Products
Tool bags for tradies
GrearWrench's latest tool bags come in a variety of shapes and sizes
GearWrench
They feature high quality zippers, buckles, handles and straps
Each bag and style has been carefully thought out and full of features
SpotOn is your source for laser levels and other tools
GrearWrench's tool bags are available in a wide range of shapes and sizes including; tote bags, medium and large general tool bags and bucket style sling bags just to name a few. They come in seven different styles.

This new bag range has been developed to accommodate the different circumstances and requirements when it comes to transporting tools on a job site.

Featuring the high quality zippers, buckles, handles, straps and a minimum of 600 denier rip-stop nylon, the tool bags have been manufactured to withstand the test of time and robust circumstances often associated with a tradies work environment.

Each bag and style has been carefully thought out and packed with features such as business card holders, external Velcro pockets, rubber carry grips, internal dividers and many more benefits.

Designed to be tough as nails and stylish at the same time.
Retailers
Rona shrinks its board
Rona is shrinking its board to pre-crisis size as two directors step down
Globe and Mail
It has expanded its product offering to include items such as pet food and bottled water
CEO Robert Sawyer still faces tough challenges ahead
Click to visit the Globel Industries website for more information
Canadian hardware retailer Rona is shrinking its board to pre-crisis size as two directors who joined the company to bolster its turnaround effort step down in the months to come.

Wesley Voorheis, the former Hollinger chief executive officer who advised Invesco Canada when the investment management company began efforts to dislodge Rona's board in November 2012, will not seek re-election the board at the annual meeting in May, according to company filings.

Barry Gilbertson, a British-based property expert with experience in distressed real estate assets, will also leave the company.

Rona's revamped board will have 12 directors, down from the 14 it put in place during a leadership shakeup in early 2013 agreed to by Rona's two largest investors - Invesco and the Caisse de depot et placement du Quebec. Eight new directors came on board as a result of that overhaul, including current CEO Robert Sawyer.

The changes reflect a deliberate attempt by the board's governance committee to find new talent to match current market challenges, according to Rona spokeswoman Valerie Gonzalo. She said:
Rona is now moving into a different cycle, a growth cycle, and the profile of its board members is changing to adapt.

The home improvement retailer has made measurable strides, tallying a C$65 million net profit from continuing operations for fiscal 2014 on revenue of C$4.1 billion.

A plan to trim costs by shutting down underperforming stores and cutting administrative staff has yielded C$79million in cumulative savings.

Last year marked the company's first same-store sales growth since 2006.

But Sawyer still faces tough challenges ahead as he works to protect market share amid industry conditions that remain shaky. In general, lower oil prices are giving clients more disposable income to spend. But that's being offset by a falling Canadian dollar that's making inventory purchased outside the country more expensive.

While Rona's sales picture varies by region, lower housing starts across most of Canada are not helping the company. Construction of new housing units dropped 16% overall nationally in February, according to Canada Mortgage and Housing Corp.

New home construction fell 53% from a year earlier in Quebec, where Rona generates roughly half its sales, and 35% in Ontario. Home construction also dropped in Alberta, although economists said they expect a much steeper decline in the months ahead.

In a bid to offset some of this weakness, Rona has expanded its product offering to include new consumable items such as pet food and bottled water. Sawyer is a grocery industry veteran.

Analysts say the effort is part of a tactical price-promotion strategy by Rona management while they wait for consumer confidence to pick up. The aim is to give customers who walk in an immediate perception of what Rona's prices are, based on these common items near the store entrance.

Those competitive prices will set the tone for the rest of the customer's shopping experience.
Companies
Paint group PPG acquires Flood Australia
PPG information
PPG
A PPG manufacturing facility in Springvale, south-east of Melbourne
Penetrol is one of Flood's leading products
Subscribe to HNN weekly e-newsletter
PPG Industries, a global paint, glass and chemicals corporation based in the US, has acquired the assets of Flood Australia.

Flood Australia manufactures and distributes products such as the well-known paint additives Penetrol and Floetrol, which make it easier to paint in temperature extremes without leaving brush strokes. Other products include ESP for surface preparation and E-B Emulsa Bond, which can help exterior acrylic paint better adhere to some surfaces.

The US operations of Flood had been previously acquired by Dutch paint company Azko Nobel in August 2006. Azko Nobel had already established itself in the North American wood coatings business with its Sikkens brand, and saw Flood as an expansion of that business. According to then Azko Nobel CEO Hans Wijers:
Acquiring Flood and its successful portfolio of products will now enable us to create a focused retailer, dealer, professional contractor and consumer woodcare business and reinforce our current market position in the US, making us one of the leading players in this sector.

The North American operations of Azko Nobel were later acquired by PPG in April 2013, in a deal worth around US$1.05 billion. One of the highlights of the deal for PPG was the enhancement of its distribution network through home centres, paint dealers and company stores. The deal meant PPG had a claimed total of 15,000 points of distribution in North America.

At the time of the partial Azko Nobel acquisition PPG's CEO Charles Bunch noted:
Our already strong portfolio of North American brands, including PPG Paints, PPG Pittsburgh Paints, PPG Porter Paints, Lucite and Olympic Paints and Stains, has been significantly strengthened with the addition of well-known brands such as Glidden, Flood, CIL, Sico and Liquid Nails.

As part of the deal, PPG also obtained licenses for Dulux, Devoe architectural coatings, and Sikkens architectural wood products.

Flood Australia continued after these acquisitions as an independently-owned operation, and was the sole licensed manufacturer of the Flood range of products in Australasia, with manufacturing based in Sydney and a wide network of warehouses and distributors.

Flood's US operations date back to 1841 in the US state of Ohio. It began manufacturing its Penetrol brand in 1934.

PPG employs around 46,000 people worldwide. Its total sales for 2014 were US$15.4 billion, and it is ranked at number 190 in the Fortune 500 listing. In the Asia Pacific region it operates 33 sites in 12 countries. Its head office is located in Pittsburgh, Pennsylvania.
Products
Sesame smart lock
The Sesame lock attaches to doors and is operated by a smartphone app
PC Magazine
It has a "patented design which fits any latch in the world", according to maker Candy House
Supporters can purchase Sesame on Kickstarter in their choice of white, silver, black or pink
SpotOn is your source for laser levels and other tools
Sesame is a locking device that attaches to doors and is operated by a smartphone app in lieu of a physical key.

