworths and its US joint venture partner Lowe's have signed off on another $90 million for Masters, according to The Australian.

    Documents lodged with the Australian Securities & Investments Commission show Woolworths injected $60 million into Masters to help fund its day-to-day operations and store roll out program. This represents its two-thirds ownership of the business. Lowe's added another $30 million.

    The latest investment follows the $105 million that the partners put into Master in late September, the fifth capital injection in 2015. Retiring Woolworths chief executive Grant O'Brien was expected to meet up with executives from Lowe's during the week.
    Bunnings attracts protest and support

    More than 2000 signatures have been collected as part of a petition against plans for a $42 million Bunnings store in Panorama (SA). The Say No to Bunnings Panorama group presented the petition with 2100 signatures to a Mitcham Council meeting recently, demanding the council reject the company's application. The group said the store was inappropriate for the area, would put local hardware shops out of business and bring traffic to a standstill, forcing motorists to use residential streets.

    However the Bedford Group has thrown its support behind the hardware giant because of the amount of jobs it provided to its workers with disabilities. In a letter to the council, Bedford Group chief executive Sally Powell said the company "fully endorse Bunnings joining [the] local community".

    The Bedford Group packages $16 million worth of Bunnings products at its Panorama factory each year, providing jobs for at least 250 people in Adelaide with disabilities.

    Mitcham chief executive Matthew Pears said the council was planning on holding a special development assessment panel meeting to consider the proposal.
    Profit surge at Bunnings NZ

    Bunnings' New Zealand unit, which has been facing union protest action over employment contract changes, reported net profit of NZ$12 million for the year ended June 30, up from NZ$5.8 million a year earlier.

    According to financial statements lodged with the Companies Office in New Zealand, directors said that the "pleasing" profit increase was driven mainly by revenue growth of 11% for the year to NZ$898 million, from NZ$813 million in 2014, as well as productivity gains.
    Statistics
    HNN Index for week ending 27 November 2015
    HNN Home Improvement Index for week ending 27 November 2015
    HNN Sources
    IGA will open another eight West Australian stores
    Gerry Harvey attributes the retailer's success to the fact it operates more like a family company than a public company
    Click to visit the HBT website for more information
    The HNN Home Improvement Index for the week ending 27 November 2015 fell by five points to 936.16. The underlying ASX 200 index fell in its comparative measure by 10 points. The actual ASX 200 fell 54 points to 5202.6 points.

    The only standout stock for the week was JB Hi Fi, which rose by 5.5%.
    Goodman Group
    Goodman Group reaffirms full-year earnings guidance

    At Goodman Group's annual general meeting in Sydney, chief executive Gregory Goodman reaffirmed the company's guidance of a 6% lift in full-year operating earnings per share to 39.4 cents. The company also maintained its forecast for a total earnings distribution lift of 7%, to 23.8c.
    Goodman Group reaffirms full-year earnings guidance - The Australian
    Harvey Norman
    Harvey Norman avoids spill motion at annual general meeting

    Harvey Norman has avoided a second strike against its remuneration report. Gerry Harvey told investors unhappy with Harvey Norman's board structure and executive pay to sell their shares, attributing the retailer's success to the fact it operates more like a family company than a public company.
    Harvey Norman avoids spill motion at annual general meeting - Fairfax Media
    Metcash
    Supermarket chain IGA to open eight new WA stores in 2016

    IGA will open another eight West Australian stores, while upgrading 20 existing outlets, in the next 12 months. Among the locations for the new stores are South Guildford, City Beach, the Tuart Ridge estate in Baldivis, and Alkimos. The moves come as German discount supermarket giant Aldi prepares to open 70 WA stores, starting from mid-2016.
    Supermarket chain IGA to open eight new WA stores in 2016 - Perth Now
    Wesfarmers
    QLD power generator sues Wesfarmers

    The Queensland government's power generator, Stanwell Corporation, is suing Wesfarmers for hundreds of millions of dollars over what it claims are unpaid royalties from a coal mine they both own in central Queensland. But Wesfarmers has filed a counterclaim seeking a repayment of $452 million in rebates paid for coal exported from its Curragh mine, near Blackwater, in the Bowen Basin.
    QLD power generator sues Wesfarmers - Fairfax Media
    Bigbox
    The Home Depot Q3 FY 2015-16 results
    Home Depot results for third quarter FY 2015/16
    The Home Depot
    Husky 100 position ratcheting tools from Home Depot
    Innovative appliances, like this heat-pump dryer, have been a success for Home Depot
    Click to visit the ITW website for move information
    US-based big box home improvement retailer The Home Depot turned in another reliable quarter of growth for its third quarter of FY 2015/16. Sales revenue climbed to US$21,800 million, up 6.34% over the previous corresponding period (pcp), which was the third quarter of 2014/15. Earnings rose by 13.33% over the pcp to reach US$1,700 million.

    Overall store-on-store (comp) sales growth fell slightly, by 0.1%, as compared to the pcp, reaching 5.1%. However, comp sales for the company's US-only stores grew by 7.3%, an increase of 1.5% over the pcp.
    Home Depot results third quarter FY 2015/16
    Products

    Ted Decker, Home Depot's executive vice-president of merchandising, outlined the performance of key categories. Categories that returned growth, but trailed the company's average included:
  • Outdoor garden
  • Kitchen and bath
  • Electrical
  • Millwork
  • Flooring
  • Timber
  • Paint

  • Categories that performed at or above the company average included:
  • Flooring tools and materials
  • Siding
  • Concrete
  • Fasteners
  • Roofing
  • Builders' hardware
  • Compressors
  • Wet drive VACs
  • Wiring devices
  • Pipe and fittings
  • Ladders

  • Categories that returned over 10% growth included:
  • Power tools
  • Power tool accessories
  • Commercial lighting
  • HVAC
  • Fencing

  • Mr Decker also mentioned special order products as growing well:
    There was also strengthened decor projects with comps above the company average and special order window coverings, vanities, in-stock kitchens and fixtures.

    Looking ahead to the coming quarters, Mr Decker highlighted two new product areas, the Husky 100 platform of mechanics' tools, aimed at both DIY and Pro (trade) customers, and NuTone InVent bath and ventilation fans. The latter product is aimed at Pro customers, and makes it possible to install ventilation fans without accessing attic space.
    Analysts' call

    The analysts' conference call was somewhat muted compared to other quarters, as Home Depot will provide a special investors' briefing on 8 December 2015. The answers to the analysts' questions were thus briefer than at previous presentations.

    Two main areas where analysts' questions concentrated were on the ongoing development of Home Depot's focus on its e-commerce and interconnected retail, and the areas where the company is seeing expansion in either/both margin and sales volume.
    Online

    In his opening remarks at the call, Craig Menear, chairman, CEO and president of Home Depot said:
    We continue to see healthy sales from our digital business. Online sales grew approximately 25% in the third quarter and represent approximately 5.1% of overall sales. About 42% of all online orders are picked up in our conveniently located stores.

    At 5.1% of overall sales, online accounted for US$1112 of sales.

    Aram Rubinson, an analyst with Wolfe Research asked:
    I know that in order to prepare for the future you've migrated some categories out of stores, at the margin - patios, grills, etc. - figuring you can sell that online and devote other space to some other new categories. Where does appliances fit into that mix in terms of migrating them out of the store versus in the store?

    As background to this question, at the results announcement for third quarter 2014/15, Mr Decker had said:
    You never would've thought appliances would be as strong as it is as an online category. Even flooring, one of the key products that we're moving into our new DF facilities is hard surface floorings. A customer is quite happy to order complete flooring jobs and direct delivery to the home. So I think that is a key learning that the interconnected - the online experience can both be educational and inspirational, but also be used for commerce on big-ticket items like flooring and appliances.

    In response to the current question, Mr Decker said:
    I would say on that we already have a model that leverages a nice interconnected complement of displaying the product in the store but then delivering direct from our manufacturers' warehouses. So we're leveraging an interconnected model from the day we developed our appliance model.

    Matthew Fassler, an analyst with Goldman Sachs asked a further question about e-commerce:
    You spoke earlier about the reality that retail is changing, consumers are shopping differently and your online business continues to grow nicely though it is still only 5% of the mix. How do you guys think about in the long run operating margin implications of this?

    Mr Menear responded:
    So the way we look at it quite candidly is as one business and an interconnected approach. A couple of things, one we shared with you that we did what we call COGS A, so we looked at normalising how we account for things in both channels so that our merchants have a common view of all costs and expenses. And then as I mentioned earlier 42% of our online orders are picked up in our stores. So it's very much a blended mix and we look at it as a blended mix and so we see it more of the same going forward.
    Growth and growth areas

    In his contribution to the opening comments, Mr Decker commented on the "ticket" (order receipt) areas that has shown the strongest growth:
    Transactions for tickets under $50 representing approximately 20% of our US sales were up 3.6% for the third quarter. Transactions for tickets over $900 also representing approximately 20% of our US sales were up 7.8% in the third quarter. The drivers behind the increase in big-ticket purchases were appliances, roofing and countertops.

    Carol Tome, the company's chief financial officer, added some information about Pro customers later in the conference call:
    To put some numbers behind it, if you just look at Pro sales on our private label credit card as well as managed accounts we know those sales. They make up 20% of our sales in the third quarter and they grew faster than the company.

    Seth Basham, an analyst with Wedbush Securities, asked about in-category growth:
    My first question is around the consumers' behaviour in the store in terms of trading up. Are seeing more activity of consumers trading up to premium products?

    Mr Decker responded:
    I wouldn't say it's any more dramatic than we've talked about before. But we do look at sales by price point. And again this quarter we had a progression of higher comps as you went up price points in an assortment.

    Michael Lasser, an analyst with UBS, also pursued information about gains in categories:
    We've seen the spread between your same-store sales in the category expand for a couple quarters now. So can you tie your share gains to specific categories that you've invested in? Or do you think it's coming from the expense of some competitors who are experiencing turbulence as a result of self-inflicted wounds? Or alternatively could we just be at the point in the cycle where the incremental consumer who's coming into the home improvement market is more compelled to go to the big-box on centre channel?

