Companies
DuluxGroup flags possible expansion at AGM
Parchem has around 22 trade stores in Australia
DuluxGroup - AGM
Products/Channels from full year presentation
DuluxGroup share chart from 2010 to 2014
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The CEO of Australia's DuluxGroup (Dulux), Patrick Houlihan, delivered some good news about the company to shareholders at the annual general meeting (AGM) on 18 December 2014. During an introduction by the company's chairman, Peter Kirby, it was pointed out that Dulux's sharemarket performance had been good since it was spun-off by Orica in 2010.
DuluxGroup share chart from 2010 to 2014

The past financial year affirmed the market results. Mr Houlihan told the shareholders at the meeting that on the basis of excluding non-recurring items:
...DuluxGroup grew net profit after tax by 21.4% to $111.9 million. Earnings before interest and tax, or EBIT, increased 19.4% on sales that grew 8.5% to just over $1.6 billion. Operating cash flow also increased by 7%.

While he pointed out that some of this growth was due to the acquisition of the Alesco building supplies business in late 2012, even with that set aside:
DuluxGroup pro forma sales grew 3.6% and pro forma EBIT grew 12%.

Mr Houlihan put much of the credit for the good results down to the company's strategic focus and its culture:
Our strong financial performance across the company in 2014 reflects the benefit of an ongoing focus on consumers and customers, which is centred around our brands, innovation and customer service.
Divisional performance

Mr Houlihan highlighted EBIT growth in the following areas:
  • Dulux Paints and Coatings, 12.1%
  • Consumer and Construction Products, 3.1%
  • B&D Garage Doors and A T A Openers, 4.6%
  • Lincoln Sentry Cabinet and Architectural Hardware, 25.4%
  • Other Businesses Segment, which includes Yates, China, Papua New Guinea and South East Asia, 34.1%
  • Strategic considerations

    Most of the comments made by Mr Kirby and Mr Houlihan were concerned with the paths to growth Dulux plans to take.

    In his remarks Mr Kirby used the Alesco acquisition as an example of the direction the company intends to follow.

    He also pointed to the creation of the Consumer and Construction Products division, formed by combining Dulux's existing Selleys business with the Parchem business that was part of Alesco as a key move, signalling Dulux's new focus on the construction chemicals market.

    Mr Kirby described Dulux's activities in the Asian market as being "a longer term play", but expressed optimism about the opportunities offered by a steadily growing middle-class in mainland China and elsewhere.

    Mr Houlihan added to Dulux's presentation of its strategy by mentioning ongoing improvements in the operating margins of its Yates garden products division. He also said:
    And, finally, we believe in the power of combining our front-end business unit focus with leveraged Group capability, and we continue to fine tune this model.

    This is likely a reference to two aspects of the Dulux business, its emphasis on research and production that then expresses itself in the market via a range of brands, but also perhaps its direct-to-consumer, trade-based retail outlets.

    It is worth noting in this context that the Parchem division of Alesco, acquired by Dulux in 2012, has around 22 stores which sell directly to tradespeople. In addition to Parchem products, these stores stock a wide range of construction-oriented lines, including construction equipment (especially to the hire industry) and decorative concrete.
    Forward guidance

    Mr Houlihan emphasised again that Dulux relied on new housing construction for only 20% of its revenues, with the renovation and maintenance sector of the market far more important. He said Dulux was optimistic as regards this latter sector:
    Over time this large and profitable segment has proven to be quite resilient, and this is expected to continue, underpinned by high levels of home ownership, low interest rates and high house prices.

    He also intimated that Dulux would seek to expand into further product channels directed at home improvement. He emphasised that Dulux established its goals, then sought acquisitions that would help it reach those goals, rather than acquiring companies that presented themselves as opportunities.
    Editorial
    A word of thanks to everyone
    HNN believes 2015 is going to be a very interesting year for hardware retailers
    Stories about big box retailers always rated highly on HNN's site in 2014
    2016 will be the year of the independent buying group
    Give to Amnesty International
    To take care of some basic business first, we have released a special "Holiday Edition" of HNN eNews. We thought we could get one last newsletter to subscribers before the holidays if we sent it out a little early this week.

    We will be pausing the regular eNews delivery for the next two weeks. The next full edition of eNews will be delivered on 5 January 2015. It will be a bumper issue.
    Readers

    We would really like to thank all of our subscribers to the newsletter. When you subscribe to the newsletter you directly indicate your support for what we are doing, and we are grateful for that weekly boost you give us.

    We are very happy to have so many people reading the website every day, and using our iPad app to access our content.

    We also appreciate the growing number of people accessing our stories through HNN's social media channels such as LinkedIn, Twitter and Google +.
    Sponsors

    We've been blessed with some of the best sponsors we could have hoped for. We would like to thank the companies that have financially supported us this year through advertising and other forms of support. Mecca Consulting was the first company to come on board, followed by Spot-On, ITW and Globel Industries. Recently HBT has joined us as well.

    Sincere thanks to Mark Gledhill; Mark and Cate Hunter; Jason Wheatley, Chris Gobel and Tim Starkey.

    There are numerous others who have endorsed HNN and encouraged us along the way. We are thankful of their support too.
    The year ahead

    We think 2015 is going to be a very interesting year. It will be the first year when we really begin to see how the Masters, Bunnings and Mitre 10 strategies are going to play out as they develop. As a consequence of that, we'll probably start to see some fundamental changes for independent retailers as well.

    HNN also believes that by the third calendar quarter of 2015 we will see more attention towards technology, including e-commerce and in-store interaction with customers. We hope to provide extended and useful coverage of these areas as they develop.

    HNN has a number of products waiting to be launched. We will soon be coming out with a new-look website, with improvements for those who read the site on desktop PCs.

    We're also making some changes to the way in which content is organised, so that the site can function better as a reference site for the home improvement industry, a place where you can quickly find and check details such as statistics, companies and people.

    We will shortly be launching iPhone and Android phone apps for the site, as well as improving our current iPad app.

    In addition, we will be producing a weekly podcast which will provide some colour and commentary of events that have happened over the week. Later in the year, we will add a short video newscast, as more information is becoming available in that format.

    HNN has worked hard this past year to improve our coverage of company news, statistics and strategic analysis. We hope in the coming year to continue to improve in those areas, but also to add more direct, in-the-field coverage of the industry, through more direct contact with more home improvement retailers, suppliers, as well as industry consultants and analysts.

    Thanks to you all once again for your support this past year. From all of us at the Hardware News Network (Betty, Ray and Scott), we wish you all a happy, joyful and relaxing holiday season.

    See you in the new year,

    Betty

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

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    HNN iPad App
    News
    Interesting links
    A day in the life of Bob Beaumont, founder of Beaumont Tiles is featured on SmartCompany
    HNN Sources
    ASSA ABLOY is set to acquire Chinese company Digi Electronic Lock
    Home Depot will buy the assets of HD Supply Hardware Solutions
    Click to visit the HBT website for more information
    A day in the life of Bob Beaumont, managing director at Beaumont Tiles; the Nine and Seven television networks have new DIY renovation shows for 2015; ASSA ABLOY acquires a Chinese lock company; Home Depot buys HD Supply Hardware Solutions; and PPG coatings samples for professional end-users. More stories below.