The Bluetooth-connected Sesame smart lock is on its way to making its US$100,000 funding goal of a 60-day Kickstarter campaign. It gained more than $60,000 in pledges from some 400 backers just hours after launching.

Sesame doesn't require any carpentry skills to install on a front door. It has a "patented design which fits any latch in the world", according to Candy House, the start up company that makes the lock.

The device slips over an existing deadbolt and is attached with supplied 3M Command tape so it can be installed on most doors.

The Sesame - the name is derived from the "Open Sesame" command from the Ali Baba tale - also has a high level encryption.

The lock is run by a smartphone app, but there are other ways to work it in addition to opening the app up. Users can also devise "special knocks" to tap on a phone or the door itself, alerting Sesame to draw back the bolt.

At the moment, there are two basic Sesame packages available on Kickstarter. For US$99, backers get one smart lock in their choice of white, silver, black or pink. This version will run US$149 at retail, according to Candy House.

Users can pay US$139 for the Sesame plus a Wi-Fi access point that plugs in nearby and connects to the Internet.

The Wi-Fi access point allows users to control the smart lock remotely, so they should never have to worry if they left their front door unlocked again. It sends alerts when the lock has been used. Candy House wants to charge US$199 for this package upon general release.

There's also a wooden version of Sesame (including the Wi-Fi access point), which can be purchased on Kickstarter for US$249. Pledges of US$279 or more get supporters multiple Sesame smart locks.

The Sesame's supplied lithium batteries promise about 500 days of use, according to Candy House. The device will send smartphones a notification when the batteries are running low.
Companies
Prefab construction savings for developer
Prefab construction is being used for Meriton's apartment development in North Sydney
Australian Financial Review
Meriton expects to cut at least five months off the construction time of its 30-storey building
Australia lags other countries in its adoption of prefabricated building methods
Subscribe to HNN weekly e-newsletter
Apartment builder Meriton expects to cut at least five months off the construction time of a 30-storey building in North Sydney.

It should save up to 20% on the construction of the building that has an end value of $200 million. Meriton Group head of construction David Cremona told the Australian Financial Review:
You're talking big bucks. You're delivering a product much earlier. It's all about delivering that product to the client as fast as possible.

Prefabrication is playing a bigger role in the construction of Meriton Serviced Apartments North Sydney, in particular through the use of steel-framed floors that replace the traditional concrete ones. The outer shell may not yet have gone up, but it is ready and waiting. Cremona said:
The first lot of steel columns go up in three weeks. We've prefabricated up to level 15. It's all waiting in the factory.

The attraction of cutting construction time to as little as eight months from the typical 13 months is obvious.

Australia lags other countries in its adoption of prefabricated building methods, but the practice is not unknown. Lend Lease took just 10 weeks to assemble the wooden Library at the Dock in Melbourne's Docklands last year.
Steel structure

Steel permits much taller structures than wood, but has less flexibility than concrete to accommodate changes along the way, so it requires more rigorous planning. Steel structures also limit buildings to more rigid designs.

The biggest hurdle to its use, however, has been the fact that steel-framed flooring has traditionally been thicker than concrete flooring - sometimes up to twice the 220-millimetre thickness of concrete - and this pushes building heights up.

In this case, however, the thickness of the prefabricated steel floor has been compressed. Ross Clarke, a director of engineering firm enstruct group, which designed the flooring system, said:
We're taking a 250-millimetre beam, but building a concrete slab within that. We are able to build within that depth a composite concrete deck. It takes a lot less concrete.

There is no cost saving by using more steel, according to Cremona. He said:
The materials cost is similar, if not a bit dearer than concrete.

But the process - being used for the first time on a residential building in Australia - is significant. Cremona said:
This is going to be a game changer if it works.
Editorial
Home improvement brand evolution
Christopher Kent's speech on economic growth
HNN sources
Graph of household consumption, 1984 and 2014
More to tradies than you thought
Give to Amnesty International
It is likely that over the next two to three years each of the major home improvement retailers will evolve its brand in a new direction.

This is despite the fact that the current brands have been quite successful. Today home improvement brands are a recognisable feature of the Australian retail landscape. Short phrases, such as "Lowest prices are..." or "Mighty helpful", are easily identified with various retailers.

This is testament both to consistency in marketing and a lot of hard work that has gone into making these phrases meaningful. The prices really are low, the staff and store itself really are helpful.

It also indicates how deep brands go in home improvement. For some clothing retailers, brand is just a label slapped on some clothing, backed up by expensive and persistent advertising.

Home improvement retailers live their brand every day. They enact it, and it informs many of the decisions they make.

Given this brand success, the forces that would lead to change would have to be quite persuasive. In this case, those forces largely relate to shifts in the spending patterns of consumers in the post-GFC economy.
Changes to spending patterns

While some retailers continue to hope that the halcyon days of 2006 may return, the reality is that the GFC and its aftermath have changed spending patterns permanently.

Some of these changes were outlined recently in a speech by Christopher Kent, the assistant governor (Economics) of the Reserve Bank of Australia. Delivering an address to the National RSL Clubs Conference on 11 March 2015 in Hobart, Tasmania, he spoke on "Australian Economic Growth - The How, What and Where".
Australian Economic Growth

The entire speech is worth reading, as it is both accessible and very interesting. Of particular interest is the section where Dr Kent spoke on the topic of "Where is the growth going to come from?" Speaking of the trends that can be seen in the economy, he said:
One such trend is the increasing importance of household and business services in the economy. Over the past 30 years, households have increased the share of their spending devoted to services, from about 53% to 65% of their total consumption.

The numbers that back up Dr Kent's words are illustrated in the following graph. Note that the semi-transparent green bars indicate the percentage difference between 1984 and 2014.
Graph of household consumption percentages: RBA

Dr Kent goes on to suggest that:
The shift in spending away from goods reflects, in part, the fall in the relative prices of goods. In turn, that reflects stronger productivity growth for goods relative to services as well as the development of lower-cost manufacturers in emerging economies. That is, the world has become much better at producing goods.

While it is clear that the forces Dr Kent outlines have had some impact, it's less certain that they are the strongest force at work. Another interpretation of the numbers above is that there has been a more fundamental shift.

The three categories that have risen the most - education, air travel and communications - suggest a pattern of their own. They could indicate that Australia is steadily progressing towards becoming more of a knowledge-based economy.