    Mr Decker responded:
    I would start on the investment piece first. Absolutely we see terrific productivity in the areas that we have invested. And from what we can track we believe we're taking share in these areas and I'd highlight three.
    One would be the lithium-ion battery technology in power tools and now migrating to outdoor power. We have an extremely robust lineup of brands and product and values in power tools and believe we're taking meaningful share there.
    LED in light bulbs and now increasingly integrated into light fixtures where we've been very aggressive following the development of that technology. We were partnered with some of the best folks in the industry and our light bulb has integrated fixtures with LED is very strong. And we believe we're taking share.
    Then in appliances certainly, you know we've been expanding square footage for some time now, investing into floor space and adding some additional brands to our portfolio there. We saw double-digit comps in appliances yet again this quarter and believe we're taking share in appliances.

    Ms Tome added some very interesting comments in response to the cyclical part of Mr Lasser's question:
    We're doing a lot of work in this regard trying to come up with our own point of view. But one thing we've learned looking at data coming out of the Harvard Joint Center for Housing Studies as well as John Burns Real Estate Advising Firm is that homes that are older than 45 years tend to be have a higher repairs.
    And in fact the amount of money spent on repairs in those older homes is 5.6% higher than the amount of money paid to repair a home that is 20, 24 years old. There are 40 million homes in the United States that are older than 40 years. So as the housing stock ages it just bodes very well for big box home improvement retailers to sell to those customers who need to make repairs in their homes.
    Analysis

    There were two interesting points to emerge from this results announcement.

    The first is the ongoing success of Home Depot's online appliance sales. As one analyst remarked, it is as though Home Depot is encouraging its customers to self-showroom - view appliances in the Home Depot stores, then go home and order those same appliances online.

    In retrospect, of course, it seems almost easy to pick appliances as a possible online sales success. Due to their size, they need to be delivered anyway, so the online sales need for delivery does not seem to impose any additional costs. Also, while many buyers would like to see an appliance and try out its basic functions physically, the actual buying experience usually relies on selecting from a number of models based on a price/features basis - something it is far easier to do online.

    The second point is that we see, once again, just how important Lithium-ion (Li-ion) battery technology has been to home improvement retail. Now that it has been available for standard power tools for some time, the technology is moving on the consumer level to include outdoor power equipment as well.

    Li-ion development can be seen as a direct consequence of the growth of the mobile phone/tablet industry. In fact, many of the new innovations in power tools, including brushless motors, owe something to the mobile phone industry. Now the most recent tools, which make use of Bluetooth-equipped communication batteries and programmable networks of tools, are taking that connection one step further.

    It will be interesting to see where this goes next.
    The Home Depot results FY 2015 Q2 - HNN
    Home Depot Q1 2015/16 results - HNN
    Bigbox
    Lowe's third quarter 2015-16 results
    Lowe's results for Q3 of 2015/16
    Lowe's Companies
    Lowe's Creative Ideas magazine helps customers with projects
    Hitachi is a featured product at Lowe's
    Click to visit the ITW website for move information
    US big box home improvement retailer Lowe's Companies has reported its results for the third quarter of its FY 2015/16 year. It has produced an improved performance, with net earnings of US$736 million, up by 25.8% over the previous corresponding period (pcp), which was third quarter FY 2014/15.

    Sales revenues also increased, up 4.96% over the pcp at US$14,360 million. Store-on-store (comp) sales grew by 4.6%, 0.5% down on the growth for the pcp. Earnings before interest and taxation (EBIT) margin improved by 0.15% over the pcp, to come in at 9.25%.
    Lowe's results for Q3 of 2015/16

    In other measures of growth, the company reported that in terms of its comp sales, there was a 2.5% increase in transactions, and a 2.0% increase in the amount of an average "ticket" (receipt for sale), as compared to the pcp. Gross margin grew by 0.26%, and operating margin improved by 1.3%.

    The company is also seeing good growth in larger purchases and projects. The comp sales for tickets over US$700 were reported as growing at above 7%.

    Lowe's credited three sales areas for the good results: the company's strength in appliances, the seasonal living category, and the project category. It also saw improvements in Pro (trade) customer sales. Lowe's did so well in its appliance sales that the US consumer ranking company J. D. Power and Associates has awarded the company the place of number one appliance retailer website for 2015.

    These categories were assisted by two strategic sales initiatives: the delivery of online and offline omnichannel capabilities, and enhanced in-store customer experiences.
    Categories and strategies for Lowe's
    Product line performance

    Out of 13 product categories, Lowe's reports positive comparative sales (comps) for 12, with outdoor power equipment essentially flat. Areas that performed well include:
  • Seasonal living (such as patio furniture)
  • Appliances
  • Tools
  • Hardware

  • Brands that created particular consumer interest included:
  • Stanley Black & Decker
  • Hitachi
  • Bosch
  • DeWalt
  • Lenox
  • Irwin
  • Paslode
  • Sherwin-Williams

  • The company has enhanced its offering in pneumatic tools. This includes the expansion of its Hitachi range, and better resources for Bostitch and Paslode products as well.

    Paint comp sales continue to be relatively low, which Lowe's suggests is in-line with general industry experience. The analyst Michael Lasser of UBS asked about this category:
    Paint has been below the company average for five quarters in a row, despite the launch of some new products within the category. Can you talk about the reason for the underperformance? Especially because paint is a category that's attached to a lot of other home improvement products, whether it's inside or outside of a house.

    Michael (Mike) Jones, chief customer officer for Lowe's replied:
    The paint industry in total is below the average. And so our paint performance is about in line with the industry. I'd say, we're not satisfied with that. We want our paint performance to be above the industry, as are most of our other business units. That's how we're seeing good momentum with HGTV by Sherwin-Williams. We've got a great relationship with Valspar. And PPG with the Olympic brands, we've leaned pretty heavy into some promotions around paint, as I'm sure you've seen. Our overall promotional cadence year-over-year is about the same, but we did redirect a little more towards paint and we're pretty excited about our paint lineup. But that said, the industry is below the average, and we're at above average pre-industry.
    Customer overview

    Robert Niblock, the company's chairman, president and CEO outlined how Lowe's sees its consumer market in the near future:
    We continue to be pleased with the results of our quarterly consumer sentiment surveys. Most encouraging this quarter is the desire to invest in home continues to grow, as survey respondents are indicating that growth in their home improvement spending is outpacing increases in their overall spending.
    In fact, the number of homeowners indicating that their home improvement spending increase has almost doubled since 2012, boosted by the persisting recovery in home prices. This trend underscores the opportunity we have to address the needs of 75 million homeowners across the country who are increasingly willing to engage in home improvement projects, in addition to the 5 million who relocate or move into a new home each year.

    Mike Baker, an analyst with Deutsche Bank, offered a question that probed Lowe's relationship with its customers and the possibility of further top-line growth:
    You're still a couple of hundred basis points away from your peak operating margin. But I think as you guys like to say, you have a line of sight to it. When you start to get to that double-digit operating margin, how do you think about balancing further margin gains with some top-line initiatives? Ever so subtly you're increasing your store count growth in other regions, in other formats, your competitors just made an acquisition, how do you think about maybe some new top-line growth initiatives to balance that margin gain?

    Mr Niblock replied:
    When you think about it from where we had peak our operating margins previously to where we're at today and trying to run back in on that, we really are a totally different company. If you think about back in those days it was single channel and we want to wrap it expansion of the store footprint. We think the store is still the nucleus of our relationship with the customer, but the store in and of itself is not enough. We really have to be there on an omnichannel basis for the customer.
    So that's why everything we've been investing in for the past few years is really to be able to deliver that omnichannel offering, so that we take those stores, we continue to build on those leverage, the PSI/PSE (project specialist) programs that we just talked about, whether it's the improvements that we've made on dotcom, whether it's all the improvements that we've made with the Pro customers to really get us back to the point where then we can look at other opportunities to try and grow that top line.
    So certainly, we expect to continue to have our operating margin improvement, continue to have nice flow-through to drive, our comps sales improving like the guidance that we've given you. But we will continue to look at how there are other opportunities, as the consumer changes, the way the consumer wants to interact with us changes, what are the other opportunities where we can do things that will continue to allow us to pursue opportunities for growth, particularly in a recovering market and the affinity that we're seeing with the consumer around investing in the home.
    So whether it's stuff like lowesforpros.com that we invested in, because we know that that's a key gap that we had there, whether it's flowing out the additional PSI programs like we added this quarter in the store, you'll see us looking at ways that we can continue to make sure that we're responding to where the customer wants to go. And whatever that ends up being, we'll end up evaluating that, but also using the base of stores we have to continue to drive nice flow-through.
    The Pro customer

    While Lowe's has been focused to some extent on the Pro customer over the past two years, this particular quarter's analyst conference call seemed to contain quite a few references to this market.

    David Schick, an analyst with Stifel, asked the company where exactly they saw the major opportunity with Pros:
    You're talking about sitting down with a Pro and the merchandising changes and all of that. Where do you think the balance of the opportunity is in the Pro? Is it Pros you already have spending more or is it Pros you're not reaching? And if so, where are they coming from?

    Mr Jones provided the initial response:
    I'll start. We think the answer is yes. We think it's the Pros that we already have spending more and we know that there are Pros today that drive past us to go some place else, and we know we can do a better job at bringing them into our stores. And so we started by ensuring that we have the right inventory depth, the right brands, and the right local market assortment.
    And as that was corrected, we feel we're comfortable about where we are. From there we started to turn on our marketing, so that we can start to invite those Pros back in. So we're excited about both the Pros we have. It's still a big part of our business. And we're excited about the Pros that historically have purchased some place else that now can come in and try to experience at Lowe's.

    Ricky Damron, the chief operating officer, followed this up to quantify the extent of the opportunity:
    I'll just add, when we look at the Pro in general, we're very excited about what we're seeing from both a transaction point of view and a comp across all ticket ranges. So when you look at comps by ticket size and the way that we evaluate those, we're seeing positive growth across all tickets, which is telling us that we're getting some new accounts in, but we're also selling our existing accounts more.
    The other thing through our Pro Appreciation events, and what we're doing to really target Pros through the new brands, the increased inventory depth and our five ways to save value propositions we're doing, we saw a strong double-digit growth in new accounts during Q3 as well. So I think that also goes to support the fact that we're becoming more relevant, that the brands that we're introducing have increased awareness with the Pro and given the aspects of services that we're providing is beginning to resonate as well.