    For further information, simply click on the images provided.
    Local News
    Bob Beaumont tells his story

    Bob Beaumont describes how he built a $200 million family business based on selling tiles. He reveals that he learnt much of what he knows about entrepreneurship from his dad. Beaumont's father, RJ Beaumont, established Beaumont Tiles in 1960 at the age of 50, after chatting to one of the tradesmen who was tiling his house. Fast-forward to 2014, the company recently opened its 100th store and employs over 800 people.
    Bob Beaumont shares his thoughts on running a family-owned, retail business with SmartCompany
    Reno reality shows coming up

    The Herald Sun reports a TV show will start production in Melbourne called Renovation Rumble, featuring former stars of The Block and House Rules. The new format is expected to air on Channel 9 in between two series of The Block in 2015. The Block and House Rules contestants are expected to go up against each other in renovation challenges. Seven is also planning two series of House Rules.
    Both Channel Nine and Seven have new renovation reality shows in the works
    International News
    China locks part of ASSA ABLOY

    ASSA ABLOY has signed an agreement to acquire Digi Electronic Lock, a Chinese digital door lock manufacturer. Its products are made under the Keylock brand. Johan Molin, ASSA ABLOY president and CEO said in a statement: "Digi Electronic Lock is another strategic step in our expansion into new growth segments in China and other emerging markets." The transaction is subject to regulatory approval and expected to close during Q4 2014.
    ASSA ABLOY buys Chinese lock company
    Home Depot buys HD Supply

    Home Depot will acquire HD Supply Hardware Solutions from its former HD Supply unit for an undisclosed sum. HD Supply provides business hardware, fasteners, ropes and chains, mainly to Home Depot, which accounts for 98% of the company's sales. It is among the largest US wholesale distributors of heavy duty, infrastructure, maintenance, repair and specialty construction products.
    Home Depot has agreed to acquire HD Supply Hardware Solutions
    PPG's coatings samples

    PPG Industries has started providing 10-by-10-inch paper colour samples of 10 popular Duranar coatings on its US-based web portal, "requestppg.com". This is to assist designers and architects who prefer large colour samples to match more closely with actual metal panels. Additionally, the company is offering 3-by-3-inch sample metal plates in 90 other colours for designers and architects.
    PPG's latest samples cater to the needs of its professional end-users
    BuildDirect raises US$50 million

    Canadian startup BuildDirect has attracted US$50 million in fresh financing. The company raised the new money from current and existing investors including Mohr Davidow Ventures, and Canadian investment firms OMERS Ventures and BMO Capital Markets. BuildDirect will use the money to expand its technology for its website and applications connecting buyers with product manufacturers, designers, trade craftsmen and shippers.
    BuildDirect has gained an US$50 million in funding from investors
    US bolting specialist bought by Atlas Copco

    Industrial supplier Atlas Copco has agreed to acquire Titan Technologies International, a provider of powerful bolting tools primarily to the oil and gas industries. US-based Titan Technologies is privately owned and also sells hydraulic torque wrenches, pumps and accessories. The business will become part of the Chicago Pneumatic Tools division.
    Atlas Copco has agreed to acquire Titan Technologies
    Sony launches Qrio Smart Lock

    Sony has launched a campaign for its Qrio Smart Lock, a device it says is the smallest of its kind, allowing users to open their doors with their smartphones and share encrypted keys with friends via messaging apps like Line and Facebook. Launching the Qrio as a crowdfunding campaign is part of Sony's new initiative to bring back the pioneering spirit that defined the company in previous decades.
    Sony has launched a crowdfunding campaign for its Qrio Smart Lock
    Smart home at CES 2015

    Smart-home products were on broad display at various venues across Las Vegas at CES 2014. At the forthcoming CES (Consumer Electronics Show), the smart home will have its own dedicated exhibit space as part of a new convention area in the Sands Hotel dubbed Tech West. It is another indicator of the smart home category's proliferation this past year.
    CES 2015 will prominently feature smart home products
    Tool e-retailer offers financing

    UK-based e-commerce tool specialist Toolstop has partnered with V12 Retail Finance to offer its customers more options when making online purchases. It has offered finance to its customers for the past five years, but since teaming up with V12 it no longer requires a customer deposit and can offer six or 12 months' interest-free credit and buy-now-pay-later options.
    UK's Toolshop operates from a 60,000sqft warehouse
    Products
    Sikkens, Hammerite TV coverage
    The Sikkens Cetol BLX-Pro range is featured on The Home Team program
    HNN Sources
    Metal care paint range Hammerite will also feature in the TV show
    The Home Team is Network 10's latest renovation show
    Click to view details of the SpotOn golf ball competition
    Timber coating brand, Sikkens and metal care paint range, Hammerite have partnered with Network 10's new renovation show, The Home Team.

    Heavily integrated throughout the 10-week series, which airs weekdays from 3.30 to 4 pm until mid-January, The Home Team follows a builder, landscaper and interior designer completely renovating a 1950s Melbourne double-brick home.

    The transformation includes the construction and coating of a timber deck, as well as the rejuvenation of timber and metal furniture and accessories.

    Products featured throughout the series are Sikkens Cetol BLX-Pro, Sikkens Cetol BL Tannin & Oil Remover, Sikkens Cetol BL Deck & Wood Cleaner, and Hammerite Metal Paint. Brian Hamilton, managing director of Tenaru Timber and Finishes said:
    The Home Team presents Sikkens and Hammerite with great opportunities to demonstrate specific applications and projects to a consumer audience. This is the first time either brand has been represented on television in Australia. Both are highly regarded by paint professionals and it enables us to reach a broader audience.
    As the show is on air during peak renovation and DIY season, a 30-second commercial has also been developed and will air throughout the show over the Christmas and New Year season. We wanted to educate consumers about the new ways of preparing decks and outdoor timber using quick drying, water-based products that help them complete projects in one day.

    Encore episodes are shown on ONE HD each night, Network 10 the following morning and Saturday afternoons at 3 pm. Episodes are available on demand at www.tenplay.com.au and viewers can obtain more information on products used on The Home Team website.
    Statistics
    ABS housing statistics for October 2014
    ABS real estate statistics
    Australian Bureau of Statistics
    Macrobusiness.com.au: The history of Australian property values
    Macrobusiness.com.au: The history of Australian property values
    Click to visit the HBT website for more information
    Our graph for year-on-year ending October to 2014 indicates an uncertain and new situation in the housing market. For both building approvals and the number of dwelling construction commitments, the rate of increase has flattened, but the rate of increase for the value of dwelling commitments has risen.

    One conclusion that could be drawn from this is that the market overall is expecting some form of a mild correction in the latter half of 2015.
    Macrobusiness reports on house prices

    Meanwhile over on the economics blog, Macrobusiness, has taken a very thorough look at house prices in Australia by updating some of their statistics and charts. It is really worth a read:
    Macrobusiness: The history of Australian property values [redux]

    The two graphs presented in the report that should be of most interest to the home improvement industry are these:
    Australian total land prices to GDP ratio, 1910 to 2014

    As the commentary on Macrobusiness states:
    The housing boom is driven by escalating land prices, reaching a peak in 2010 at 298 per cent of GDP. The land market bubbles of 1974, 1989 and today are clearly demonstrated in the figure below.
    Australian total land prices to GDP ratio
    Australian residential land and dwelling prices to GDP ratios, 1984 to 2014

    As the commentary on Macrobusiness states:
    The cost of construction has remained steady for the last quarter century; the entire housing price boom has been in the land component.
    Australian residential land and dwelling prices to GDP ratios

    Effectively what these graphs mean is that while the current housing bubble (as defined by Macrobusiness) does provide some boost to home improvement, the circumstances of inflated land prices is sucking away much of the revenue that could be more usefully employed through construction activities.

    Dollars that could be going to tradespeople, suppliers and retailers are instead going to people who own land, government taxes and real estate agents. It is not only not the best outcome for the home improvement industry, it also does not really help the Australian economy.
    Careers
    Brain infection from chicken manure highlights need for care
    Rooster Booster is an organic fertiliser apparently available exclusively through Bunnings.
    AustLii
    Mt Isa in Queensland
    Choosing a respirator, some guidelines
    Visit the Mecca Website
    A recent court case has brought home once more how dangerous the home improvement retail environment can be, and how retailers must be constantly vigilant in detecting hazards.

    According to court documents published on Austlii, a Bunnings employee, Janelle Cowen, fell ill in March 2008 after spending over two hours tidying up some bags of "Rooster Booster" chicken manure fertiliser that had burst due to weathering.

    Ms Cowen was working at a Bunnings store in Mt Isa when the events occurred. She was responsible for the area in which the bags were stored, and set about tidying up the mess the bags had made. The fertiliser, normally moist, had dried in the hot sun of the 40 degrees Celsius day, and the fine manure began to irritate her nasal passage. According to the court documents:
    As she did the work she also, she said, began to sneeze and regularly went back into the shed to get tissues. Her nose began to run. She was coughing. When she went home after work her partner, Henry Clay, would not let her into the house until she took her shoes off, and brushed her clothes. She had a shower. Her nose continued to run and she was still coughing and sneezing after she went to bed.[3] She went to work the next morning around 7am, with a headache. At work, it grew steadily worse. She remembers serving a customer and, next, waking out of a coma in Townsville Hospital.
    She had been in that coma for some days. She had been admitted at Townsville after an urgent transfer from Mt Isa with pneumococcal meningitis, encephalitis and septicaemia.
    It seems that she had worked into the afternoon of 25 March, by which time she was so obviously unwell that she was instructed to go home. There, her partner also observed that she was unwell, and unsteady. She was taken to Mt Isa Base Hospital where her condition was diagnosed, and she was aerially transferred to intensive care at Townsville. Her convalescence was stormy, with serious complications requiring a long stay, and rehabilitation. She has some residual cognitive dysfunction.