In cultural terms, that means a society that is a little less based around possessions and activities, and more based on experience and personal enrichment. A shock such as the GFC may have pushed Australia more firmly in that direction.

We should make the point that by experience and personal enrichment, we don't mean yoga classes for everyone. What we do mean is people who see real security not as that now-mythical job for life, but rather in terms of education, more experience of the world, and the pursuit of personal values.

One of the few books written in the wake of the GFC that has retained its value is Richard Florida's "The Great Reset". Writing about the changes in society he perceives in the US, Dr Florida observes:
Although spending on tangible goods, especially luxury goods, is demonstrably down, consumers haven't stopped spending completely. Some of the consumer power has been redirected towards more experiential purchases: travel, wellness and fitness, entertainment, self-expression, and self-improvement.

Later, writing on changed perspectives on brand, he continues:
Instead of showcasing logos and material bounty as a mark of achievement in life, people - successful, affluent people - are beginning to wear their lack of consumption, or at least their capacity for smart consumption, environmentally or politically correct consumption, as a badge of honour. The idea of quality is transmuting.

Though many home improvement retailers are not aware of it, they have actually already begun to make the shift to adapt to these kinds of cultural change.

For example, as HNN has mentioned a few times, it would seem that kitchens have changed from being something like the culinary equivalent of the Starship Enterprise, to intimate, warm places where the family can gather and converse - the kitchen as living-room.

Many home improvement retailers understand and are prepared to service this and similar changes in demand.

An example of a retailer which has not adapted to the shift is the Australian department store Myer. It has continued to sell "stuff", and has, unfortunately, had to pay a heavy price for this.
The brand evolution

The area of the actual consumer-facing aspects of brands is just too complex to enter into. Only a retailer itself can really judge that part of its business.

What we can look at are the basics of brands. That involves both what the core of the brand means to the retailer itself, and what the brand "promise" really is to the consumer.
Bunnings: All the dream

What really is the current Bunnings brand? "Lowest prices are just the beginning" is itself a slightly mysterious tagline.

For the average consumer, what lifts Bunnings up above the level of other retailers (and not just retailers in home improvement) is its ability to surprise.

Time after time Bunnings comes up with the unexpected product at the unexpected price point. You can sometimes see customers brought up short by these surprises in the store. (A band saw, at $99?)

Surprise, however, can only take you so far. The challenges that Bunnings faces over the coming two to three years are considerable, as HNN has already outlined. Bunnings has to expand both product categories and customer categories to achieve the growth it needs. It has to do this within the context of current store design and operations, without disenchanting its current customer base.

However, if these cultural trends continue, they may open a pathway for Bunnings towards achieving these difficult goals.

The "things and activities" culture naturally tends to stratify dwellings. It results in houses that have great bathrooms and kitchens, perhaps a great "outdoor room/BBQ" and/or a great living-room. Much of the rest of the house, though, is often not up to the standard of the more public rooms.

The experience and personal enrichment culture tends to view dwellings more holistically. Rather than a series of show rooms, it might promote the refurbishment or renovation of most rooms in a house. The very high expenditure on kitchens and bathrooms might diminish, but the overall household spend would likely be equal, if not actually more.

This is one of the paths the Bunnings brand could choose to go down. The purchase of a kitchen or bathroom renovation could become the entry point to a whole-house refurbishment, using a series of coordinated Bunnings products. This would enable category expansion, and as a consequence also expand the brand into new consumer segments.
Mitre 10: Be the tradie

Mitre 10 has found itself in a difficult position for some time with its brand. At one time it is deeply dependent on the professional, tradesman market for much of its revenue. At the same time it can't help but want some of the high-margin consumer revenue as well.

In this sense its "Mighty helpful" tagline is well thought-out in that it appeals to both groups. However, it's what could be thought of as something of a "soft focus" brand: it's encouraging, but not really that gripping.

What has changed, though, is that tradies have lost some of the associations they once had as unpleasant rough-and-tumble practitioners of the manual arts, or at best likeable larrikins. That opens up the possibility of appealing to non-professionals through their sense of their own "inner tradie".
Masters: You deserve this

Properly speaking, Masters so far does not have much of a brand presence - and that's deliberate. As with many other things, the wily managing director of Masters, Matt Tyson, has done just enough branding, while holding back until he has a better sense of the direction to go in. "Australia's fastest growing hardware store" just doesn't say much.

It's likely that Masters' new brand will place it in a different market from Bunnings. Masters will promote home improvement shopping that is a positive, enjoyable experience, without the frustrations customers may have experienced elsewhere.

As Bunnings is all about necessities, Masters' placement is likely to be about rewards instead. If the store in store concept is widely adopted, for example, you could expect to see Masters promoting its brand expertise, and product availability.

In the Masters' view, consumers will go to Bunnings if they have to, but will visit Masters' because they want to.
Home Timber and Hardware Group: It gets better

As James Aylen, the general manager of Home Timber and Hardware Group (HTHG) explained, HTHG plans to have retail outlets in built-up areas tend towards tradies, and stores in less built-up areas serve the general public as well.

The probable brand direction of HTHG lies in making elements of home improvement more accessible. As HNN has mentioned in the past, one of the main reasons tradies seek relationships with home improvement retailers is that it helps to reduce risk in what is actually a pretty risky occupation. Properly pursued, the same situation could apply to amateur DIYers as well.

The brand may choose to build itself towards something that is reassuring and reliable. It might not be the place that is the least expensive, but it is the one that will guide the amateur down the right path.
Conclusion

Strategising about brands can make it easy to forget some of what they are all about, which is a kind of pre-engagement with customers. Gareth Kay, chief strategy officer at US advertising firm Goodby, Silverstein and Partners described engagement in an interview with the editors of Think With Google:
Engagement has always been a fundamental, it's just more apparent nowadays given the rise of participatory platforms and the ability for people to interact with brands more. But there is no single definition - which is an issue. Some people account for it through time spent, number of contributors, +1s or likes, etc.
To me, though, it's more fundamental than this. It's really about true emotional engagement - making your brand matter more, making it more top of mind. This is important because when there's more emotional engagement, it means something is more likely to be effective. Lots of research shows that emotion drives behaviour - we're not rational actors.
Think with Google

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
Statistics
HNN Index for 27 March 2015
HNN Home Improvement Index for 27 March 2015
HNN sources
Supermarket boss Fergus Collins leaves Metcash
Myer share price
Click to visit the HBT website for more information
The HNN Home Improvement Index managed a rise of about half a point during the week ending 27 March 2015. The underlying ASX 200 index managed to drop 55 points, or 10 on the adjusted scale.