    David Vargas, an analyst with Raymond James asked which categories were showing good growth for the Pro customer. Mr Jones responded:
    I'll pick on tools where we've really worked diligently to get the right brands. So we've added brands like Irwin Lenox. We've added Hitachi. We've added Goldblatt, as an example. You couple that with brands like DeWalt, Kobalt, Porter-Cable and Bosch. We saw a double-digit growth in pneumatics. We saw a very strong growth in cordless, power tools, accessories and rotary tools.
    And we watched tools in particularly, because it's a good indicator of how well we're engaging the Pros. And this isn't just adding brands by happenstance. If you look at the way we've added brands around pneumatics, we've added Hitachi to complement our offering in Bostitch and Paslode. So we have the three best brands in pneumatics.
    If you want to buy pneumatics as a Pro, we feel that Lowe's is certainly the best place to come. So we look at each category. We strategically decide how to best serve the Pros. We build brands that complement one another. And from there, we increase our relevant engagement with the Pro. But certainly, we saw it in tools. We see it across the stores to continue to grow our Pro business.
    Marketing

    This quarter was also a little unusual in that Lowe's highlighted its use of various marketing approaches. In his introductory remarks the company's chief operation officer, Ricky Damron, described its marketing approach:
    We also drove productivity and marketing by using a robust set of analytic tools to optimise our media allocation, leading to a reduction in print advertising and increase in digital advertising, and an expansion of social media, increasing the efficiency and effectiveness of our media buy and improving our advertising spend, all while maintaining our customer reach and improving exposure. While we have already seen positive results from this work, media optimisation is a multiyear effort and opportunity.

    An example of this approach, as described by Mr Damron in answer to an analyst's question, is to use radio and email marketing as a means of targeting the Pro market more directly. This point was picked up by Robert Hull, the chief financial officer:
    And just to build on that, you'll see us leverage some of our digital assets as well. So we talked quite extensively about lowesforpros.com, that gives us ability to reach the Pros and see some of our more creative online techniques to get the right promotion in front of Pros at the right time. As we continue to migrate more towards digital, away from print, with pros you'll see us take a slightly different balance, where we'll use some print to talk to them as well.
    I think the key is that, what we've done is we may consider effort to make sure we had the right brand that Pros need and now we're starting to reach out to those Pros much more efficiently and effectively, so we can get the right promotion along with those brands in front of the Pros.
    Analysis

    One of the reasons behind Lowe's increased focus on the Pro customer may be rival The Home Depot's acquisition of Interline Brands, which provides supplies primarily to maintenance, repair and operations (MRO) professionals. While Lowe's has had a good presence in this market in the past, Home Depot might possess the capability to take some of that market share away.

    Lowe's seems to be placing an increasing emphasis on its strengths in communication. Where Home Depot is concentrating on providing its customers with a set of tools, Lowe's wants to interpose a layer of service between the customer and the store.

    It will be interesting to see how these approaches play out over the coming year.
    Acknowledgement

    HNN would like to gratefully acknowledge the provision of the transcript of the Lowe's conference call by the investment website Seeking Alpha. It is a great contribution to better company reporting.

    The full transcript of this conference call can be accessed at:
    Lowe's third quarter conference call - Seeking Alpha
    Lowe's FY 2015-16 Q2 results - HNN
    Lowe's grows well in Q1 2015/16 - HNN
    Bigbox
    Kingfisher results for third quarter 2015-16
    Kingfisher results for third quarter FY 2015/16
    Kingfisher
    Memo from B&Q referring to 50 Shades of Grey
    Castorama's poor sales in August 2015 will have consequences
    Click to visit the ITW website for move information
    UK-based European home improvement retail conglomerate Kingfisher has released results for the third quarter of its FY 2015/16. The results were somewhat mixed, with French operations affected by an overall soft market for home improvement, and results from UK and Ireland reflecting a more positive market.

    Overall results for the company saw sales of GBP2651 million. This is down by 5.86% over the GBP2816 million reported for the previous corresponding period, which was third quarter FY 2014/15. Taking account for alterations in operations, the true decline would be 2.5%, according to Kingfisher. In constant currency terms, Kingfisher asserts that an increase of 4.0% was achieved.

    Retail profit was GBP223 million. This is down by 0.9% on the figure for the pcp. Taking account for operational changes, Kingfisher says the decline was actually 6.6%. In constant currency terms, the result actually improved by 0.4%.

    Like-for-like (comp) store sales growth was 2.6% in constant currency terms, an improvement of 3.5% over the pcp. For France, the constant currency comp sales growth was 0.1%, a 4.1% improvement over the pcp. In the UK and Ireland, sales growth in constant currency came in at 4.6%, a 2.0% lift over the figure for the pcp.
    Kingfisher results for third quarter FY 2015/16
    Divisions

    Once again, the "star" performer for Kingfisher is its Screwfix operations in the UK, which has a dynamic online presence. Sales for Screwfix came in at GBP278 million, an increase of 23.4%, with comp sales growth of 13.3%. B&Q in the UK and Ireland increased sales by a modest 1.0%, and lifted comp sales by 2.4%.

    In France, Castorama increased sales by 0.5% in constant currency terms, but lost 0.2% of market share in terms of comp sales. Brico Depot gained 2.8% in constant currency terms, and increased comp sales by 0.4%.

    Other international operations gained 5.4% in constant currency terms, and saw comp sales increase by 2.8%.
    Analysis

    Kingfisher remains very much a company that is in transition. The company has clearly described its plan for the mid-term future, which includes the development of a core offering across its home improvement operations and the development of a single IT system to underpin all of its operations.

    While these operational improvements will help to provide a better pathway to growth, the company does depend to a large extent on a recovery in the home improvement retail industry in France. Given recent events in that country, and the likelihood that the effects from these will continue for a least a year, it seems Kingfisher may struggle to provide growth.
    Kingfisher results 2015-16 first half - HNN
    Products
    Cordless tools for dual markets
    The EY74A2 13mm drill and driver has a high powered brushless motor
    Panasonic
    The EY79A2 hammer drill and driver has a new speed control function
    There is a shorter brushless motor included in the EY75A7 cordless impact driver
    Click to visit the HBT website for more information
    Panasonic has new products designed to deliver optimum performance and durability: the EY74A2 13mm drill and driver, the EY79A2 hammer drill and driver and the EY75A7 impact driver.

    The enhanced internal engineering and technology is complemented with a revamped body design. The cordless tools have a "carbon fibre look" textured finish, and a comfort grip for improved ergonomics. All models are part of Panasonic's Tough Tool IP range of IP56 rated dust and water resistant power tools. Chris Moore, business manager - power tools said:
    These powerful tools won't let you down and are ideal for professional tradespeople such as plumbers, electricians and carpenters, as well as DIY enthusiasts. They are efficient and precise to support demanding drilling tasks as well as jobs that need fine control.

    For the latest models, Panasonic has both 3.0 Ah and 5.0 Ah Li-ion batteries available to suit the job at hand. They offer a long lifespan under high workload conditions.

    The P-type 3.0 Ah battery is ultra-slim and light with a newly-developed 20mm battery cell and a design for easier work in cramped spaces without compromising performance. The J-type 5.0Ah Li-ion battery has "dynamic capacity" for long-time usage.
    EY74A2 cordless drill and driver and EY79A2 cordless hammer drill and driver

    The brushless motor in the EY74A2 and EY79A2 has newly-designed control circuits that increase stable current flow by more than 70% (compared with previous Panasonic brushless models). This allows a compact design while still enabling operation at full power during high load tasks.

    A new speed control function allows three different low rotation speed settings (H/M/S). Designed to work at allowable maximum speeds with metal hole saws, this feature greatly reduces "burn out" and prevents surface scorching on stainless steel and other materials.

    The models have a Hybrid Switch that has been redesigned to provide up to double the life of conventional Panasonic switches. Advanced speed control electronics start at slow rotation speeds. This enables very slow and smooth starts that give a high degree of control where accuracy is important, such as when precision drilling or working with small screws.
    EY75A7 cordless impact driver

    The shorter brushless motor included in the EY75A7 cordless impact driver helps to achieve an ultra-compact body with optimum centre-balanced ergonomics. This makes for comfortable handling and heavy-duty use, even in restricted spaces such as ceiling voids, lofts, or under floorboards.

    Panasonic has also used its extensive experience in durable design to improve parts such as the hammer, bearing, switches and anvil, which require especially robust design and high specifications for heavy use.

    In addition, a "self-drilling screw mode" limits the risk of stripping the thread on fasteners or materials during screwing in (less than 4 x 15mm) by automatically switching from high speed to low speed.
    Key features
    EY74A2 13mm Cordless Drill and Driver
  • Compact body: length 178mm
  • Light weight: 2.05kg
  • High power: 50.0 N-m
  • Optimum rotation speed control
  • High power brushless motor
  • Variable speed control/reversible
  • 18-stage clutch plus drill position
  • 13mm heavy-duty keyless chuck
  • LED light to support work
  • Electric brake
  • EY79A2 Cordless Hammer Drill and Driver
  • Compact body: length 188mm
  • Light weight: 2.10kg
  • High power: 50.0 N-m
  • Optimum rotation speed control
  • High power brushless motor
  • High speed brick/masonry drilling
  • Variable speed control/reversible
  • 18-stage clutch plus drill position
  • 13mm heavy-duty keyless chuck
  • LED light to support work
  • Electric brake
  • EY75A7 Cordless Impact Driver
  • Compact body: length 188mm
  • Light weight: 1.70kg
  • High power: Max. 160.0 N-m
  • 4-stage rotation speed selection
  • New design high power brushless motor
  • Self-drilling screw mode
  • Variable speed control/reversible
  • LED light to support work
  • Electric brake
  • Products
    HD security camera for smart homes
    Netgear's Arlo Q that offers 1080p high-definition video
    Ledger Gazette
    Arlo Q can see entire rooms from corner to corner
    The new Arlo Q is gives users seven days of free cloud video recording
    Click to visit the HBT website for more information
    Netgear has unveiled a new addition to its range of HD security cameras with the launch of Arlo Q that offers both 1080p high-definition video and two-way communication. Pat Collins, vice president of smart home products at Netgear said:
    With Arlo Q, our goal is to deliver an end-to-end experience that leaves you feeling as though you are right there in your home, even though you may be a world away.