    While Bunnings did admit to a partial failing in its duty of care, the company did feel that it was perhaps not entirely responsible for the illness Ms Cowen suffered. The illness was caused by streptococcus pneumoniae. It is quite common for people to carry this bacterium in their nasal passage. Lawyers for Bunnings suggested, with some scientific backing from experts, that a number of additional factors could have led to the bacterium making its way into Ms Cowen's bloodstream, where it caused her serious illness.

    However, the judge in the case, Hon. Alan Wilson, pointed out that scientific and legal causation are quite different.
    Earlier, Kiefel J had spoken of the way the courts undertake this exercise. The common law, her Honour said, requires proof by the person seeking compensation that the negligent act or omission caused the loss or injury constituting the damage; but all that is necessary for that purpose is for the plaintiff to show that, according to the course of common experience, the more probable inference arising from the evidence is that the defendant s negligence caused the injury or harm. More probable means, she said, no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood. But it does not, as Kiefel J emphasised, require certainty.
    Safety guidelines

    As you might expect, there does not seem to be much in the way of safety guidelines for handling fertiliser of this type. The Rooster Booster brand relies on the granulation of the fertiliser. In the case of Ms Cowen, the fertiliser had been exposed for some time to the sun, and had broken down to a find dust that was easily inhaled.

    On the website for the Canadian Centre for Occupational Health and Safety, under guidelines for avoiding Histoplasmosis infections, the site does suggest:
    Persons working in contaminated areas should use protective clothing such as gloves and coveralls. They should also use a respirator equipped with a high efficiency particulate air (HEPA) filter that is capable of filtering particles down to two microns in size. For major clean up operations of prolonged exposure, a powered air purifying or supplied air respirator may be necessary.
    CCOHS
    Bigbox
    Restoration Hardware Q3 2014/15 results show profit up over 50%
    Restoration Hardware
    Seeking Alpha commentary on Home Depot results
    Restoration Hardware Q3 2014/15 results
    Gary Friedman, CEO of Restoration Hardware
    Click to visit the ITW website for move information
    While the home improvement industry tends to focus on what low-cost sectors are doing, in the US the luxury end of the business has been quite active and profitable as well. The third quarter FY2014/15 results for Restoration Hardware have seen the retailer post large gains over the previous corresponding quarter. Adjusted net income (excluding non-recurring items) rose from US$13.0 million to US$20.3 million, an increase of 56%.
    Restoration Hardware Q3 2014/15 results

    The company's revenue of US$485 million brings its total for the past twelve months to US$1.67 billion, with an operating margin of over 10%. Year-over-year comparable store sales increased by 13%, continuing a trend that saw the comp sales grow by 30% in 2012/13 and 31% in 2013/14.

    The results were seen as very encouraging, and resulted in a strong increase in the retailer's share price from around US$86 to over US$96.

    The company has plans to increase its revenue to over US$4 billion in the next five years. To make this possible it is rapidly expanding its retail space, planning on building 30 new retail locations, and expanding its footprint at existing locations, with its Boston store recently expanded to 40,000 square feet (over 3700 square meters).

    Another part of its expansion plans is to open branches in overseas markets. Along with the Middle East, Asia, Europe and South America, Australia has also been mentioned as a possible target market.
    Business model

    Restoration Hardware has an interesting business model. Its sales are split between three sources: Increasingly luxurious retail spaces, online sales, and what the company calls "the book", a huge catalogue delivered annually to customers.

    In 2013 the size of the catalogue was 1600 pages. In 2014 the catalogue contained over 3300 pages. Answering an analyst's question, the company's CEO, Gary Friedman, explained Restoration's approach to selecting new products:
    The key, right, the key is the integration of it all. And does it reflect, is it edited well enough to have a specific point of view that is of the moment, right, and is current, and what we like to say is fresh yet familiar, right? Is it fresh yet is it familiar? When things are neither fresh nor familiar, business usually isn't good. If they're only one of the two, business is probably good, not great. When you hit fresh yet familiar, it's usually when you develop the biggest net, right, and the biggest economic net for an idea.

    The company provided a video with its third quarter results.
    Restoration Hardware video
    Reports
    SiteReview: Interior designer blogs
    Beautiful view from an apartment in Tel Aviv
    Seemingly plain but very luxurious bathroom
    A room at Hotel Hotel
    Subscribe to HNN weekly e-newsletter
    It is very easy to overdose on interior designers.

    Where one might normally operate on a fairly primitive, acquisitive level - "Me likem chair, me buyem chair" - interior designers tend to elevate any conversation about objects to an allusive level that burdens them with so many references it induces a feeling not unlike carrying a half dozen books on one's head to held promote better deportment. "Ah yes, that chair. Sort of Edwardian Sixties, with a dash of the more debonair Constructionist style of the Fifties, and not unlike the chair alongside the longer grey console table in the fifth scene of the second act of 'Breakfast at Tiffany's'".

    So one ventures somewhat cautiously onto the blogs of interior designers, worried that you might be "design mugged" at some unexpected moment. In some cases this caution proves warranted. There are some really bizarre site navigation schemes out there, such as the one for Chelsea Hing's blog:
    Chelsea Hing

    However, there is also some good and interesting content. This week we are going to look at the IN/OUT blog produced by Sydney-based interior designers Juliette Arent and Sarah-Jane Pyke, and the Design Addicts blog. DA (as it is known) is edited by the Melbourne-based Richard Misso, along with Brendan Guy, Monica Del Rosario, Morris Selvatico and Nicholas Kaiko.
    IN/OUT
    OUT/ABOUT: HOTEL HOTEL

    Hotel/Hotel is a hotel in Canberra designed by a number of interior designers, each of whom seem to have contributed some unique aspect to the hotel. The project was conceived by brothers Nector and Johnothan Efkarpidis, who describe its goal like this:
    Ultimately you want the business guest, student, locals and someone travelling from the outskirts of Canberra staying with family and friends to sit down beside each other and have a conversation

    There is something quite Australian about this goal, the idea of a building dedicated to helping people simply converse with each other. While some of the rooms in the project seem a little difficult, many of them are truly delightful, especially when compared to the cookie-cutter, faux-luxury of many modern hotels.
    A room at Hotel Hotel
    A detail of room
    A lobby - not exactly inviting, but interesting
    The library
    Meandering Bathroom

    It is also worth visiting the website of the hotel itself:
    Hotel Hotel
    Design Addicts
    Apartment in Tel Aviv
    To install meaning

    This is the redesign of a relatively small apartment in a prestigious area of Tel Aviv. It is interesting in that it has a certain stark simplicity to it, a functionality, which is balanced against the high-rise views outside (and, yes, where is that balcony railing?).
    Room with a view
    Staircase helps to define the space
    Hopefully, no children allowed on the balcony
    A refined renovation
    Chiswick house

    This house in Chiswick, London had been somewhat neglected for some years before being restored to some of its original Edwardian grandeur by a clever redesign and extension by Found Associates.
    The extension
    Inside extension, looking out
    A home office one could actually get some work done in
    Combination of period and modern furnishings
    Seemingly plain but very luxurious bathroom
    Editorial
    Metcash woes could come to home improvement
    Metcash is on a rocky ride
    IKEA stores group items around a particular function of the house
    Apple anticipates customer needs to deliver better experience
    Give to Amnesty International
    The problems that Metcash Food & Grocery (MFG) faces today are the same as those that independent hardware retailers will face three years from now. By that time Bunnings and Masters will have completed much of their store build-outs.

    Added to that will be Bunnings online e-commerce offering (which might show up in the second or third calendar quarter of 2015).