The big surprise was probably Metcash, which, despite an announcement of the resignation of the head of its supermarket division, managed to remain trading in a tight band around $1.50.
Bluescope Steel
Bluescope settles tax avoidance claim

The company is reported to have settled a $174 million tax bill which arose from the fraudulent actions of Anthony Dickson and an unnamed partner in 2005 and 2006.
Bluescope Steel in the AFR
Breville Group
ASX now listing Mervyn Cohen as CEO of Breville

The chief financial officer of Breville, Mervyn Cohen, is now listed by the Australian Stock Exchange as CEO as well.
Breville listing on ASX
Charter Hall Group
Charter Hall to sell office building

The company announced it has appointed Colliers International to help it sell an office building on Sydney's north shore, which will be converted into apartments. The property is expected to attract investors based in Asia, who are seeking an alternative to investing in the Sydney central business district.
Charter Hall in The Australian
Fletcher Building
Black Rock buys 5% of Fletcher

US fund manager Black Rock now has a 5% stake in Fletcher Building.
Fletcher Building in news.com.au
Fletcher to construct office building in Auckland

The office building will be constructed in Auckland's Wynyard Quarter. It will include retail and office space. When completed, it will be purchased by Goodman Property Trust and Singapore's sovereign wealth fund for $83.7 million.
Finance News Network
Goodman Group
Goodman to sell more properties

Singaporean company Mapletree Investments may buy several properties from Goodman. These could include offices complexes at the Macquarie Park technology hub. The properties being considered could cost over $250 million. Goodman Group flagged its willingness to sell assets when presenting its most recent results.
Goodman Group in the AFR
GUD Holdings
GUD Holdings to acquire company

After receiving a "please explain" letter from the Australian Stock Exchange over a surge in its price, GUD Holdings has revealed it is considering an acquisition. There is some speculation that the company in question is Breville.
Leighton Holdings
Name change goes to shareholders

Leighton Holdings has asked its shareholders to approve a change of name to "CIMIC Group Limited". The new name stands for Construction, Infrastructure, Mining and Concessions. Speculation suggests this is to distance the company from past problems with corruption, though the company insists a new name will reflect its new way of doing business.
Leighton in Architecture and Design
Metcash
Supermarket CEO Fergus Collins leaves

Saying little else, Metcash has announced the resignation of its veteran supermarket head, Fergus Collins, after 13 years of service. While the company searches for a replacement, Metcash CEO Ian Morrice will take on the role.
Metcash in Business Spectator
Myer Holdings
Myer could face legal action over forecasts

Melbourne City Investments Pty Ltd (MCI) may sue Myer for lack of disclosure, after Myer failed to disclose it would miss profit targets in a timely manner. The company claims it only realised it would miss its target by $15 million the day before it released results.
Myer in Sydney Morning Herald
UGL
UGL signs LNG contract

UGL has won a contract to provide plant services to a Curtis Island LNG facility. The contract is worth $120 million, and involves the Santos-led Gladstone LNG project. Santos GLNG's first LNG cargo will be delivered in 2015.
UGL in The Australian
Woolworths
New head of liquor

Martin Smith has been named as the managing director of Woolworth's liquor division. Previously, he ran the Dan Murphy's liquor chain.
Woolworths in AFR
Bigbox
Big box update
Woolworths has confirmed it would not build a Masters store in Tweed Heads (NSW)
HNN Sources
Team members have been hired for the Bunnings development in Swan Hill (VIC)
The construction of the Bunnings store in West Footscray (VIC) is forging ahead
Click to visit the ITW website for move information
Woolworths has scrapped plans for a Masters store in Tweed Heads (NSW); May opening for Bunnings Swan Hill; and Bunnings store in West Footscray on track for mid-year launch.
Masters Tweed Heads cancelled

Woolworths has confirmed it would not build a Masters Home Improvement store in Tweed Heads (NSW) despite having the green light from Tweed Shire Council. A spokesperson told Echo News: "Masters recently advised council that we were unable to meet the development timetable required under the contract with the landowner for our proposed store in Tweed Heads. Unfortunately this means the store will not proceed as planned."

The 51,000sqm site is now on the market with the price tag expected to be about $15 million. According to The Australian newspaper, it is being marketed by Canford Property Group's Roland Evans. It is close to proposed major house-and-land residential developments where more than 12,000 house lots are planned.
May opening for Swan Hill

Over 50 local residents are now official team members of the new $13 million Bunnings development in Swan Hill (VIC). The scheduled opening in May should provide a range of meaningful career opportunities for the latest recruits.

The Swan Hill outlet will have two kitchen displays, two bathroom displays, a nursery and timber area, along with a three-lane trade drive through. Parking will be provided for over 130 cars.
Bunnings in West Footscray

Construction of the Bunnings Warehouse in West Footscray should be complete by the middle of the year. The $50 million development will feature a heritage facade that has been retained from the old Dimmeys building. Just before the store build officially started, Bunnings chief operating officer Peter Davis said about 310 jobs will be created during construction and more than 180 when it opens.
Companies
Sika acquires Construction Technologies Australia
(l&r) Troy Hogan, managing director, CTA and Miljan Gutovic, general manager, Sika Australia
Sika
CTA is an Australian-owned manufacturer of tile adhesives and associated products
The acquisition will expand Sika's local manufacturing footprint and product range
Subscribe to HNN weekly e-newsletter
Sika has signed a contract to acquire Construction Technologies Australia (CTA), an Australian-owned manufacturer of tile adhesives and associated products.

The acquisition will expand Sika's local manufacturing footprint and product range. It should help to position the company as a leading supplier of surface preparation, adhesive and waterproofing products for tiling applications in Australia. Miljan Gutovic, general manager of Sika Australia said:
CTA's product range will increase Sika's presence in new and existing distribution channels and allows the business to leverage cross-selling opportunities. The range includes tile adhesives, grouts, waterproofing membranes, floor levellers and associated products, acoustic s and sealants.
The acquisition will extend Sika's manufacturing operations in Sydney and Brisbane, and provides an opportunity to streamline and optimise the production of powder and mortars to deliver cost savings and efficiency gains.