    Arlo Q connects directly to any existing WiFi network. It has a 4-megapixel-image sensor and built-in night vision to reveal a detailed picture even in total darkness.

    Using a 130-degree wide-angle lens, Arlo Q can see entire rooms from corner to corner. It can be placed wherever required.

    Netgear's director of product management for smart home, Damir Skripic recently told Engadget in an interview:
    I think cloud storage and infrastructure, the availability of content, as well as video analytics...will become a real differentiating point for a lot of these devices.

    The new Arlo Q is giving users seven days of free cloud video recording. It features activity zones and alert times that can be customised to the specific needs of users. In addition, the seven days of cloud storage for recordings is good for up to five cameras, with two subscription plans available: 30 days of recording storage for up to 10 cameras for US$10/month or US$100/year, and 60 days of recording storage for US$15/month or US$150/year.

    For an additional fee, users can add the Continuous Video Recording plan (CVR plan), which continuously uploads everything the cameras records to the cloud, allowing users to have easy access without worrying about storage issues.
    Careers
    Seeking opportunities
    A digital marketing manager wanted at Dulux
    HNN Sources
    A Sydney-based buying position at Masters is available
    A national account manager for hardware and consumer goods
    Visit the Mecca Website
    A selection of home improvement and hardware retail roles around Australia. A digital marketer is required for the Dulux brand; Masters is recruiting for a buyer; and a national account manager needed to sell hardware, homewares and bathroom products.

    For further information, simply click on the images provided.
    Digital marketing for Dulux

    The Dulux digital marketing manager will responsible for the development and execution of digital marketing strategies that will enhance brand equity. These initiatives will contribute to profitable growth across both retail and trade markets. A business management degree with a major in marketing, business or digital marketing is necessary. An MBA or post-graduate degree is preferred.
    Digital marketing role at Dulux
    Buyer position at Masters

    Reporting to the merchandise manager, this buying role involves sourcing the range, managing relationships with suppliers and working in partnership with and across multiple internal functions such as merchandising, store operations, store environment, quality and marketing. The ability to create and manage a promotional plan to drive results is critical.
    A buyer for electrical is wanted at Masters
    Selling hardware and consumer goods

    A fast growing, manufacturing company is looking to expand its sales team with the addition of a national account manager. The product range is well recognised and can be found in hardware and retail chains including Bunnings and Woolworths. This role is focused on managing relations at a senior level within the hardware and homewares channels.
    National account manager role in hardware and consumer goods
    News
    HI Weekly Vol. 1 No. 12
    Download the latest HI Weekly, issue number 12
    HI Weekly No. 12
    Dulux consists of five internal segments
    Hitachi has agreed to purchase Metabo
    Click to visit the HBT website for more information
    Each week, the HNN weekly e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out.

    Just use the following link to download the PDF:
    http://hnn.bz/HIWeekly-1-12.pdf

    In this week's edition, we take a look at forecasting specific to hardware and home improvement retailers including the drivers and influencers. We discover a number of basic tools that could prove useful. DuluxGroup's annual results are examined along with Hitachi's planned acquisition of Metabo.

    Other news stories this week include Haymes Paint's transition to the next generation of managers and online housewares retailer Temple & Webster's purchase of furniture e-tailer Milan Direct.

    Also in this edition: a selection of the latest home improvement jobs from around Australia and bamboo composite material as a potential replacement for steel in the future.

    Plus all our regular features: big box updates; HNN Home Improvement Index; new products; and hot links.
    http://hnn.bz/HIWeekly-1-12.pdf
    Statistics
    Construction and manufacturing forecasts
    Percentage change in metal fabrication and machinery manufacturing
    HNN Sources
    Gross value added from mining
    Construction activity: Overall
    Click to visit the HBT website for more information
    Modelling the future for tools, industrial, and construction suppliers is far from being a simple task.

    For example, a great deal has been written over the past two to three years about the Australian economy transitioning from mining and manufacturing to being more of a services-based economy. If, as is commonly suggested, cities act as the main drivers of the kind of creative innovation needed to drive a services-based economy, then it benefits everyone if they operate as efficiently as possible.

    As a result of Australia's dramatic increase in the population of its urban areas, most large cities are not very efficient. In part this is because they are struggling with an ongoing infrastructure deficit.

    One good example is the public transportation system - especially light and heavy rail - for the region stretching 40km around Melbourne in Victoria. Under constant stress to carry an increasing number of people from ever increasing average distances to the city centre, the rail system has so far chosen to reduce convenience and amenity in favour of increased capacity.

    Thus there are now far fewer tram stops, and more express rail services that have reduced services in inner-urban areas. Rail carriages have been altered to remove a further 20% of seating, increasing standing room and thus overall capacity.

    As "economical" as these changes may seem, they still carry infrastructure costs. Increased frequency of trains places additional stresses on the level crossings that halt traffic on major roads whenever a train goes through them. This leads to increased traffic congestion, and ongoing safety concerns. Thus the Victorian state government has found itself forced to invest in creating rail overpasses at key level-crossings - a very costly necessity.

    Digging a little deeper into this example, what are the causes of so many people travelling from far outside the city to the city centre? It is an obvious case of centralisation, but what is helping to drive this increase?

    One candidate is the decline of manufacturing. Manufacturing is, and has been, one of the main forces that - in the past - allowed Australian cities to decentralise to some extent. No one builds factories close-in to a city centre, for a wide range of reasons, including land cost and environmental concerns.

    We all know of entire suburbs that seem to have been created to service certain industrial clusters. With many of those regions now entering decline - which will accelerate sharply as, for example, automotive manufacturing ceases - the residents of these areas now have to get to the city in order to have a job.

    Of course, our cities need to get "smarter". They need to be better designed. New forms of decentralisation need to be introduced. Even new forms of work itself need to be encouraged - for example, if 35% of city workers would "telecommute" - work from home - just one day a week, that would reduce transportation stress by 7%, which is a huge gain.

    Underlying all these possible changes, however, is one simple constant: infrastructure. The reality is that every major Australian city has a large amount of infrastructure work that really must get done if they are to function effectively in what - we are told - is Australia's future economy.

    To put that into the terms that relate directly to tools, industrial, and construction suppliers, there is an ongoing, steadily increasing demand in this area. However, it is going to be greatly restricted by the twin issues of financing and planning.

    Australia will be forced over the next five to six years to look increasingly to overseas financing of its public infrastructure projects, which brings with it a number of political difficulties. Equally, in terms of planning, governments remain torn between expenditure on shoring up the considerable remnants of a past economy and investing in parts of the new economy.

    In this type of environment, it is just very difficult to forecast what is going to happen in the short term. HNN can say with some confidence that tools, industrial, and construction supplies is going to be a very, very good business in the future. Exactly when that particular part of the future is going to come more fully into effect is very difficult to judge.

    While HNN does not feel confident to offer much in the way of a forecast, we can take a look at some past trends that will give a good view of what is likely to happen through the next calendar year.
    Manufacturing

    The level of statistics readily available for manufacturing makes providing good forecasts quite difficult. This is a sector that at the moment in Australia varies quite widely from one area to another. Much of that variance can be put down to, aside from what is happening on the demand-side, how well each area is coping with the transition to being part of a high-cost industry.

    In a paper prepared for the Prime Minister's Manufacturing Taskforce in April 2012, entitled "Australia's Manufacturing Future", Roy Green & Goran Roos outline the differences in approach needed when moving from a lower-cost to a higher-cost manufacturing environment.
    Moving from low-cost to a high-cost manufacturing environment

    In the following chart, HNN has graphed the percentage change in two key manufacturing areas, metal fabrication and machinery, against the currency exchange rate for the AUD to the USD. What this graph shows to some extent is the difference between the pre-GFC and the post-GFC manufacturing environment.

    Pre-GFC the value of the AUD would seem to be regularly influential on these forms of manufacturing, with a low-value AUD tending to enhance manufacturing. Post-GFC, that relationship is less clear. What is clear is a strong downward trend, as the percentage change becomes overwhelmingly negative.
    Percentage change in metal fabrication and machinery manufacturing
    Mining

    The story of mining in Australia is one that has been well-documented, but it is worth looking at a quick chart to see how the various factors play off against each other.

    In the chart below, it is clear that the major growth driver in mining has been iron ore. It is also clear that the sharp drop in commodity prices, which is expected to continue, will keep driving the value of mining activity downwards.
    Gross value added from mining
    Construction

    To begin, this is a graph that provides an overview of engineering construction and building construction in terms of value of work done:
    Value of work done in sectors of construction

    This is a graph of the overall view of work commenced, work done, and work yet to be done:
    Construction activity: Overall

    The following graphs break this down by industry sectors.
    Roads, Highways and Subdivisions
    Construction activity: Roads, Highways and Subdivisions
    Bridges
    Construction activity: Bridges
    Railways
    Construction activity: Railways
    Harbours
    Construction activity: Harbours
    Water storage and supply
    Construction activity: Water storage and supply
    Sewerage and drainage
    Construction activity: Sewerage and drainage
    Electricity generation, transmission, distribution
    Construction activity: Electricity
    Pipelines
    Construction activity: Pipelines
    Recreation
    Construction activity: Recreation
    Telecommunications
    Construction activity: Telecommunications
    Oil, gas, coal and other minerals
    Construction activity: Oil, gas, coal and other minerals
    Other heavy industry
    Construction activity: Other heavy industry
    Products
    Impact driver test: Milwaukee & DeWalt
    Height of the drivers
    HNN Sources
    The DeWalt has three lights to the Milwaukee's one
    Electronic speed setting on Milwaukee
    Click to visit the HBT website for more information
    There is a good reason why you probably do not see that many written reviews of power tools these days, while online video reviews have proliferated. In general, for most common power tools, the design and construction of them has reached a stage where differentiating between most brands comes down to a question of preference and taste. It is an emotive and fun subject, and something ideal to cover in a good video clip.