    It is worth looking at what is happening at Metcash to find some clues as to where home improvement needs to go. What is wrong with Metcash's strategy? How can independent home improvement retailers avoid the same mistakes?
    Metcash's answer

    The reason why the Metcash share price plunged so much in the first weeks of December 2014 is not just that the company has indicated it has problems executing its make-or-break strategy. It is also that many market analysts place little faith in the end strategy towards which Metcash is working.

    The strategy that Metcash has initiated as it struggles to grow in an environment dominated by two major and two minor competitors is to develop its capability to a level of what we could call "functional mediocrity".

    Instead of stretching to a "best of class" standard in some aspect of its business, MFG is setting out to equal the offering at the major supermarket chains. It is doing this through a series of emulations, from matching prices on specific items, to re-developing its own-brand product line, Black & Gold.

    The Metcash strategy is based on the assumption that if it can equal the offering of the major chains, it can win customers simply through the closer proximity of its stores to its potential customer base.
    Propinquity

    Metcash points to statistics that indicate shoppers are shopping more frequently, doing one biggish weekly shop (increasingly on Sundays) and then "topping up" two or even three times a week. The assumption Metcash makes is that if it brings prices down to close equivalence, more shoppers will do their "top ups" at IGA stores.

    This is an entirely untried and unproven thesis. Propinquity - which means closeness both geographically and in terms of relationship - certainly is a driver in some forms of consumer purchases, but not all.

    In the past it certainly was a driver of grocery shopping, but that was before centralised shopping centres appeared. It seems unlikely that the move away from local shopping was driven by price alone.
    Competing strategies

    Equally, while Metcash might work out some way to match supermarket prices in the short term, this might not be sustainable in the longer term. If Coles and Woolworths see market share going to MFG, they will have a number of ways in which to fight back. One is simply to drop prices on products lines that MFG is price matching down to a level MFG cannot follow.

    Added to this is the continued erosion of MFG's market by the growth of Aldi and Costco. Offering different buying propositions - limited but cheap, and bulk purchasing respectively - both further restrict the market available to MFG.
    An alternative strategy

    One of the insights offered by Harvard Business School (HBS) professor Clayton Christensen is the idea that companies should see what they do not only by using tools such as demographics and segmentation.

    They should also think about what they sell directly from the consumer's perspective. To do this they can envisage their products and services as being "hired" by the consumer to perform a particular job or task.

    Here is how the concept in introduced on the HBS Working Knowledge blog:
    When planning new products, companies often start by segmenting their markets and positioning their merchandise accordingly. This segmentation involves either dividing the market into product categories, such as function or price, or dividing the customer base into target demographics, such as age, gender, education, or income level.
    Unfortunately, neither way works very well, according to Harvard Business School professor Clayton Christensen, who notes that each year 30,000 new consumer products are launched - and 95 percent of them fail.
    The problem is that consumers usually don't go about their shopping by conforming to particular segments. Rather, they take life as it comes. And when faced with a job that needs doing, they essentially "hire" a product to do that job. To that end, Christensen suggests that companies start segmenting their markets according to "jobs-to-be-done." It's a concept that he has been honing with several colleagues for more than a decade.
    Harvard Business Review: Working Knowledge blog

    Dr Christensen goes into some detail about this method in this video:


    If we look in the food sector, what areas do we see that are growing, which lack full participation by the market, and which depend heavily on propinquity?

    One area we know has been growing strongly, particularly through 2014, is the takeaway food business (what in the US is known as "takeout"). According to figures from the Australian Bureau of Statistics (ABS), there has been considerable real growth over the past three years.
    Takeaway food retail revenues

    There are, however, countervailing numbers as well, which comes in the category of the behaviour that consumers aspire to. They want to provide home cooked meals, they want to provide healthy food to their families, and they are concerned about teaching children poor dietary habits.

    The collision of these two creates a market opportunity. That is the provision of a range of meal options, from "dinner kits" requiring some preparation, through to "heat and eat" offerings. These enable busy families to find an alternative to takeaway meals that is healthier, involves a degree of preparation, and can add some variety to a family's meals.

    The job the supermarket is being hired to do in this case is to provide an easy-to-prepare, healthy alternative to standard takeaway food.
    Relevance for home improvement retail

    If we follow through on the notion of customers hiring retailers to do a job for them, what would be the job they would hire independent hardware retailers to do?

    If we look at the retailers themselves, it would seem the job they think they are being hired to do is something like: "Without supplies, services, help and advice, you can be your own tradie!"

    That was probably a good approach 15 even 10 years ago. While it still has some pull for people for are interested in DIY for its own sake, most homeowners no longer find it attractive. Today the focus is not on doing things, but achieving set results.

    A better description of the job consumers want to hire a home improvement store to do would be something more like: "With our products, help and assistance, it will be almost as simple and easy as having a tradie working for you!"

    It is a subtle change in wording, but a big change in attitude for the retailer. It is a shift from helping people to develop in such a way that they can perform certain tasks, to helping them get through the current task they face as quickly (and cheaply) as possible.
    Implementing task-based retailing

    Just about every independent home improvement store is laid out from the view of products that are provided. In one section is the paint, next door will be paint equipment such as rollers and brushes. Then there is a hand tool area, a power tool area, an area for larger items such as ladders, as so forth.

    The task for someone entering such a store to, say, get the equipment needed to paint the master bedroom for the first time in four years is going to be complex and difficult.

    Paint is in one place, the scraper for the wall filler in another, the ladder in another, the orbital sander he needs for some of the work in another, and so on. It would be quite easy to use up 30 minutes just assembling things to buy. What's more, this is not a good 30 minutes. It consists of a number of difficult and confusing choices that are wearying.

    Imagine if instead the store manager assembled three or four "kits" for home painting, at different grades and for slightly different purposes. For most people it would come down to choosing between two such kits, with one or two substitutions for special circumstances.

    Suddenly that 30 minutes becomes more like 12 minutes, and the choices to be made are much simple and much less tiring.

    The error that many independent home improvement store managers seem to make is that, as offering help and advice is their main differentiator, they seek to maximise this kind of contact.

    In fact, there is a better way for them to employ that knowledge. They can pre-configure the experience for the customer, reducing the complexity of the buying task and steering them away from poor decisions.

    One retailer that has made a success of this kind of customer service may be a little familiar to you: it's Apple. For more on how they do this visit:
    The Art Of Anticipation - Forbes

    This is also an approach that the UK home improvement retailer HomeBase is introducing to its new stores:
    HomeBase uses task-based layout - Daily Mail
    A bigger change

    If buying shoes was as difficult as buying hardware can be, there would be a lot more people walking around barefoot.

    The point of this is that at the core of the changes noted above is a bigger change that has been trending upwards for the past five years, but is now close to critical mass.

    This is simply the ability of consumers to influence what retailers do, not only by choosing different products but also through changing participation. Where once people would "have" to paint certain rooms in their house, today they might easily choose to let them go another year or two, and instead go on a vacation, or buy a new computer - just as if grocery stores are not offering what they want, they might instead buy from a takeaway outlet.

    To put that in different terms, competition today is not just about winning over competitors inside a category, it is also about competition between categories. In that kind of field, it is never enough to be "better than". It is about providing comprehensive, packaged value to your potential customers.

    Until next time,

    Betty

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

    To receive a daily dose of HNN, download the free HNNBrowser app from the Apple store:
    HNN iPad App

    PS. HNN made a pre-Christmas visit to the Spot-on team in Geelong (VIC);

    (l-r) James Hunter, Colin McMillan, Cate Hunter, Betty Tanddo, Carla Ellis, Mark Hunter, Alex Hunter and Ray Quek
    HNN visits the Spot-on team
    Reports
    HNN ASX Home Improvement Index 12 Dec 2014
    HNN Index for week ending 12 December 2014
    Westpac Consumer Sentiment Index - December 2014
    Harvey Norman share performance
    Subscribe to HNN weekly e-newsletter
    The HNN Home Improvement index fell by 23.25 points to reach 939.69, slightly below its level of a fortnight ago. The underlying ASX 200 index rose by 104 points to 5231 points, a drop of 2%. This was a fall of 21 on the comparative index.
    HNN Index for week ending 12 December 2014

    Many retail stocks, such as Harvey Norman, Super Retail Group and Myer Holdings were hard hit by a reported drop in consumer confidence as measured by the Westpac-Melbourne Institute consumer sentiment index. This suggest consumer confidence is now at its lowest level since August 2011.