CTA has established itself as a key supplier to pro dealers in the last few years. Full ownership of CTA will transfer to Sika on 1 April, 2015.
Careers
Seeking opportunities
Home Timber and Hardware Group has a career opportunity for a business manager
HNN Sources
An electrical goods supplier has a role that involves managing the Bunnings account
A business manager role with responsibility for growing a network of Plants Plus stores
Visit the Mecca Website
A selection of job opportunities in the home improvement industry. HTHG is seeking a candidate with a strong understanding of wholesale and retail channels; a supplier of electrical products needs a national account manager; and a role managing Plants Plus garden centres is available in Victoria.

For further information, simply click on the images provided.
HTHG business manager role

Home Timber and Hardware Group is offering a career opportunity for a business professional to develop and drive successful sales and outcomes for its Victorian and Tasmanian store network. An individual with significant multi-store area management experience is ideal.
Home Timber and Hardware Group is seeking a business manager
Selling electrical products

An electrical goods supplier has a role that involves strategic development and planning. The successful candidate will have the responsibility for the retention, growth and development of the Bunnings account. The individual will have demonstrable experience working with a large number of SKUs as a national category manager, business or account manager in hardware, electrical products, homewares, FMCG or related industry sectors, servicing major accounts.
National account manager for electrical goods supplier
Garden retail management

Home Timber and Hardware Group has a business manager role with responsibility for growing a network of Plants Plus garden centres in Victoria and Tasmania. It would suit a professional who is sales and people-focused, with a can do approach.

The individual would undertake regular store visitations to motivate, develop and improve individual Plants Plus store performance.
Business manager role within Plants Plus retail group
Retailers
Pirch ups the ante in home appliances
Pirch has been described by retail experts as a game-changer in the appliance industry
North Jersey
Pirch's high-end approach is similar to the Expo concept that Home Depot tried and abandoned
By 2018, Pirch is forecast to have 20 showrooms
Click to visit the Globel Industries website for more information
California-based appliance retailer Pirch has seven stores across the United States, and plans are underway for an eighth.

The retailer stocks well-known brands such as Miele and Fisher & Paykel, however it goes far beyond what many of its more traditional competitors do.

The Pirch experience includes encouraging people to cook on stove tops, watch professional chefs use fully-functioning kitchen appliances, trial washing machines and dryers, and even shower to test a range of 38 shower heads in an area called the "Sanctuary". Bathers are optional.

Customers are also invited to try gourmet pizza or pastries created by in-store chefs, while sipping barista-made coffees.

The company prides itself on its unique experiential offerings and its personalised service. Delivery and installation are managed and carried out by Pirch and its carefully trained employees; it does not use subcontractors.

Situated in high-end shopping centres in affluent areas rather than industrial or bulky goods outlets, Pirch wants customers to stop in and browse to see what's available. It does not want them to just rush in when their washing machine has died and they are in panic to replace it.
Business model

Pirch's high-end approach, with the use of "vignettes" or display kitchens and bathrooms, is similar to the Expo concept that Home Depot tried, and abandoned [in 2009].

Retail consultant Hank Darlington of Darlington Consulting said Expo's problem was that the stores "tried to do too much - they had everything", selling lighting, flooring, cabinets, carpeting in addition to appliances.

Pirch, in contrast "has picked three product segments and is zeroing in on [those] to do it better than and different than anybody else. The test for Pirch will be if it can generate enough revenue to pay the rent for large, 20,000- to 30,000-square-foot spaces in high-end malls.

Pirch has been described by retail experts as a game-changer in the appliance industry. They believe it will change appliance showrooms the way Apple changed how electronics are sold.

Darlington believes the rise of Pirch will inevitably challenge conventional appliance retailers to pursue more personalised approaches. He said:
It's a very unique business model. I would be nervous if I was just a standard, old-time appliance dealer. To compete, smaller appliance stores will need to emphasise service and personal relationships with customers.

Darlington said there is still a niche for smaller appliance dealers to succeed in, but that they will have to "make it an extraordinary shopping experience" for their customers to compete with the Pirch model.
Origins

The company was established in 2009 after founders Jeffrey Sears and Jim Stewart experienced difficulties buying appliances as part of their own renovating and home-building efforts.

They decided there had to be a better way to spend money on large appliance and plumbing purchases. In an interview with the Washington Post, Sears said:
Jim and I had horrible experiences trying to buy plumbing and appliance products. People just start pushing boxes of stainless steel at you. They don't ask you how you live or how you entertain. We wanted to create a place where people would be treated as we wanted to be treated, where you would have the ability to learn about products, and use them, and be educated.

Both founders believe customers benefit from interaction with appliances to determine their suitability.

Rather than simply "push" sales, Sears says using the products in-store provides home renovators with inspiration in a way that cannot be achieved online. He said:
I think human beings want to go someplace to be inspired and gather with other human beings. If retail doesn't find a way to inspire people, then why go? I want to touch things and understand them and be educated about them.

While Pirch sells many items in the luxury-price range, it also has mid-priced appliances. Sears said:
Products start where Home Depot and Lowe's end, with a bit of overlap. We have plumbing and appliances to serve the first-time home-buyer all the way to someone who says this is the last home they are going to build, their dream house.

The retailer is set for sustained growth, with Forbes ranking it 25th on its 2015 list of promising, high-growth private companies. It has reported revenues of US$113 million, nearly double that in 2013. By 2018, Pirch is forecast to have 20 showrooms.

Sears has also been named one of the five "retail disruptors" - executives who are changing their industry - in January by the influential National Retail Federation in the US.

Story by Robyn Williams
News
Interesting links
Greenman Garden Tools use heritage designs to create its latest ergonomic range
HNN Sources
Scotts' free mobile app helps users create a custom lawn care plan
Linkio enables any electronic device to be controlled with a user's mobile phone
Click to visit the HBT website for more information
An additional roundup of home improvement stories. A family firm of toolmakers in the UK have gone back in time to create its latest range of garden tools; Scotts has a new mobile app to help homeowners create ideal lawns; Travis Perkins unveils shop floor training for recruits; and Valspar's new chalky finish paint creates an aged, distressed look. More stories below.