    The two impact drivers that we are looking at here are a good example of this. On the surface, they would seem to have some big differences. The DeWalt DCF 886-XE is an 18-volt impact driver and the Milwaukee M12 CID is a 12-volt impact driver.

    The DeWalt has a few "higher end" features, such as three lights to illuminate the driving area, where the Milwaukee only has one. On the other hand, the Milwaukee does offer a two-speed drive mechanism, where the DeWalt has only the single, basic setting.

    In doing our battery life/endurance test, driving 50mm 14g Bugle Batten screws (from Otter) into construction-grade pine battens, we found that both impact drivers had nearly equivalent speed performance, with the DeWalt getting perhaps 0.1 second on the Milwaukee on the average 3.4 seconds to 3.6 seconds per screw drive time.

    To measure the battery endurance of the impact drivers, we first devised a means of measuring total charge in the batteries. To do this we hooked up the batteries to their respective light units, then shined these lights on a photoelectric sensor. When the light eventually went out due to a flat battery, the photoelectric sensor passed this message along to an attached computer, which noted the time of battery exhaustion.

    HNN drove 50 of the 50mm screws in with each driver, operating from a freshly charged battery. The batteries were then re-attached to their light units, and the photoelectric sensor recorded how long it took for them to go flat once again. Simple maths provided us with the proportion of charge consumed, and we could work out from this the total number of screws each impact driver could fasten without recharging.

    Not surprisingly, given its voltage advantage, the DeWalt came out ahead. Our calculations show it could drive 127 screws using the 18-volt 2.0 amp-hour battery. The Milwaukee showed it could drive 96 screws using its 12-volt 2.0 amp-hour battery.

    Of course, this doesn't mean that one tool is in any way universally "better" than the other. Both tools can be equipped with larger batteries, though the DeWalt accepts an overall larger battery than the Milwaukee can. For many users, however, having a capacity of around 100 of these large screws would be more than enough.

    In casual use by a range of people who happened to drop by the HNN offices, opinion about the two tools was very much divided. For some, the DeWalt has a more "balanced" feel, as the heavy motor in the head is balanced by the mass of the battery at the other end of the handle. The people who liked this aspect of the DeWalt actually felt that the Milwaukee felt heavier in the hand.

    On the other side, people who liked the Milwaukee tended to do so with some enthusiasm. The most common comment about the bright red impact driver was that it felt "handy". Fitted with the 2.0 amp-hour battery it is about 19cm tall sitting on its handle butt, versus the 22.5cm of the DeWalt.

    For HNN in the end, the one "killer" feature that the DeWalt does have is its Bluetooth battery. The more we use this, the more impressed we have become with its future potential for people who need to manage more than 10 or so batteries.

    We are also very much looking forward to trying out Milwaukee's One-Key tool management system in the future. It will be interesting to see how both systems develop.
    Bigbox
    Big box update
    Bunnings Maitland is probably moving to a new site
    HNN Sources
    Masters has gained approval to build in Tuggerah (NSW)
    Bunnings has altered plans for the store it wants to build in Panorama (SA)
    Click to visit the ITW website for move information
    Bunnings has confirmed it is looking at a new site for its Maitland store in regional Victoria; approval has been given for the development of a Masters Home Improvement Centre at Tuggerah (NSW); Bunnings revises plans for its store in Adelaide's south east; and Harvey Norman opens a third branch in Northern Ireland.
    Bunnings Maitland is moving

    After the Bunnings store in Maitland re-opened following the extensive damage it suffered during the April superstorm, much of the site remains closed. The prospective new site is the vacant lot next to the current warehouse.

    Bunnings management said the decision to investigate potential new store locations had nothing to do with the April superstorm. Andrew Marks, general manager - property told the Maitland Mercury: "Well before the storms earlier this year we started investigating opportunities to increase our offering with a larger store, to meet the growing demands of the community.

    "We have now identified land next to the existing Maitland store and we are speaking with the relevant authorities to understand if there is an opportunity to develop a new, bigger store to replace the current warehouse."

    While the plans are still under assessment, Marks said talks had already begun with Maitland City Council. He added: "The existing Bunnings Warehouse Maitland is currently undergoing the final stages of repairs and will be completed regardless of the outcomes of these discussions.

    "If there is an opportunity to develop a new Bunnings store, the existing, fully repaired store will provide an attractive prospect for other retailers seeking to establish a presence in Maitland."

    Bunnings leases the site from The Bunnings Warehouse Property Trust, which is a separate entity.
    Masters gains approval for Tuggerah

    A Masters Home Improvement Centre in Tuggerah will be built after the Joint Regional Planning Panel gave its unanimous approval. Masters plans to invest more than $26 million on the development. The site will include the Masters outlet, a vegetated riparian corridor and public art. More than 130 local jobs are expected to be created once the Masters centre is open for business.
    Bunnings makes amendments

    Bunnings has altered plans for the store it wants to build in Panorama (SA). However the amended plan for the $42 million store has met a mixed response from locals.

    The hardware retailer has acceded to residents' calls to cut a planned entrance from the plans. It has also proposed installing traffic lights at the site's sole entrance. Panorama Clapham Community Group spokesman Neil Baron welcomed the amended plans. He told Adelaide Now: "Bunnings has shown good faith by being open and listening to our concerns...They needed to understand our concerns about traffic management and having the new lights and crossing makes it a...safer proposal."

    Panorama Clapham Community Group, along with the Say No to Bunnings Panorama group, have protested against the development since the company bought the site more than a year ago.

    Bunnings property general manager Andrew Marks said the company would continue discussing the proposal with Mitcham Council. Mitcham's Development Assessment Panel is expected to assess the application in March 2016.
    Harvey Norman's growth in Ireland

    Harvey Norman's third store in Northern Ireland follows outlets in Holywood Exchange and Newtownabbey. It is a multi-million pound investment by the retailer. The latest store is the company's first Harvey Norman Home Centre. In addition to Harvey Norman product lines - including a higher-end range - it will also have store concessions operated by independents for other aspects of home improvement, such as paint, wallpaper, curtains and fabrics. A new restaurant has also been added, run by home-grown chain Synge & Byrne.
    Companies
    Haymes Paint makes the transition
    Haymes Paint has made a successful transition to a new generation of managers
    BRW
    The family behind the Haymes paint brand
    Glen Cooper from Coopers Brewery is a new member to the Haymes network
    Subscribe to HNN weekly e-newsletter
    Reflecting on the past four years when his children were coming back into the family company, former Haymes Paint managing director David Haymes says it was jealousy and lack of communication that caused problems. He did not expect the one of the "lows" during his time in the business would be when he handed the company over to his children.

    David, whose father established the Ballarat-based business, never assumed his children would take over from him. Instead, in 2008 when he wanted to retire he considered all of his options, selling the company, bringing in professional management or continuing it as a family business.

    His three children, Matthew, Tim and Belinda, all had their own careers. But they decided to come back into the family company, triggering a four year period that could have sunk one of Australia's most successful homegrown paint companies. He told BRW:
    I assumed that because they had different skill sets they'd work together and it would all just work. But it didn't and that's because I didn't know how to communicate.

    David's son Tim, who is the commercial director of Haymes, says the lack of structure, family personalities colliding and the Haymes staff still seeing their father as boss resulted in turmoil.

    Improved communication between the Haymes siblings has resulted in strong business growth and a happier family environment. He said:
    There were a lot of fights. Our board meetings at the time consisted of us having raisin toast around the breakfast table. We were all trying to do the right thing...but with any business you need formal structure.

    It took attending a few Family Business Australia conferences for the family to start making the necessary reforms to let the business run smoothly. David said:
    You have to all get together and talk. Bring your sons, the wives of your sons, your daughters and get them all together and talk about the issues. If you don't you'll end up with broken hearts, sadness and grandkids that never see their grandparents.

    Matthew Haymes, who admits to be the most volatile one in the family, says his lightbulb moment came when he realised it wasn't about them, "it was about the 100 other families that worked in the business". He explained:
    We were all fairly self-interested and wanted to be heard. We all had our careers outside of Haymes and it took us years to work out what we were all good at and to respect one another.

    The siblings are now developing their sixth edition of the family constitution, and by having well-defined roles and a formal structure, the business is performing strongly.

    The company says it has grown its share of the architecture and exterior paint market from 2.5% to 7.5% in six and a half years, and it's revenue is growing at 15% per annum. Haymes Paint has 350 distributors nationally, 11 company owned stores and one store owned by a partnership. Tim said:
    Over the last 10 years we've innovated, filled gaps in our product, service and colour offerings. Traditionally we were in retail trade, but now we've tapped into commercial work, maintenance work for government buildings and schools, protective coatings and everything in between.
    News
    HI Weekly Vol. 1 No. 11
    Download the latest HI Weekly, issue number 11
    HI Weekly No. 11
    Mezzanine level outdoor furniture at Mitre 10 Paddington
    Worklights from left to right: DeWalt, Bosch, Milwaukee
    Click to visit the HBT website for more information
    Each week, the HNN weekly e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out.

    Just use the following link to download the PDF:
    http://hnn.bz/HIWeekly-1-11.pdf

    In this week's edition, we visit prototype stores from Australia's top three hardware/home improvement retailers: Bunnings Alexandria, Masters Rouse Hill and Mitre 10 in Paddington. All these stores are located in New South Wales. We also review worklights from Bosch, DeWalt and Milwaukee, and ITW's third quarter results are examined.

    Other news stories this week include CEO changes at buying group Natbuild and USG Boral's focus on the Asia Pacific region.

    Also in this edition: a selection of the latest home improvement jobs from around Australia and B&Q showcases its IT system in Ireland.

    Plus all our regular features: big box updates; HNN Home Improvement Index; new products; and hot links.
    http://hnn.bz/HIWeekly-1-11.pdf
    Editorial
    Three leading edge home improvement stores
    View from the upper floor of Bunnings Alexandria
    Editorial PDF
    Hafele's excellent display of pantry fittings
    Mitre 10 Paddington mezzanine level outdoor furniture
    Give to Amnesty International
    Each of the top three home improvement retailers has "called out" one of their New South Wales (NSW) stores as being on the leading edge of store development. HNN decided to take a mini-road trip and visit each of these.