    According to a media release from Westpac:
    Of particular concern was a major collapse in the sub-index tracking assessments of "time to buy a major household item". This component fell 11.8% from 124.2 to 109.6. It is now 21.4% below its level of a year ago and has reached its lowest level since April 2009. This is a particularly awkward time for respondents to feel so downbeat about purchasing major items given that it comes in the critical lead up weeks to Christmas. That said, the decline may well be a reaction to recent sharp falls in the Australian dollar and the impact this is expected to have on the cost of imported goods.
    Westpac Consumer Sentiment Index
    Underperformers
    CSR

    CSR fell by 6.3% during the index week.
    Downer EDI

    Downer EDI 6.3% during the index week.
    Iron ore price depresses Downer share price - Fairfax Media

    The decline in the price of iron ore has led some investors to sell out of Downer EDI, causing the share price to decline. Downer is exposed to the price of ore through a contract worth $3 billion with Fortescue Metals Group. The risk is seen as being that the price of ore will continue to decline, and create operational issues for Fortescue. Downer's mining division contributed about 45% of the group's $341 million in earnings before interest and taxation in 2014.
    Harvey Norman Holdings

    Share price fell by 10% during the index week.
    Plunge in consumer sentiment sends retail stocks down - Fairfax Media

    The Westpac-Melbourne Institute consumer sentiment index for December 2014 has fallen to 91.1 from its November reading of 96.6, on a scale where 100 represents neutral sentiment. This is its lowest point since May 2009. A number of retail stocks, including Harvey Norman, were sold off in response.
    Metcash

    Metcash's price fell by 5.4%. The price has continued to drift downwards as the market absorbed its disappointing results, and added declining consumer sentiment to the burden the company carries.
    Myer Holdings

    Myer's share price declined by 9.6% during the index week. Declining consumer sentiment and reports of lacklustre sales led to the decline.
    Super Retail Group

    The group's share price declined by 10% during the index week. Declining consumer sentiment and reports of lacklustre sales led to the decline.
    Average performers
    Adelaide Brighton
    Adelaide Brighton confirms contract renewal - Cemnet

    Adelaide Brighton announced that it has extended a supply agreement to a major cement customer in South Australia. The current agreement which expires at the end of December 2014, has been extended on similar terms until theend of December 2015.
    Bluescope Steel
    New colours for Colorbond - infolink

    BlueScope Steel announces the addition of six new colours to the COLORBOND Metallic steel range. BlueScope marketing manager Gregory Moffitt said the new colours were developed in direct response to industry and customer feedback.
    Charter Hall Group
    Charter Hall looks to Masters Home Improvement

    Charter Hall joint managing director David Harrison has confirmed the group is looking at Bunnings and Masters assets, particularly in metropolitan locations. This was because:
    We think Bunnings and Masters will eventually dominate the hardware sector. It's a big sector, it's fragmented and there is a big opportunity for large chains to provide a nationally consistent product. In particular the company is interested in a $45 million Masters store in Sydney's Penrith set to open in September 2015.
    Leighton Holdings
    Leighton sells John Holland to China's CCCC - RTT News

    CCCC International, the financing platform wholly owned by the China Communications Construction Company, has purchased Leighton Holdings' contracting division, John Holland. The purchase price has been set at $1.15 billion. John Holland is behind Australian projects including the Sydney desalination plant, Melbourne s EastLink tollway and Perth s children s hospital. The sale is subject to approval by the Foreign Investment Review Board.
    Leighton's Healthscope to build hospital - Perth Now

    A deal to design and construct a Sydney hospital will garner Leighton annual revenues of around $540 million. Preparatory activities are underway on the site, with construction due to begin in early 2015 and the new hospital set to open in 2018.
    Wesfarmers
    Wesfarmers Blackwoods wins award - Manufacturers' Monthly

    Blackwoods, the largest business in the Wesfarmers Industrial and Safety Division, was a winner in the 2104 Supply Chain and Logistics Association of Australia s Australian Supply Chain & Logistics (ASCL) Awards. The award was in recognition of the distribution centre Blackwoods has built in Sydney's western suburbs. A key feature of its new DC is the first Multishuttle 2 Goods-to-Person (GTP) order fulfilment system of its type in Australia.
    Woolworths
    Woolworths expands into healthcare

    The Pharmacy Guild of Australia says Woolworths is hiring final year pharmacy students, graduating pharmacists and nurses to conduct health checks such as blood pressure and cholesterol in their stores. The system is currently being trialled at six stores in New South Wales and Queensland.
    Reports
    MagReview: Real Living and Style at Home
    Real Living December 2014 issue
    Style at Home (UK) November 2014 issue
    Style at Home, November 2014, p80
    Subscribe to HNN weekly e-newsletter
    While Real Living is a far more "lush" magazine and Style at Home, it is the latter that manages to make its designs click.
    Real Living December 2014

    As a magazine, it is a little difficult to define Real Living. Published by Bauer Media, it is somewhat like that publisher's Homes+ magazine, but aimed at slightly less bohemian, more "successful" families, and particularly women. It is a magazine that relies somewhat on the idea of "constant stimulus" with an apparent goal of making individual page spreads "exciting".

    The result is actually quite difficult to read, and at times a even a little disconcerting. Some pages so bristle with images, highlighted text, bold face type and headlines that it is impossible to find a focus. It reminds one of the first moments of sitting down for coffee with good friends you haven't seen for a month, with everyone talking at once. Only it doesn't stop and settle down.

    This editorial approach seems to flow into the interiors the magazine chooses to profile. Without being able to say exactly how or why, virtually every interior that is presented sort of works - and sort of really doesn't, either.

    Some of this might be because the rooms and houses are quite attractive when viewed directly, but simply do not photograph particularly well. More often, however, the looks presented simply do not cohere. Objects are placed together that tend to jar and break things up.

    A prime example is this "country cottage" built in the 1960s, which its new owners have spiffed up in what does seem a quite interesting way. Here is a picture of the living area of the cottage:
    Real Living December 2014 page 26

    No matter how one tries, it seems almost impossible to make those chairs around the table "work" with the room. They are not horrific, and the rest of the room is styled in an interesting way, but it is almost impossible, when looking at this picture, to mentally try out half a dozen chairs that might have worked better. Here is another image of the room, shot from the mezzanine of the cottage:
    Real Living December 2014 page 29

    Looks better, and you can see the effect being attempted. But it still, definitively, does not really work.

    One answer to this problem is that, if you investigate closely, you realise this cottage is actually most likely in France - the magazine itself is careful to make no mention of location, but the names of its owners, and the notes in French scribbled on a blackboard suggest this. Sometimes French interior design, which loves to mix its eras, will go one step too far.

    Another example of this "almost but not quite" feeling is this room:
    Real Living December 2014 page 103

    The house architecture is interesting, the use of the louvred windows is interesting, but somehow, in the photograph at least, the elements fail to come together.
    Style at Home November 2014

    In some ways this magazine is the reverse of Real Living. It is one of the "cheap and cheerful" titles that come out of the UK. Even exported to Australia, it costs just $5.95.

    There are no lush homes, or fancy houses in this magazine, just women mostly in their 30s and 40s who have put together decent and interesting homes. Despite not having much in the way of resources they do manage to get things to "click".

    This first image is typical of what makes up the magazine. It is a relatively "rough" room, but somehow its disparate elements - t he old leather chair, the marked and weathered box, the distressed dresser and the wood-burning heater just do go together in a very British way.
    Style at Home, November 2014, p16

    What is great about the bathroom below is that it does manage to remain stylish, but is also plain out practical, with its tubs of personal effects labeled with big initials.
    Style at Home, November 2014, p38

    Finally, there is this handy DIY page. There are a number of great things going on here. It's a really practical transformation, the instructions are simple and workable, and the materials (at least in the UK) easy to source and inexpensive.
    Style at Home, November 2014, p80
    Careers
    Former Kingfisher boss leaves the stage
    Sir Ian Cheshire has stepped down as group chief executive of Kingfisher
    Retail Week
    Cheshire wants his legacy to be remembered by the way that people work together
    Veronique Laury has taken over as group chief executive of Kingfisher
    Visit the Mecca Website
    The ex-head of Kingfisher, owner of B&Q, Sir Ian Cheshire has officially passed the baton to Veronique Laury. He explains how he is looking ahead to a new start in a recent interview with Retail Week.