For further information, simply click on the images provided.
UK toolmakers launch garden range

Greenman Garden Tools, based in Devon, United Kingdom have used heritage designs to create its latest ergonomic range. The ash handles have been traditionally steam bent like farm tools of yesteryear in order to improve performance and ease of use. The slight curve allows for efficient transfer of power from hand to tool to combat backache. The line has been developed by Adam Greenman, the third generation of the family firm.
Heritage designs help create Greenman Garden Tools
Mobile app for "dream" lawns

Scotts' free mobile app helps users create a custom lawn care plan that offers step-by-step guidance for feeding, watering and seeding throughout the year. The My Lawn app provides lawn care recommendations like when to feed, seed and water their lawn - all based on their specific lawn, climate and environment. It includes automated recommendations for feeding or seeding based on real-time weather, as well as a recent and forecasted precipitation gauge. The app also adjusts the plan if the user misses a feeding.
Scotts' mobile app helps users create a custom lawn care plan
Customised store training

British builders' merchant and home improvement retailer Travis Perkins will be offering tailored shop floor training to potential recruits as it plans to boost its workforce by 4,000 staff at 400 new branches across the UK over the next four years.

Retail operations resourcing specialist Anna Ganapathee said: "It's not that most people are scared of the customers, they're just not very good at selling. It's the interaction with customers. We have noticed that in the business and we're doing something about it."
Travis Perkins will be offering tailored shop floor training to potential recruits
Chalky finish paint

Valspar's new chalky finish paint is ideal when creating a vintage style. The 40 chalky finish colours are suitable for use on wood and metal furniture, featuring a low odor and easy cleanup. The thick, ultra-matte paint can adhere to nearly any surface without stripping or priming, and it's easy to use for amateur DIYers.
Valspar's chalky finish paint helps create a "shabby chic look
Low maintenance storm windows

Red Devil's Snap-N-Seal interior window insulator system lets homeowners create a interior storm window that saves on energy and fuel bills. The product is virtually invisible so it maintains the look of the existing window, keeps out insects, pollen, mould and humidity and blocks UV rays. It also creates a sound barrier to reduce exterior noise. When not needed, the storm window is easily removed and reused.
Red Devil's Snap-N-Seal lets homeowners create a interior storm window
Linkio connects smart devices

Linkio founder Thibault Honegger successfully raised funds from a crowdfunding campaign on Kickstarter for a home automation system that enables any electronic device to be controlled with a user's mobile phone. The complete Linkio system consists of Le Hub which speaks to Le Remote, Le Plug, and Le Switch. The main component, Le Hub, links the consumer's mobile phone and their connected electronics and appliances.
Linkio enables any electronic device to be controlled with a user's mobile phone
Mobile bidet products

The attachable GoBidet from Danco easily turns an ordinary toilet into a personal cleansing device. Requiring no electricity, it features a self-cleaning nozzle with a controlled spray with adjusted water pressure and variable nozzle angle adjustments. The second new GoBidet product is the Travel Bidet, a discreet and compact portable bidet. It fits its easily in a purse, briefcase or carry-on bag.
Danco has expanded its GoBidet range
IdeaPaint plans mobile app

Boston-based dry-erase paint maker, IdeaPaint will release a mobile app in June that will allow users to capture, edit, organise and share ideas. IdeaPaint's product, which turns almost any surface into a dry-erase canvas, has been installed at more than 150,000 locations around the world to date, including offices at Facebook and Google.
IdeaPaint is set to release a mobile app in June
Award for fog-free shower mirror

ClearMirror has been awarded "Best Of Houzz" for customer satisfaction. Its luxury fog-free shower mirror was chosen by the more than 25 million monthly unique users that comprise the Houzz community from among more than 500,000 active home building, remodelling and design industry professionals.
The luxury fog-free shower mirror has been given a Houzz award
Companies
Brickworks' profit falls 25% in H1
Brickworks has experienced a fall in half-year net profit
Business Spectator
Its Austral Bricks business in NSW had the most orders since the lead up to the 2000 Olympic Games
Brickworks believes more bricklayers are urgently needed to meet the current housing demand
Subscribe to HNN weekly e-newsletter
Brickworks has lifted its interim dividend despite a fall in half-year net profit. However it expects to continue benefiting from the upturn in housing activity, which "shows no sign of easing".

In the six months to January 31, Brickworks posted a net profit of $42.204 million, a 25% slide on the $56.302 million profit recorded a year earlier. The result was impacted by nearly $17 million in impairment charges.

But underlying profit, which excludes one-off items, rose 17.6 per cent to $62.8 million. Brickworks said the impairment charges reflected a delay and risk in achieving planned operational efficiencies at the Austral Precast and Auswest Timbers businesses.

Revenue in the same period rose 7.4% to $349.616 million.

Sales revenue in the building products division rose to a record $340.6 million. Earnings before interest, taxes and significant items rose 35.9 per cent to $26.1million.

A continued increase in sales volumes and cost reduction initiatives would put Brickworks in a strong position to deliver "significantly improved earnings in the second half of the final year" compared to the previous corresponding period, the company said.

The building products group added that more land and bricklayers are urgently needed to meet the current demand in housing.

Brickworks managing director Lindsay Partridge says there's a wait of up to a year for new housing in some markets because of a lack of land releases and tradespeople to build new homes. And that is helping to push up prices. He said:
Despite surging demand, Sydney still has the lowest number of lots being released for housing development of all major capitals. This is rapidly pushing up prices and reducing the average lot size. There has been good progress in NSW to increase the release of land, but more land is required quickly. What we need are cheaper and larger lots that are readily available.

Partridge said the bricklayer shortage had become critical with the national industry also struggling to find more than 200 apprentices.

Brickworks said its Austral Bricks business in NSW had the most orders since the lead up to the 2000 Olympic Games and the boost in housing activity showed no signs of slowing down, according to Partridge.

Consequently, Austral Bricks will restart production at its Horsley Park Plant 2 in April, and prepare its second kiln in South Australia so that it's ready for production by mid-2015.

Chairman Robert Millner said all three of Brickworks' divisions - building products, land and development, and investments - had generated higher earnings.
Reports
Overview of hardware and building markets
The hardware and building supplies retailing industry in Australia is set to grow
PR Web
Weaker activity in non-residential building construction markets has restricted the wholesale sector
IBISWorld has updated its reports on the hardware and building supplies industry in Australia
Subscribe to HNN weekly e-newsletter
Industry research firm IBISWorld has updated its report on the hardware and building supplies retailing industry in Australia.

An undersupply of affordable housing and rising housing prices have contributed to industry growth. It has become expensive and time consuming for homeowners to upgrade to bigger and better homes.