    The managing director of Bunnings, John Gillam, nominated its Alexandria store at the last Wesfarmers' Strategy Briefing Day in mid-May 2015 as a good indicator of the company's impact in trade sales. The managing director of Masters Home Improvement, Matt Tyson, has pointed to the store at Rouse Hill as a launch pad for many of the retailer's "Masters 2.0" ideas. The CEO of Mitre 10, Mark Laidlaw, has suggested the Sunlite Mitre 10 store in Paddington represents the best of what the company's Sapphire concept has to offer.

    Each of these stores is, to some extent, experimental. The Bunnings store in Alexandria is partly about the trade business, but also the value and impact of very large store sizes. The Masters at Rouse Hill today is about how the retailer can continue to explore and develop its new store formats. Paddington's Sunlite Mitre 10 is about bringing the Sapphire concept to smaller stores, and evaluating their impact in inner urban communities.
    Bunnings Alexandria

    At the investor day in mid-May 2015 an investment analyst asked Mr Gillam whether Bunnings needed to focus more on trade sales. Mr Gillam replied by suggesting the analyst should show up at the Alexandria store at 6:30am to see the tradie trucks lining up to get in. His point being, what Bunnings is doing currently to encourage tradie business is working.

    The HNN team did try to get to the Alexandria store by 6:30am, but we only made it by 7:30. Even that late (for tradies) we can verify that there was considerable tradie traffic, which continued (at a slower rate) up until when HNN left at 9:00am.
    Trade area 8:45 am

    The Alexandria store is thought to be the largest hardware/home improvement store in Australia, at 20,000 square metres of floorspace. (To give some perspective on this, the IKEA store located at Tempe in Sydney NSW is close to 40,000 square metres, and is the largest IKEA store in the southern hemisphere. Most Masters stores are around 14,000 square metres in floor size.)
    View from the upper floor

    The slightly startling conclusion HNN came to during our store visit was that there is something about this size of store that seems quite "natural" to Bunnings. That may be in part due to the store being built over two floors (more cost effective in this inner urban suburb). At the single-floor Epping store we kept noticing how big the store was, and we also enjoyed some of the spectacular use of the space. At Alexandria the use of space is more utilitarian, which makes the size less noticeable.

    HNN didn't realise how much an impact the Alexandria store had on us until later in the day when we stopped by the Bunnings at Marsden Park in NSW. This is another good Bunnings store, with some creative use of displays and good team members on the floor. However after our experience of the Alexandria store it seemed at first (unfairly) quite average.

    The meaning behind what Mr Gillam said at the strategy briefing also became more clear to HNN. With the expanded size, Bunnings can stock that one size extra, above the standard consumer lines, moving it more into the trade area. For example, in lawnmowers Bunnings Alexandria has the Toro Timemaster. This is a self-propelled, 70kg lawnmower, featuring a 76cm wide cutting path, made possible through the use of two rotating blade sets. While Toro does seem to market this to consumers with big lawns, it is really also an ideal tradie tool for simple landscapers - and one they might not have previously considered.
    Toro Timemaster mower

    Another area of this kind of category expansion is with ladders, with the Alexandria store offering a wide selection of industrial-grade ladders. There are likely a lot more finely detailed expansions and additions as well.

    That said, HNN could also see some examples where Bunnings applied solutions more common in "normal" 14,000 square meter stores that might not be the best answer in these expanded stores. For example, in the display of items such as laminated wood flooring, the Alexandria uses the same "high-set" display that is common to most Bunnings stores. The only stores that currently do not use this are the evolving compact urban stores, such as the one in Collingwood, Victoria, right on the north-eastern outskirts of the central city area. This instead uses a much more accessible low-set flooring display.

    It is likely the high-set display is used as it facilitates keeping adequate stock on the floor, with ample room under each item displayed. In the mid-format urban stores, less stock may be needed due to lower volumes, and restocking in a smaller format is easier to manage, so a low-set display can work. It might be possible to add depth to the low-set display, solving the stocking problem, and making better use of the space in the store.

    The only other area we noted was that the use of the view from the upper floor to the lower floor was not made use of for promotional purposes. It's not unusual to see department stores with similar above-floor views use simple merchandising displays such as extra-large price banners.

    These are, however, just quibbles.
    Bunnings' future?

    Given the success of the Alexandria store, is it possible that what we are seeing here is the first step on the way to the second wave of Bunnings' expansion? Over the past six years Bunnings has built itself out geographically. What we could see beginning in another couple of years is the expansion of regionally strategic stores to this new, very large format. These large stores could become the anchor stores in the Bunnings network, offering an expanded range of products.
    Decking and tools displayed at Bunnings

    *Masters Rouse Hill

    The story of the Masters store at Rouse Hill is one that has been told before. This is the store that Mr Tyson used to test out the "Masters 2.0" concept . Stores built to this new format have a claimed 30% improvement in sales revenues over "Masters 1.0" stores. There are also encouraging signs, the company says, that Masters 1.0 refitted to 2.0 deliver much improved performance as well.

    Rouse Hill was used for this development for a number of reasons. One of the main reasons seems to be that it is relatively convenient to get to by car from the Woolworths headquarters at Bella Vista. That way Mr Tyson could be more personally involved in what went on there.

    Perhaps more importantly, Rouse Hill is itself something of a unique real estate and social development. Put together by Lend Lease and the GPT Group in the early 2000s, the development sought to provide a form of planned but commercially-driven development. Michael Duffy, writing in Fairfax Media, described it like this in early 2008, as the first stage of the project was opened for sale:
    The new Rouse Hill Town Centre opened last week. It's not really a city but it is enormous, particularly striking because it is still surrounded by fields, like something just created in the computer game SimCity. Unusually in the history of Sydney's expansion, the town centre has been created before the town. It's a real centre, containing not just shops, cafes and cinemas, but streets and a town square surrounded by apartments, offices and civic facilities. It's owned and managed by a private company, the GPT Group, but there has been considerable input from state and local government.

    Its basic goals included:
  • Creation of a genuine 'main street' town centre rather than an enclosed shopping centre
  • Integration of residential and civic uses into town centre
  • Set a new benchmark for residential and mixed use developments

  • There was also considerable input by Landcom in association with government bodies to lessen its environmental impact and improve its sustainability credentials. This included:
  • Target of 20% reduction in ecological footprint (25% reduction is likely)
  • 63% reduction in water usage
  • 40% reduction in energy usage
  • 130,000 tonnes of recycled materials used in construction
  • Best practice water sensitive urban design, including 150,000 litre rainwater tank
  • 130,000 plants in the town centre, of which 80% are indigenous to the local area

  • Part of what inspired this kind of development was the range of problems experienced in the development of land just to the south of Rouse Hill, at Kelleyville. In that area ad hoc development led to problems with basic resources such as roads and schools. The commercially-driven Rouse Hill sought to overcome those problems by comprehensive development planning through a privately-owned company that was responsive to governmental oversight.

    It has attracted a fairly homogenous social group in terms of age and income. A statistical breakdown based on census data from 2011 shows the following:
    Country of origin

    69.4% of people living in the suburb of Rouse Hill were born in Australia. The other top responses for country of birth were 3.8% Philippines, 3.3% England, 2.0% New Zealand, 1.9% South Africa, 1.5% India, 0.9% China , 0.7% Egypt.
    Marriage

    63.0% of people are married, 25.7% have never married and 6.4% are divorced and 2.9% are separated.
    Employment

    65.3% of the people living in Rouse Hill over the age of 15 and who identify as being in the labour force are employed full time, 25.5% are working on a part time basis. Rouse Hill has an unemployment rate of 4.2%.

    The main occupations of people living in Rouse Hill are 22.7% Professionals, 17.7% Clerical & administrative workers, 16.5% Managers, 14.3% Technicians & trades workers, 9.7% Sales workers, 7.4% Community & personal service workers, 5.2% Labourers, 5.0% Machinery operators & drivers, 1.4% Occupation inadequately described/Not stated.

    The main industries people from Rouse Hill work in are 11.9% Retail trade, 9.9% Construction, 9.4% Manufacturing, 9.3% Health care and social assistance, 7.9% Professional, scientific and technical services, 7.2% Education and training, 7.1% Wholesale trade, 6.1% Public administration and safety, 5.2% Financial and insurance services.
    Income

    Australian Taxation Office records from 2013 indicate there were 23,005 people of employable age earned an annual average salary of $65,428 for a total group income of $1,505,168,405 a year. The actual average salary of people who were earning a wage is estimated to have been $75,074.

    What Rouse Hill provided Masters with was a concentration of the demographic that would be the target market for its Masters 2.0 format. It was, and is, an ideal place to trial its new store concepts.
    What is Masters 2.0?

    The first Masters format had something of an industrial feel to it, and suffered a number of deficiencies in its product ranging. With the arrival of Mr Tyson in early 2014, that began to evolve to better match both the market that was available, and to find ways to work around the dominate position of Bunnings, rather than trying to tackle it head-on.

    What evolved - and is still evolving - is an approach that seeks to provide an effective resources for "real" hardware supplies, but to include more "home improvement" products, such large white good appliances, as well as home decor items like cushions and wall art.

    Key to this new - and still developing - strategy is a high-end brand approach to market segmentation. As Bunnings has a dominant position in low- to mid-range brands, as well as high-regard "tradie" brands, Masters is actively positioning itself at other points in the spectrum.

    In power tools, for example, Bunnings has Makita, the DeWalt 18-volt line, and - the perfect Bunnings brand - the very wide-spectrum of Ryobi products. The counter that Masters has developed relatively recently to this is the Triton range of utilitarian power-tools, supplemented with the Stanley FatMax tools for prosumers. This is topped off with both Panasonic and Hilti tools. In-between the very high end and the prosumer tools, Masters has a range of brands, including some Bosch Blue and Hitachi.

    Similar patterns can be seen throughout the Masters 2.0 ranging. Bunnings has the excellent Kaboodle kitchen products. Masters has its Principal kitchens, supplemented with a wide range of fittings from Hafaele, and so on.
    The Rouse Hill store

    The main question we wanted to answer by visiting the Rouse Hill store was: "What's new?" We found three potential areas where Masters seems to be refining its offer.