    While the 55-year old does not give too much away on what the future may hold, he takes wry amusement at stories in the mainstream business press linking him to the chairman role at UK supermarket giant Tesco. He said:
    It is a very out of body experience finding yourself being volunteered for something you haven't put your hand up for. At 55 is it a bit soon to go off and be a chairman? One of the reasons for stepping down now is it gives me a four to five year period where I can do something full on.

    And if he still has four or five years in him as a chief executive, why not stay on as Kingfisher boss? Cheshire explains that while in January he envisaged staying on for another one or two years, it became clear that the Kingfisher board required a five year commitment.

    The five-year plan includes the acquisition of French rival Mr Bricolage and embedding it into the group, and the setting up of a major new systems platform that will run across all of Kingfisher's businesses. He said:
    Either you stay for this and see it through or you actually need to leave before it. So it bought [my departure] forward maybe a year. I thought no, I'm not going to do 11 years as CEO.
    Eventful years

    His 17-years at Kingfisher has not been short of drama. Cheshire admits he had plans to leave the company on three separate occasions but that circumstances took over and he was parachuted into various roles by then boss, Sir Geoff Mulcahy.

    Cheshire joined Kingfisher in a strategy and mergers & acquisitions role focused on the Castorama acquisition, and initially planned to stay for three years before moving on.

    Roles have included heading up Kingfisher's ecommerce arm, leading the international business and the chief executive role at B&Q, before he became group chief executive in January 2008. He joked:
    It was a bit of baptism of fire and looking back on it; 2008 was a really stupid time to take over.

    He took the top job following the sudden departure of Gerry Murphy, soon after the first signs of the credit crunch had begun to emerge in late 2007. One of Cheshire's first tasks as group chief executive was to talk the credit agencies round; they wanted to downgrade Kingfisher to junk status. A deadpan Cheshire said:
    That would have been really good news as a new CEO.

    On top of that, he was at first forced to do two jobs simultaneously as he sought a successor for the B&Q business. And to exacerbate matters, Duncan Tatton-Brown, now at online supermarket Ocado, decided he could not commit to another five years as chief financial officer. He explained:
    There was a slight sense of 'you are all on your own here'...The first six months before I got the team in place was probably the most painful because I had not yet backfilled B&Q and was trying to shelve things and make some changes.

    Fortunately during those first six months without a senior executive team in place, Cheshire managed to dispose of the Italy business for 600 million euros, just before the global financial crisis really took hold. He said:
    f we hadn't done that we would have been sitting there with Stg1.6 billion of debt with no banks lending any more.

    By October of that year, Cheshire had his team in place to help him execute his vision for the company. He said:
    The thing I have always believed in is leadership through teams and the hero CEO stuff I find very hard to believe and I automatically distrust.
    Team environment

    Cheshire believes his greatest legacy is getting Kingfisher operating effectively as a team, something that certainly was not the case at the start of his tenure. He said:
    There was a flat out civil war going on; Brico Depot and Castorama were fighting each other, B&Q and Screwfix would not talk to each other. Nobody wanted to talk to anybody...so it was all quite tricky.

    In order to break the deadlock in France Cheshire came up with a remarkably simple yet effective solution; he forced greater interaction by putting one person in charge of Kingfisher France and made bonuses dependent on the total profit performance of Brico Depot and Castorama. Cheshire describes it as a JFDI (just f**king do it) moment.

    He then allowed the executives to hammer out the detail as part of his philosophy of enfranchising the team and avoiding micromanagement wherever possible. He said:
    What CEOs need to work out is, what are the big framing decisions we need to take and a chunk of what you have to do is get out of the way of very good people.
    There is a great temptation in CEO life to say 'make it so' and everyone responds 'yeah whatever' and 15 years later you wonder why it hasn't happened.
    Mobile commerce

    During Cheshire's time in the top job, he has witnessed an online revolution that has transformed the retail landscape. It is the rise of mobile that has had the biggest impact on the sector, alongside institutional leases, according to Cheshire.

    Both have had transformative an effect on Kingfisher, in both positive and negative ways. A huge opportunity for Kingfisher going forward, and something that Cheshire and his team spotted early on, is the power of mobile, particularly for Screwfix, the company's jewel in the crown.

    But institutional leases have given Cheshire a huge headache; B&Q has been left lumbered with giant 100,000sqft stores that look out of kilter in the era of multichannel retailing.

    However, overall Cheshire believes he has left the business in a decent state for Laury to take it to the next level. He advises his successor:
    The door has opened, there is a bunch of opportunity, have the courage to build on it and go faster.

    While Kingfisher's performance has slipped of late - retail profit declined 6.9% during the quarter ending November 1, the last set of figures under Cheshire - the outgoing boss can be proud of what he has left behind.

    During his 7-year tenure, adjusted pre-tax profits have more than doubled from Stg337 million to Stg744 million and sales have risen from Stg9 billion to Stg11 billion.

    As the book closes on the final chapter of his time at Kingfisher, Cheshire insists he has no regrets. He said:
    The only slight wish factor would have been more progress in the last two or three years in Poland and Russia. But I don't really see any big regrets because most of what has happened we have decided. Some of it worked, some of it didn't, so can you really regret it?
    Retailers
    Indie store update
    Cummins & Partners has won the Home Timber & Hardware advertising account
    HNN Sources
    Express Industrial Supplies has fallen into voluntary administration
    The Good Guys Mile End store in SA celebrates its 10-year anniversary
    Click to visit the Globel Industries website for more information
    Home Timber & Hardware has appointed a new advertising agency. In other news, Express Industrial Supplies has fallen into voluntary administration and The Good Guys Mile End store in South Australia reaches its 10-year anniversary.
    Home Timber & Hardware changes agency

    Cummins & Partners has won the Home Timber & Hardware advertising account and will provide integrated strategic and creative services for the retail group. Home Timber and Hardware national marketing manager Kevin Lillie said: "We are excited to have Cummins & Partners as our new creative agency partner, and look forward to developing innovative creative for the brand. Importantly, we are looking forward to further differentiating Home Timber & Hardware from the competition and demonstrating our compelling offer for tradies and home renovators alike."

    The advertising agency will commence work on the account immediately. Other clients include Dulux, Specsavers, Jeep and Tupperware, and it recently picked up the Vodafone account.
    Insolvency for industrial retailer

    McGrathNicol have been working as the administrators for Express Industrial Supplies which has branches in Padstow, Tuggerah and West Gosford in New South Wales and Thomastown in Victoria. According to SmartCompany, the creditors meeting was scheduled for December 10. McGrathNicol was reviewing a sale agreement, which Express Industrial Supplies entered into with Atom Supply Group prior to its appointment. At the time, the retailer was trading under a license agreement with Atom.

    Express was founded in 1991 and had a much larger store footprint, as a result of a number of acquisitions. In 2003, the company acquired Brisbane Waters Industrial Products, which operated two stores on the central coast of NSW. This was followed in 2004 with the acquisition of Moyles Engineers Supplies, which gave the company a presence in the Sydney suburb of Mascot. In 2008, Express Industrial Supplies acquired Brentool Industrial Supplies, which added three Victorian stores to its network.
    Ten year milestone for The Good Guys in SA

    The Good Guys Mile End store opened in December 2004, and proprietor David Brooks has steered the business through a decade marked by challenging economic conditions and a changing retail industry. Brooks told Appliance Retailer: "The customer now has an increased power and has a wider range of choices. Some of the biggest changes I've witnessed first-hand have been the much wider range of products, the growing expectations placed on staff and the introduction of value-add services, such as appliance installation."

    A third major refurbishment of the store is planned for the future. Its support for the local community will continue though its partnership with Cara which helps people living with a disability and their families.
    Products
    All-purpose tool for projects
    The F50 Sonicrafter from WORX can be used for a wide variety of tasks
    WORX
    Featuring 39 accessories, the tool can be used on many surfaces
    This Sonicrafter model is very powerful with a 450W output
    SpotOn is your source for laser levels and other tools
    The F50 Sonicrafter from WORX uses micro-sonic high-frequency technology, enabling the user to apply the tool to a wide variety of tasks such as cutting, sawing, scraping, sanding, and polishing just to name a few.