Industry revenue fell in 2009-10 and 2010-11 due to subdued expenditure on private homes, but has since returned to growth in 2012-13 and 2013-14. This was boosted by positive consumer sentiment and greater expenditure on DIY renovations and home improvement projects.

Many homeowners have been deterred from moving, seeking instead to improve their existing homes through DIY renovations.

In addition, the abolishment of mortgage exit fees has made it easier for homeowners to refinance and unlock equity in their homes, which can be subsequently put towards home improvement projects.

As a result, revenue is estimated to increase at a compound annual rate of 3.5% over the five years through 2014-15. Rising capital expenditure on private dwellings and increasing household discretionary income are set to contribute to further growth of 3.3% in 2014-15, with revenue reaching $14.6 billion.

The industry is expected to continue to perform moderately over the next five years. Steady rises in capital expenditure on private dwellings, discretionary income and the number of households are likely to contribute to this performance. IBISWorld industry analyst Spencer Little said:
The competition between Bunnings and Masters is projected to remain a crucial part of the industry's structure over the next five years.

Both companies have signalled their intentions to build several new big-box warehouses over this period in an effort to increase their dominance. Smaller hardware retailers are therefore likely to find it extremely difficult to remain competitive.

A medium market share concentration characterises the hardware and building supplies retailing industry.

According to ABS counts of business data, in 2012-13 over 30% of firms in the industry were non-employing and a further 64.6% of enterprises employed less than 20 staff. These trends indicate that there are many smaller scale firms that operate in the industry in conjunction with the three major players.

The introduction of Masters stores has increased market share concentration substantially over the past five years. In addition, Wesfarmers has sought to maintain its dominance over the industry and has also aggressively expanded its Bunnings big-box warehouse network. This expansion has contributed to further increases in market share concentration over the past five years.

For more information, visit the report page:
Hardware and building supplies retailing industry in Australia by IBISWorld
Wholesaling sector

IBISWorld has also updated its report on the hardware wholesaling industry in Australia.

Weaker activity in non-residential building construction markets has restricted the industry's performance over the past five years, according to its latest findings.

As a result, demand for products such as power tools, metal fasteners, cement and paint has been muted. The same can be said for building products such as roofing materials, bricks, tiles, doors, windows, sand, paint, plaster, locks, wire netting and fibreglass swimming pools.

Wholesalers initially benefited from accelerated expansion in institutional building markets, associated with the Federal Government's primary school refurbishment program. However, subdued demand from commercial and industrial building construction markets has offset these benefits and further limited industry revenue.

Revenue is estimated to increase at an annualised 1.2% over the five years through 2014-15. Growth is expected to pick up in 2014-15, with revenue forecast to rise by 3.9%, to reach $15.4 billion. Little said:
This projected increase is due to greater demand for hardware products from residential construction markets and DIY homeowners.

IBISWorld believes the industry is composed of many small-scale firms that operate in narrow regional markets, which are typically part of a larger franchise or buying group.

There has been some consolidation of industry ownership over the past five years, but the largest players still account for a fairly small share of total industry revenue. The industry exhibits a low level of market share concentration.

Over the next five years, the hardware wholesaling industry's performance is expected to remain sluggish. Modest recovery in residential housing and non-residential construction markets is set to boost demand for many hardware products and other building supplies.

However, as competition intensifies at the retail level and instances of wholesale bypass rise, revenue growth is likely to be restricted. The 2011 entry of Masters Home Improvement is set to result in strong price-based competition.

For more information, go to the report page:
Hardware wholesaling industry in Australia by IBISWorld
Retailers
True Value profit slips in 2014
US-based co-op True Value has posted a US$54.3 million profit for 2014
BusinessWire
President and CEO John Hartmann participated in the popular "Undercover Boss" TV program
Stores using the DVT format achieved higher sales than those without the new layout
Click to visit the Globel Industries website for more information
Chicago-based hardware retail co-operative True Value has posted a US$54.3 million profit for 2014. The reported profit does not factor in the company's US$13.2m in strategic plan expenses.

Revenue for 2014 was US$1,495 million, compared with the US$1,411,507 million reported in 2013. This represents an increase of 5.9% or $83.5 million.

While revenue grew in 2014, the US$54.3 million profit was 1.8% weaker (or US$1 million down) than the US$55.3 million profit reported in 2013. Increased labour and freight costs, combined with retailer subsidies contributed to the profit decline.

Despite the decline in profit from the 2013 result, True Value's revenue, store network and gross billings enjoyed positive growth.

Gross billings for 2014 strengthened by 6% to reach US$2.02 billion, the company's highest reported growth rate in 20 years. (At True Value, gross billings include revenue from its warehouse, vendors and other fees before reductions or adjustments.)

2014 was a 53-week reporting year versus a 52-week reporting year in 2013. On a 52 week comparable basis, gross billings were up 4.9%, or US$93.9 million. Comparable store sales increased by 5.2% on a gross billings basis.

The retail co-op posted earnings of US$41.1 million including US$13.2 million of strategic plan related expenses, a decrease of 25.7% or US$14.2 million, for the same period a year ago.
New stores

President and CEO John Hartmann is pleased with the hardware co-op's performance, particularly the growth of its store network. It grew by 230 stores during the year: 126 brand new, "ground up" stores and 104 conversions. He said:
True Value's growth team had a record year attracting new members to the co-op. Gross billings from new stores exceeded lost billings from terminated stores by US$23.6 million.

During the reporting period, True Value also issued loans totalling US$16.7 million to stores involved in the implementation of the "Destination True Value" (DTV) format. The 2014 results appear to validate the investment in the DTV program.

Stores with the DTV format have reported stronger results than those without the new layout. DVT stores achieved comparable store sales growth of 4.8%, compared with the network-wide growth rate of 3.1%.

Hartmann is optimistic that its strategic plan will fuel further growth in 2015, and continue to expand the approximately 4,500-strong network on independent retailers. He said:
These achievements are the result of our members' support and the hard work of our associates as together we make the changes needed to drive new levels of engagement, growth and efficiency.

Story by Robyn Williams
Products
Cordless stick vacuums
Two cordless stick vacuums with ORA technology from Black+Decker
Black+Decker
Both the 36V MAX and the 24V MAX vacs feature a wide floor head
The latest vacuums feature Black+Decker's lithium ion battery platform
SpotOn is your source for laser levels and other tools
Black+Decker has two new high-voltage, cordless stick vacuums: the 36V MAX (maximum initial battery voltage measured without a workload is 36V; nominal voltage is 32.4V) and 24V MAX (maximum initial battery voltage measured without a workload is 24V; nominal voltage is 21.6V) lithium stick vacuums with ORA technology.