    The first is in power-tools, where we seem to be seeing an increasing emphasis on the Triton range of tools. These seem to have largely supplanted the 909 range of tools, though specific 909 tools - such as mitre saws - are still available. While there have been some Stanley FatMax tools in the past, these have also had their presence increased.
    Triton display at Masters

    HNN also thinks that Masters is evolving its small appliances strategy as well. We've seen over the past six months racks of small microwave ovens from a range of suppliers appear in Masters stores. As far as we could tell this was not the case for the Rouse Hill store. Instead it offered for sale large quantities of a single microwave oven from Sharp at a very attractive price-point. This could be the beginning of a comprehensive strategy for a range of small appliances.
    Stack of microwaves

    This small appliance strategy also seems to be part of a super discount strategy by Masters. Where in the past the retailer has provided mid-aisle drop-pallets of competitively priced goods (a major strategy by Bunnings), it seems to be moving away from that to providing large islands of attractively priced products in key locations in the store.
    Discount display at Masters

    The most intriguing development HNN saw, present in both the Rouse Hill store and the Masters store at Marsden Park, was an addition to the paint department. Along with the standard paint counter, Masters seems to be developing a specialised project planning space. At the moment this consists of a single, stand-up table, with a second small table and chairs for children.

    This could be the first signs of Masters considering the development of some kind of in-store project centre, where customers could take time and get inspiration for the design of their homes. That would certainly be a highly interesting development.
    Hafele's excellent display of pantry fittings
    Sunlite Mitre 10 Paddington

    After HNN's review of the Mitre 10's Sapphire concept store in Ballarat, some people on Mitre 10's management team suggested we should take a look at the other significant Sapphire store in the network, the Sunlite Mitre 10 store on Oxford Street in Sydney's Paddington area.
    Sunlite Mitre 10 Paddington

    Unfortunately, after visiting this store, we find ourselves having to pretty much repeat what we have already said about the Ballarat Sapphire store.

    It is perhaps best to first of all go over what exactly the Sapphire store concept is. The idea would seem to parallel what Metcash is doing with its IGA brand by introducing what it has called its "Diamond" store program. This program takes the better-managed and well-located IGA stores and helps to transform them into retail outlets capable of competing with the Coles and Woolworths supermarkets.

    It is a clever strategy, because by improving these individual stores, Metcash helps to improve the overall brand image of IGA. Also, this program gives Metcash a little leverage of the independently-owned IGA stores. Those who are willing to adhere closely to Metcash's guidance on how their stores are run are rewarded with membership in the Diamond program.

    Sapphire has some of the same ambitions with the Mitre 10 hardware stores. The basic design concepts greatly improve the amenity of the stores, making them more accessible, and enhancing their overall presence. Where it does seem to miss a bit, however, is that it is almost totally concerned with store amenity to the exclusion of all else.

    Mitre 10 does also have what seems to be a separate program of promoting a "store-within-store" concept. Companies such as STIHL chainsaws and Beaumont Tiles open the equivalent of mini-franchises inside larger Mitre 10 stores. The connection between this development and Sapphire does not seem evident, as neither of the two Sapphire stores HNN has visited seemed to have had anything that was store-within-store.

    The point is that in developing a new wave of stores, improving amenity alone is not likely to be enough. With its Diamond store program, not only is the store amenity improved, but also the store supply chain (with a particular emphasis on fresh products). Sapphire is really just a slightly improved way of selling the same product lines that all Mitre 10 stores sell. As such, it is difficult to see how this development qualifies for the description Mitre 10 gives it as the "store of the future".

    That said, the Sunlite Mitre 10 store in Paddington is a really lovely little store. It has some clever features, such as a mezzanine level between the main levels, which provides some very good merchandising options. It is a super-clean store, and the staff there, even in HNN's brief contact, were great. The store was busy and active, with people dropping in constantly the whole time we were there.
    Mitre 10 mezzanine level outdoor furniture

    There is little doubt that if a Mitre 10 store like this was in the neighbourhood of any HNN staff member, it would rapidly become a favourite place to drop by for a range of purchases. It is a great little store. It's lovely. We are sure it will be very successful. But it seems unlikely that this is a prototype of the store of the future.
    The possible future

    What would a store of the future look like? HNN thinks that if anyone is really developing a good urban format store, it is probably Bunnings. We've been increasingly impressed by Bunnings at Collingwood in Victoria. This purpose-built store has a range of intriguing design features. Overall it is amazing both how the store manages to fit so much product in, and also how carefully tailored that product is.

    We can see this store's story in just one single feature that, had Mitre 10 incorporated this into its Sapphire design would have been a great advancement.

    Recently Bunnings Collingwood has added to its power-tool displays specially formatted "Special Orders" brochures. As the photographs illustrate, these enable customers to easily browse through additional tool ranges not present in the store, and order these in, through the Special Orders desk that is present in every Bunnings store.
    At Bunnings in Collingwood, Victoria, special orders brochures displayed with tools

    From the store amenity viewpoint, this is a simple addition. The brochures are well-designed, simple to use and very accessible.

    That is, however, a very small part of the story. What rests behind those simple brochures is an entire complex supply-chain network. This identifies the tools that should be featured, provides the images and brochure copy, designs the brochure display mechanism, prints and distributes the brochures, accepts orders from the brochure through the special orders desk, prices the product appropriately, sources the product, and distributes the product to the stores or directly to the customer.

    Simple frontend brochure, substantial backend infrastructure. What gets delivered, in the end, is what is sometimes referred to in digital retailing as the "endless aisle". The size of the store matters less, as it has become partly also a gateway into a much larger range of products.

    To relate this directly to the Sunlite Mitre 10 Sapphire store at Paddington, NSW: in the limited space of the store it does a good job of displaying a narrow range of power-tools. These are mostly the Positec brand Rockwell, as well as some Bosch green products. Those products match well with the usually less-intensive DIY of an inner-urban area.

    Using something like the Special Orders system of Bunnings, the store offer the entire range of Makita products Mitre 10 sells. While HNN was in the store, at 10:am on a Monday morning, there were definitely quite a few tradies visiting, around 10 or 12. Using that kind of backend system, it would be a simple matter for the friendly and helpful staff at the store to develop a solid secondary market.

    And that might really be something towards the store of the future.

    Until next time,

    Betty

    PS. We would also like to give a shout out to a friend from the industry (our own "Deep Throat") who made it possible for a number of stories to be included in this issue. Thanks again.

    You can contact me directly via email betty@hnn.bz or Twitter @HNN_Australia

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    Products
    Three lights, three design approaches
    From left to right: DeWalt, Bosch, Milwaukee
    HNN Sources
    The Bosch light
    The DeWalt light
    Click to visit the HBT website for more information
    Most people buy cordless systems rather than cordless tools. That means that products which were once regarded as being more of secondary importance have now become vital for manufacturers to get right. While the competition for the best drill, impact driver and circular saw remains intense, a second front is opening up in these once neglected accessories.

    One of the more important of the accessories is the worklight. Having a really good worklight might be just enough to tip a customer over into buying one brand over another.

    The three worklights that HNN wanted to look at this week are complementary to the impact drivers we are also testing. (Apologies for not having the test results ready yet. We keep completing tests, looking at the results, and seeing either flaws or ways to make the tests better.)

    Like those impact drivers, each of these worklights has its own character and unique set of capabilities. While most of these brands offer alternative worklights, these are the "mainstream", non speciality items that would be suited for most customers.
    Bosch: basic but surprising

    To begin with the simplest of the group: the Bosch GLI VariLED Professional. This light has a familiar design, as it represents a style quite common with NiCad worklights in the past.

    The VariLED attaches directly to either a 18-volt or 14.4-volt Bosch Li-ion battery. It adds about 30mm to the overall height of the battery when folded shut. A red plastic button at the top of the unit turns it off and on. The light also features a plastic lens that can be rotated, producing either a more focused light beam or a less focused, more wide-angle beam. It features a soft plastic band that folds out from the unit, and can be used to hang-up the light.
    The Bosch light

    The top of the light sits flat against the battery, but can be rotated up in 15 degree increments, to a slightly down-facing 120 degrees.

    Though it is not evident at first, this is very much a special purpose light. What it is good for is providing sturdy illumination of a specific work surface. In particular, it would be good for users who need to light something from underneath, in a confined space. Think plumbers, some electricians and even auto mechanics.

    The LED light itself is rated at 300 lux, and while not startlingly bright, provides enough work to get things done with. The rotating lens again just seems a bit of a gimmick more than a carefully thought-through solution.
    Dial adjusts focus

    Outside of this kind of static illumination, it's difficult to see how using this light would work very well. It could be used for, finding the way down a path at night, but holding the battery (which is how you would do it) is a bit awkward.

    The soft rubber hanging loop could make it more useful, but it seems something of an afterthought. For example, to use the loop, you have to slide the light off the battery, fold it out, then slide the light back onto the battery.

    So, to conclude, this is more of a specialists item than it appears at first.
    DeWalt LED Work Light DCL040-XE

    This is definitely one of the more "high-end" handheld worklights on the market. It features an ergonomic pistol-style grip faced with a durable soft rubber finish. Gripping the light naturally brings the forefinger to sit on the light switch. The head of the light tilts from a slightly downwards angle of 80 degrees from the vertical to an upwards facing 190 degrees. The tilt is on a ratchet, with 10 clicks, so around 11 degrees per click. The 18-volt battery attaches to the base of the light on a horizontal slide, and provides a solid, weighty base for the light to rest on.
    DeWalt light

    The light produces 110 lumens, and this is in two zones. There is an outer ring of softer, diffused light, and an inner core of brighter light. The worklight also has a small metal hoop attached to its head, which locks down on a cam, and swivels up to provide a means of hooking it on something. There is also an attachment point for a lanyard on the back of the light near its base.

    Judging by some of the online reviews, this is a light that has found some favour with people on casual security duty, or who have to do regular work in the dark. It is definitely the ideal kind of light to hold while the user illuminates an area where others are working, as it is comfortable to hold for long periods, and the trigger switch provides very good on/off control.

    The switch is, however, a little of an ergonomic oddity. The pistol-style grip means the forefinger constantly rests against the switch, which is not something generally required.