    The variable speed control and multi-angle adjustment system makes this tool suitable for use on wood, brick, aluminum, plastic, tile, stone and cement. Featuring 39 accessories, the end-user have everything they need for any job on any surface.

    This Sonicrafter model is extremely powerful with a 450W output. One of the major benefits of all this power is the speed of oscillation. With a constant speed control and up to five times faster than other leading brands, WORX has ensured that jobs and projects can be done quickly and smoothly without any concerns of the finished product being uneven.

    But despite the enormous power capabilities of the F50, it is still very lightweight and simple to use. All WORX Sonicrafters use the Hyperlock[tm] system. Developed in Australia, it is a tool-free, universal locking mechanism which exerts over one tonne of clamping force to the tool accessory, so that the attached tool is secure.

    The Hyperlock system has a universal accessory interface, which is compatible with other oscillating brand accessories.
    Bigbox
    Big box update
    Charter Hall Group is looking at a Masters store in Penrith (NSW) for purchase
    HNN Sources
    The new Bunnings Bundaberg store is exactly double the size of the old 9000sqm site
    Bunnings New Zealand tripled its annual profit at NZ$4.9 million
    Click to visit the ITW website for move information
    The Masters store in Penrith (NSW) has been targeted by a property management group. In other news, the soon-to-open Bunnings store in Bundaberg (QLD) is both larger and "cooler". Bunnings also triples its annual profit in New Zealand as it benefits from the demand in construction.
    Buying hardware properties

    Charter Hall Group is looking at a $45 million Masters store in Sydney's Penrith as part of a strategy that could position it to secure more Woolworths hardware outlets for its newly established hardware property trust. The company recently announced the expansion of its Bunnings partnerships - rebranded as the Long WALE Hardware Partnership - saying it had the capacity to spend $300 million on new properties. Charter Hall joint managing director David Harrison confirmed to The Australian it was looking at both Bunnings and Masters assets, particularly in metropolitan locations. He said: "We think Bunnings and Masters will eventually dominate the hardware sector. It's a big sector, it's fragmented and there is a big opportunity for large chains to provide a nationally consistent product."

    The planned opening date for the complex in Penrith is September 2015 and will be anchored by a 13,517sqm Masters, along with specialty retail stores. Masters' 15-year net lease, which also carries a Woolworths guarantee, accounts for more than 80% of the income stream. Industry sources suggested the buyer would be well positioned to pick up more Masters stores across Australia.
    Bunnings gets cool

    The new Bunnings Bundaberg store will be temperature-controlled through air-conditioning. There will be no industrial fans dangling from the ceilings in the $38 million location, and it is exactly double the size of the old 9000sqm site. Bunnings Trade Centre manager Bill Webb said the added feature of air-conditioning is "a big plus", and should encourage customers to stay in the store longer to browse.

    According to the Gladstone Observer, the layout is much the same as the old store with the trade centre now incorporated within the Bunnings Warehouse. There is a larger child's play area and the Hardware Cafe is in a different location looking on to the outdoor plant area. To the back of the store, there are 28 kitchen, bathroom and laundry displays. The store will be officially opened by former professional rugby league footballer Shane Webcke.
    Construction boosts Bunnings NZ profit

    Bunnings has more than tripled annual profit in New Zealand, as a booming property market stoked demand for building products. The New Zealand business unit delivered a profit of NZ$4.9 million in the year ended June 30, from NZ$1.1 million a year earlier. Sales rose 15% to NZ$813 million, according to a report in Scoop Media. Wesfarmers generated about AUD$1.22 billion in total sales from its New Zealand businesses which includes Bunnings.

    New Zealand is in the midst of a construction boom led by the rebuild in Canterbury and a heated housing market in Auckland. Rising real estate prices in Auckland means more people were opting to pursue DIY renovations rather than re-enter the housing market.
    Companies
    Saint-Gobain bids for control of Sika
    Saint-Gobain recently unveiled a plan to take over Sika
    Yahoo News
    The deal was not well received by Sika's board of directors
    Urs F. Burkard is part of the founding Burkard-Schenker family and sits on the board of Sika
    Subscribe to HNN weekly e-newsletter
    French-based Saint-Gobain unveiled a plan to take over Swiss rival Sika by buying a stake that would give it a majority in the company, but without conducting a public offer for remaining shares.

    Saint-Gobain said it had agreed to pay 2.75 billion Swiss francs (approximately 2.3 billion euros) for the 16.1% stake held in Sika by the Burkard-Schenker family which founded the company.

    That would give Saint-Gobain 52.4% of voting rights in the firm, and would not force it to launch a public offer for the remaining shares that would force it to spend considerably more. Saint-Gobain does not intend to launch an offer for Sika's remaining shares.

    In Switzerland, a company taking over a publicly-listed firm does is not required to make a public offer for remaining shares when taking over majority control.

    The price Saint-Gobain offered was an 80% premium to the closing price of Sika's shares on Friday, 12 December 2014.

    However the deal was not well received by Sika's board of directors, which said in a statement that it makes "no industrial sense". Sika board chairman Paul Haegl said the board would seek other alternatives to Saint-Gobain taking over the company.

    The statement also said members of the board and its management have decided to resign following the closing of the transaction, once anti-trust approval has been obtained.

    Saint-Gobain CEO Pierre-Andre de Chalendar said he was "extremely surprised" by the reaction, adding that the group had pledged to retain Sika's current management. He said:

    "At this stage I will not explain myself. There must be emotional aspects that I don't understand...The family decided to sell its stake, and to do so it set in motion a process that was both competitive and confidential.

    Saint-Gobain, which employs nearly 193,000 people worldwide, had been pursuing the operation in the utmost secrecy, and hopes to complete it in the second half of next year.

    Sika, which employs 16,000 people, had a turnover of 5.1 billion Swiss francs last year.

    De Chalendar said the merger would produce synergies worth 100 million euros from 2017 and 180 million euros from 2019.
    Bigbox
    Home Depot widens 3D printer program
    MakerBot 3D printers are now available in 39 Home Depot stores, up from an initial 12
    3D Print
    MakerBot and Home Depot hope consumers will try out the 3d printing technology
    Home Depot began offering MakerBot printers and supplies online during the US summer
    Click to visit the ITW website for move information
    Home Depot and MakerBot are partnering up to bring 3D printing to more home improvement customers.

    In a retail program that was already in place with 12 stores, MakerBot will be extending the program with Home Depot to 39 stores. Jenny Lawton, acting CEO of MakerBot said:
    We are really excited to expand MakerBot's presence in physical stores. The addition of these new locations will bring 3D printing with a MakerBot Replicator directly to customers.

    The sleek, colorful MakerBot kiosks are designed to entice consumers to come and try their hand at the magical new technology. It's a unique opportunity to get some free lessons and input on 3D printing, as trained MakerBot representatives are available to give demos. They can offer tips when customers have questions regarding purchases of equipment and materials.

    Embarking on the partnership in July, it was a "wait and see what happens" pilot program that is going in the right direction. Home Depot also began offering MakerBot printers and supplies online during the summer months in the US.

    While this program may not be a profit game changer for the two entities initially, it does combine the forces of two companies that have a customer base that looks to them for the latest trends, as well a guidance in craftsmanship.

    Adding the latest stores for the holiday season should be a boon to both Home Depot and MakerBot this year.
    Products
    Paint briefing: new products
    Haymes Solashield paint provides high level UV defence
    HNN Sources
    The Monarch Razorback 3 Piece Roller Kit comes with a 230mm deep well tray
    Dulux Exterior Weathershield has unique MaxiFlex Stretch Technology
    Click to view details of the SpotOn golf ball competition
    Solashield is the latest exterior paint product from Haymes. The Monarch Razorback 3 Piece Roller Kit is ideal for tradies and Dulux Exterior Weathershield paint has been developed to will survive most weather conditions.
    Preserving home finish

    The new Solashield formula is another addition to Haymes Ultra Premium exterior paint range. Customer research indicated that when making a purchasing decision on exterior paint, tradies and renovators nominated longevity and the ability to repel dirt as their two core values. Taking these findings into consideration, Haymes Solashield provides a high level UV defence. It is so confident about this product that it is providing a 20-year guarantee against paint peeling, flaking and blistering.