    As mentioned above, the battery gives it a weighty base, so that it can be stood off to one side on its own to illuminate an area. The worklight also can operate quite well resting on its back to shine directly upwards in a tight space.

    It is a very versatile light, but it does still have some limitations. The pistol-style grip that makes it comfortable to use also means it has to be held in just one way, and there could be situations when working solo where it would be awkward to get it pointed in the right direction.
    Milwaukee M12 LED-0 (49-24-0146)

    Where both the Bosch and the DeWalt might be thought of as lights with some of a specialty in a couple of areas, the M12 LED is very much a general purpose light. In fact, with its slim 12-volt battery, it reminds one of a conventional flashlight, especially when the light head is in the directly upwards position.
    Milwaukee light

    As with the DeWalt, it has a tilting head, with a slightly more limited range of between 90 degrees and 180 degrees, incrementally by eight clicks. The off/on switch is a standard plastic-covered unit.

    The light is not as bright as the DeWalt worklight, but it is about as bright as the Bosch. It features a quite strong magnet of the back, making it easy to hang from any handy metal surface. It can be stood on its base, but as this is a triangular area about 40mm to a side, it is not very sturdy in this position.

    Where the light does excel is in the kind of solo work a user does with the light in one hand and a power-tool or screwdriver in the other. For example, the simple tube shape makes it easy to hold the light upside down, and thus, for example, lean over something and shine the light back towards the user.

    It is really part of what Milwaukee does best, which is to rethink conventional designs and make them work better, without sacrificing their basic utility.
    Conclusions

    As with all these comparisons, there is no such thing as a clear "winner". It is interesting just how much of each manufacturer's overall approach to the market shows through the way in which they design even these relatively simple accessories.

    In that light, HNN must confess that we are still struggling to fully understand how Bosch goes about its design processes. It is difficult not to believe it is perhaps designing for a slightly older generation than the other two manufacturers.

    The DeWalt is truly an interesting and well thought-out design. It does feel slightly futuristic, and it would seem that at times it would be the perfect solution to a lighting problem and at others just a little less than optimal.

    The Milwaukee light is quite traditional, but surprisingly versatile. What comes through in this design, as in many other Milwaukee designs, is that while the company caters to the "traditional" at times, it also never condescends. It assumes its users will be intelligent, interested in good design, and be able to discern the advantages of the simple.
    News
    HI Weekly Vol. 1 No. 10
    Download the latest HI Weekly, issue number 10
    HI Weekly No. 10
    Triton products in boxes at a Masters store
    First Use: DeWalt Bluetooth 18-volt battery
    Click to visit the HBT website for more information
    Each week, the HNN weekly e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out.

    Just use the following link to download the PDF:
    http://hnn.bz/HIWeekly-1-10.pdf

    In this week's edition, we look at the latest Woolworths results and its home improvement division. A number of questions are included from the presentation to analysts. The DeWalt Bluetooth battery is also tested.

    CSR's first half results are included along with Reece and the most recent hardware retail statistics.

    Other news stories include Mitre 10 New Zealand's annual results and Lowe's top 2015 vendors are named.

    Also in this edition: the online home services market in the US continues to expand with Sears.

    Plus all our regular features: big box updates; HNN Home Improvement Index; new products; and hot links.
    http://hnn.bz/HIWeekly-1-10.pdf
    Products
    First Use: DeWalt Bluetooth 18-volt battery
    The DeWalt Bluetooth battery flashes its LED
    HNN Sources
    Completed charging notification
    The lending screen
    Click to visit the HBT website for more information
    Wow.

    The one thing that using DeWalt's newly released Bluetooth equipped battery, the DCB183B, convinced HNN about was that we needed to improve the way we review these new technologies. We're simply going to have to divide our reviews into two, starting with a "first impressions" review, and following up a month or so later with a more reflective review.

    The reason behind that decision is that it is simply almost impossible not to be very enthusiastic about new technologies such as this DeWalt battery when you first start using them. It seems clear to us at the moment that DeWalt has really developed a technology here that will eventually take over a significant part of the market.

    It's not so much what DeWalt has already done with this technology - which is considerable - but how this technology could develop in the future. Just about everyone who uses the DeWalt battery comes up immediately with an additional feature they would like.

    HNN hopes that Stanley Black & Decker is giving some serious thought to opening up the programming end of this device, enabling third-parties to develop more software tools that make use of it.
    The basics

    To start with, the most important thing to emphasise is that DeWalt has made using this battery just as simple as possible. Once you have the battery, you start by downloading the DeWalt app to your smartphone or tablet (Android of Apple iOS) - it's free, of course.

    The next step is to "pair" the battery with the app. If you've used Bluetooth before for something like cordless headphones, a Bluetooth speaker or a mouse, then this is exactly the same. You begin by tapping the "+Tool" button on the home screen. You can give the battery its own name, and optionally choose to register it with DeWalt at the same time.
    Adding a tool.

    When you complete those details, the app will begin scanning for the battery. To pair it up, simply press the button that illuminates the charge indicator on the back of the battery. In our case it took less than 10 seconds for the app to pair up the battery.

    Your first stop after doing that will likely be the Diagnostics tab. This tab shows you five basic parameters: the date and time the battery was "last seen" - when it was in range; "fuel gauge" - the amount of charge on the battery; the battery's status (enabled or disabled); the battery's health; and the current temperature of the battery.

    This seems a simple display, but it is actually quite sophisticated. For example, the fuel gauge will let you know when the battery is being charged, as well.
    Diagnostics tab

    Below the information display are three buttons: Enable, Disable and Identify. If you tap the Identify button, a blue LED set into the side of the battery will begin to flash, and continue for about six seconds. That way you can tell exactly what battery you are dealing with.
    The DeWalt Bluetooth battery flashes its LED

    In fact, whenever you send any kind of command to the battery, the LED will flash to confirm you are making the change. Most of these commands actually reprogram the battery to work in a specific way. That means the battery is not checking back with your mobile device to see what it should be doing. Instead, it carries instructions for its own behaviour. The app simply helps you to change what those instructions are.
    Disabling

    Dewalt has obviously thought pretty thoroughly about how the battery/tool combination should behave. For example, one of the options you have from the diagnostics screen is to simply disable the battery immediately. You might do this if, for example, the battery seemed to be operating at too high a temperature, and you were concerned it might be damaged.

    However, even after the battery has been disabled, it remains usable for some applications. Pressing the trigger on a drill with a disabled batter still makes the drill LED lights go on. In fact, if you have a worklight attached to the battery when it is disabled, the light will continue to work.

    HNN believes this is likely to be a well thought out safety measure. Whatever the reason you may have for disabling the battery, you certainly don't want to leave someone up a ladder in a dark room without a light, for example.
    Actions

    Many of the interesting things that can be done with the battery an be found on the "Actions" tab. There are five basic actions, and four of these are information alerts.

    The options to "Alert if out of range" triggers a notification on your mobile device when it can no longer "see" the battery. In testing this using an Apple iPad mini outdoors, it seemed the range was reliable up to around 50 metres.

    "Alert at low battery charge" sends a message when the charge is getting low enough that it will affect performance in the near future. "Alert at high temperature" lets you know if the battery may soon exceed its operating temperature range. "Alert at charge completion" tells you when the battery is up above 80% charge again, and ready to be used.
    Completed charging notification

    In addition to those four alerts, the fifth option is "Disable if out of range". This enables the owner to set up the battery so that if it is taken far enough away that the mobile device can no longer communicate with it over Bluetooth, it is automatically disabled. It's a simple theft protection measure.
    Lending the battery

    One of the more interesting features is the ability the app has to set the battery up to be loaned out for a specific period of time. There is a "Lend" button on the actions page. Tapping that button brings up a screen that enables the owner to set a loan period ranging from one hour to months, if necessary.
    The lending screen

    At the end of the loan period, the battery will be automatically disabled, and, optionally, the battery's owner will be sent a reminder message, including the name of the person who borrowed the battery. With the DeWalt Bluetooth battery you can not only be much more certain you will get the battery back, but also that it will be the right battery.
    Alerts

    The alerts tab in the app keeps track of all the alerts the owner receives, from all the Bluetooth batteries owned. The type of alert, and the date/time it was issued are all displayed. Tapping on an alert brings up a screen that enables the owner to delete that particular alert. A button at the bottom of the tab enables the owner to clear all the alerts with a single tap.
    The future of batteries, and ...?

    As we remarked, just about everyone who gets to use the app and the battery comes up with further ideas for it. For example, alert forwarding, where the mobile device of the person actually using the device could also receive an alert after the owner's device received it.

    Many people have suggested the extra hardware features they would like to see on the battery. The one that comes up the most is for a GPS chip, so that the battery could communicate its location back to the owner. Some would like it to have a small sound chip, so that it could buzz, helping to locate the battery if it has been accidentally left behind, for example.

    Perhaps the most exciting idea, however, is that it seems evident DeWalt plans to expand this Bluetooth system to devices other than batteries, and likely to the tools themselves. This could mean that DeWalt is planning a line of tools similar to the Force-Logic tools from the Techtronic Industries-owned Milwaukee Tool, which report on their exact usage patterns. This might extend to something like the control system that Milwaukee has planned, which enables power tool owners to set up programmed parameters on tools, ensuring they are used correctly.
    Making the use case

    Who might effectively use this type of battery? At the moment the most likely market are professionals/tradies with a battery fleet of over 12 or so units. Some sub-contractors, for example, supply most of the tools their crews use, and that can easily run up to 20 batteries for even a small crew of five or six (presuming they need to use more than one tool at a time).

    Aside from helping to limit loss and even theft, these batteries could reduce the total number of batteries required by 10% to 20%. Being able to remotely monitor the battery charge state means more effective charging patterns, and so less redundancy required. That translates directly to more money in the cash flow, which for anyone at anytime in the building industry is always a good thing.
    Conclusion

    The one thing HNN would really like to emphasise is that, even if you don't like "fiddly" things, you might still like these batteries. DeWalt has done a great job in making the setup and systems controls as easy to use as possible. There isn't anything difficult to do, and the result is a battery system that makes a lot more sense, and makes using cordless tools even easier.


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