    Haymes also created an exclusive surface lock technology specifically for Solashield, which inhibits dirt and mould and maintains a new home look for longer. Sizes range from 4-litres to 10-litres.
    Heavy duty painting

    The Monarch Razorback 3 Piece Roller Kit comes with a 230mm deep well tray for paint storage, a strong frame and microfiber roller cover. It is designed to make painting easy, mainly because of its durability and provides a professional finish and coverage. The kit is easy to clean and ideal for all paints. Available from Bunnings stores.

    The Monarch brand is part of the suite of products from Australian Brushware Corporation (ABC) which also includes Rhino Gold and Black and Teskor. ABC is a major distributor of a wide variety of quality painting tools and accessories. It has a comprehensive national sales force to deliver customer service, knowledge and support.
    Long lasting colour

    Dulux Exterior Weathershield paint is mould resistant, has UV protection and includes a self-priming undercoat. This 100% acrylic paint is water based and has unique MaxiFlex[tm] Stretch Technology that gives it a tough flexible finish, for protection against all Australian weather conditions. It has also has excellent durability that allows the paint to expand and contract with climate changes.

    Dulux guarantees that this product will not blister, flake or peel for as long as homeowners are living in their house. A range of colours are available from an extensive line of white and coloured bases. Sizes include 1-litre, 2-litres, 4-litres, 10-litres and 15-litres. Available from Bunnings stores.
    Bigbox
    Lowe's expands footprint in Canada
    Lowe's is expanding its Canadian operations and plans to open three more stores
    Sault Star
    Lowe's Canada president Sylvain Prud'homme. Photo credit: Financial Post.
    The latest Lowe's Canada stores will lean heavily toward seasonal products
    Click to visit the ITW website for move information
    Lowe's is bolstering its Canadian operations and plans to open three more stores to be located in Alberta, Saskatchewan and Ontario.

    The first one of these three stores, covering 94,500 sq. feet, will come in Lethbridge, Alberta in the first half of 2015. The other two, covering 86,000 sq. feet and 75,000 sq. feet, will be located in Saskatoon, Saskatchewan and Sault Ste. Marie, Ontario, respectively. All the three stores will have an adjacent garden and offer more than 40,000 products.

    Lowe's Canada president Sylvain Prud'homme said in a recent interview that it will remain "extremely competitive". He said:
    Our policy is quite simple, we offer the lowest price or we beat them (competitors' prices) by 10%. That's been our price promise, and I can tell that we live by it. More competition always ends up being a good thing for the customer.

    In Canada, DIY television programming has helped boost the interest in home improvement projects. Many homeowners tackle renovations themselves, and those who don't often hire contractors to do the work. DIY TV helps them get a better sense of how to approach a project, according to Prud'homme.

    Lowe's can help by providing a variety of products for those jobs, he noted. The retailer will offer a variety of products, including an assortment of appliances and fashion plumbing products. And many items will complement other local home-improvement outlets, Prud'homme said.

    The company leans heavily toward seasonal products such as patio furniture, barbecues, Christmas related items and home decor. He said:
    These are all categories where we are very strong.

    Lowe's also has "a pretty high ratio of full-time" employees compared to other retailers, Prud'homme said.
    That's given the nature of our business. It's a business where we need to provide our customers with a lot of help and support in regards to their planning, so the skill set is important."
    Products
    Lightweight, cordless tools from TRUMPF
    The TruTool S 160 shear is part of the new range of cordless tools from TRUMPF
    Canadian Metalworking
    TRUMPF relies on 10.8 Li-Ion battery technology for its latest cordless tools
    The TruTool C 160 cutting shears are designed to be 20-30% lighter
    Click to view details of the SpotOn golf ball competition
    With a lightweight design, longer operating time and shorter battery charge time, the compact power tools from TRUMPF offer high performance and increased comfort for the operator.

    The TruTool PN 130 profile nibbler, the TruTool S 160 and S 114 shears, and the TruTool C 160 cutting shears are all part of this new family of cordless, handheld power tools.

    An improved Li-Ion battery and the battery-optimised aluminum gear head make these cordless power tools more mobile. In development, the gear head was tailored for the low voltage of the battery used in the cordless tools. The result is an above average operating time.

    For all its latest cordless power tools, TRUMPF relies on 10.8 Li-Ion battery technology for the 2 Ah standard battery and the optional 4 Ah battery. This enables users to work for extended periods of time without charging the battery.

    Individual electrical cell monitoring in the battery unit and charger protect the battery from overload, overheating and deep discharge. The power tools come standard with two 2 Ah batteries that feature accelerated charge time. This battery requires just minutes to reach an 80% charge and 30 minutes for a full charge.

    The lightweight design enables users to operate the TruTool for longer periods of time without fatigue. On average, these tools are 20-30% lighter than competitive shears and nibblers on the market.

    This TruTool range also features an ergonomic and sleek design. The weight of the tool is distributed between the gear head and the motor. The soft grip of the motor housing allows operators to comfortably maintain a secure hold.

    In addition, small, practical features such as coloured LED lights notify the user when the battery power is running low. A removable belt clip, which can be attached to the side of the motor, lets the user to hang the tool from a belt or pants pocket and keep it always within his or her reach.
    Retailers
    Will click-and-collect pay off?
    Forty per cent of Best Buy's online revenue already comes from orders picked up in-store
    Yahoo
    Mitre 10 is just one local hardware retail group that offers click-and-collect
    Amazon has set the benchmark when it comes to click-and-collect
    Click to visit the Globel Industries website for more information
    Brick-and-mortar merchants are seeking an edge over Amazon and other online retailers this holiday season by encouraging customers to pick up online orders at their local store. But the tactic could raise costs - and create problems managing inventory, according to retail analysts and consultants.

    In the US, Lowe's, Wal-Mart, Target, Best Buy and other merchants are combining in-store pickup with lower online prices to draw shoppers to their stores. The hope? Customers will make additional purchases.

    But the shift is forcing chains to carry a wider array of products and could overwhelm inventory management systems. Also, many stores might not have storage for all the extra goods. Michael DuVall, a supply chain consultant for Strategy&, formerly Booz & Co. said:
    Most retailers are still trying to figure out where is the right place to position this additional inventory...a lot of them aren't quite prepared.

    Best Buy CEO Hubert Joly acknowledged inventory management is a challenge. He told Reuters:
    Stores that boost inventory to meet just the in-store pickup demand face a risk of being stuck with excess.

    Still, he added, the electronics chain has a lot of experience with in-store pickups. Forty per cent of Best Buy's online revenue already comes from orders picked up in the store.

    Some retailers, meanwhile, are establishing special distribution centres called "dark warehouses," partly because traditional storage facilities can't handle the small daily quantities associated with store pickup. Dark warehouses, so-named because they are almost always unmanned, cater to five to 25 stores at once. Truck drivers drop off and stock the merchandise; stores send small teams to collect the goods.

    A retailer might spend US$1 million to set up a 100,000-square-foot dark warehouse, DuVall said, but that would still be less costly than storing the additional inventory.

    In-store delivery is proving popular with customers. A survey by consumer insights firm Parago showed 64% of consumers who placed online orders have selected in-store pickup over delivery this year - that compares with less than 4% a year ago.

    Some retailers are seeking to leverage in-store visits by offering gift cards to pick-up customers. But such discounts could reduce profitability, analysts warn. Eileen Kolev, of retail analytics firm Microstrategy said:
    They are making money but they are also giving away margin they don't have to.

    Retail analysts figure a one per cent price cut can reduce a product's operating profit by as much as 11%. Lowe's CEO Robert Niblock said the company tracks gift-card promotions, including those connected to in-store pickup, to measure whether increased sales justify the discounting. He said:
    The cost of having a promotion for store pickup or in general must bring us an adequate benefit, and we track that very closely.

    Retailers that use gift cards and other promotions as perquisites for in-store pickup may find they need to dole out such promotions during future holiday seasons, too.