ORA, or Optimized Runtime & Airflow Technology, provides fade-free power and no loss of suction (when tested to a method of BS EN60312-1:2013 Clause 5.9). The 2-n-1 design allows each vac to function as an upright stick vacuum as well as a detachable hand vacuum.

With streamlined designs and the latest vacuum technology, the output of each new vac is maximised for serious power. The hand vac is the central component in each vacuum. It achieves 40 air watts max of power and incorporates a 12 air-cyclone system.

These features capitalise on the power potential of the unit by helping to prevent material from clogging the unit and letting air flow freely through the cyclones, helping to maintain high performance throughout the cleaning task.

The latest vacuums feature Black+Decker s lithium ion battery platform which has strong suction and fade-free power, making runtime concerns a thing of the past. In addition to long battery life, the stick vacs perform well on fine dust, large debris and all floor types including wood, tile, and carpet.

The removable hand vac and onboard crevice tool allow the vacs to reach tight spaces making them ideal for car cleanup, stair vacuuming, and more.

Both the 36V MAX and the 24V MAX vacs feature a wide floor head and a powered beater bar allowing them to cover wide swaths of floor and suck up unwanted dirt around the home. Additionally, the inconvenience of changing out messy bags is eliminated, as the vacs have easy-to-clean, removable and washable bowls and beater bars.

Four LED lights on each vac make up a circular state-of-charge indicator which shows the level of charge remaining in an easy-to-read display. Each vacuum is operated via a comfortable on/off button.

Major differences between the two units include the self-standing feature that the 36V MAX provides, so it is always at the ready and within reach. The 36V MAX is charged via a docking station while the 24V MAX is charged via wall mount. And the 36V MAX beater bar can be shut off to conserve battery power and extend runtime.
Products
Alternative to instant concrete
Sika Post Fix is a fast-setting and lighter alternative to instant concrete
Sika
Once mixed and in foam state, Sika Post Fix is inert and will not leach into the soil
The easy-to-mix solution requires no special tools and does not use water
SpotOn is your source for laser levels and other tools
Builders and landscapers can turn big projects into easy jobs with Sika Post Fix, a fast-setting and lighter alternative to instant concrete that is designed to fix posts in the ground.

Instead of using 60 kilograms of instant concrete to fix one average sized post into place, contractors can use just one 1.1 kilogram bag of Sika Post Fix. (Contents expand to produce enough material to install 100mm x 100mm post in a 900mm deep x 200mm wide hole.) It is suitable for wood, PVC, metal or concrete posts.

Sika Post Fix sets in just three minutes, reducing the time required to brace or support the post when compared to instant concrete. It hardens completely in just two hours, allowing contractors to complete projects quickly.

The easy-to-mix solution requires no special tools and does not use water. Users simply pre-mix in the bag before opening, pour and watch it expand rapidly to fill the hole and fix the post in place.

Any excess material cured above the surface of the ground can be cut away with a sharp knife before covering with top soil.

Sika Post Fix has a unique chemical formulation that does not harm the soil or surrounding environment. Once mixed and in foam state, Sika Post Fix is inert and will not leach into the soil.
Editorial
Home improvement retail strategies in 2015/16
The senior executives responsible for strategy
HNN sources
A Kaboodle kitchen display at Bunnings
The original application for the Masters at Rouse Hill
Give to Amnesty International
Australia's home improvement industry has completed its opening moves in response to the new market that has emerged since 2011. What we will see in 2015/16 is the beginning of the middle game, where strategic responses will become more important than the set-pieces we have seen so far.

Australia's three major home improvement retailers will hold strategy briefings over the next two months. Home Timber and Hardware Group (HTHG) revealed much of its strategic focus at its annual show in early March 2015.

This is a good time to review the strategies being pursued by the main groups in the industry. There are four defined strategy groups: Bunnings, Masters Home Improvement (Masters), the trade-focused Mitre 10 and Home Timber and Hardware Group (HTHG), and independent retailers.

To give the strategy of each of these groups a label, they would be (respectively) vertical, horizontal, business-to-business service-oriented, and precision market fit.
Bunnings: Vertical

While Bunnings isn't vertically integrated in the classic sense, in that it doesn't own its supply sources, it is heavily focused on its supply chain as a driver of its business.

It could be said that for Bunnings, its individual retail outlets work as the best possible expression of its supply-chain dynamics. It works hard to get the right product at the right price. Once that is done, the task of the store is to make those products available with as little fuss as possible. Marketing is largely about notifying its customers about the great deals on offer.
Challenges

In the coming financial year of 2015/16, the main challenge facing Bunnings will be finding the growth necessary to justify its expenditure in vastly expanding its retail space over the past five years.

The respected Citigroup retail analyst Craig Woolford has clarified some of the nature of this challenge. His analysis indicates that Bunnings may have developed too much retail space for its current market reach. The unneeded infrastructure will exert a drag on earnings, which inhibits future growth, as well as making earnings more vulnerable to a market downturn.

This doesn't mean Bunnings was necessarily wrong to expand. A major driver behind the floor space expansion was the need to inhibit the development of Masters as a competitor. This strategy has worked, but it came at a cost.

Basically, if a competent company is willing to lose $900 million to enter the market in which your company has a major interest, it is going to have an effect. The contribution of Mr Woolford's work is to make plain the exact locus of that cost effect on Bunnings.
Finding growth

Store expansion can be seen as something we might call proximity-based marketing -- people are more inclined to use a home improvement store that is close by. As a strategy, it promotes expansion inside an already defined market -- you are not necessarily attracting different sorts of people, but rather more of the same sorts of people who regularly visit your store.

Further, as the stores have themselves not evolved in this process, the nature of the retail sales made has not changed, either.

For Bunnings to achieve reasonable growth it needs to not only expand within its established markets, but to also gain access to adjacent markets as well. That is always tricky, but it is especially difficult for Bunnings because it has spent a decade fine-tuning its marketing and retail approach to its current, quite specific market.
An example

Kitchens provide a good example of this. HNN has written in the past about how much we respect the main kitchen supplier for Bunnings, Kaboodle, and its approach to the market.

What Kaboodle has done is to take a narrow kitchen category -- basic and inexpensive -- and rev that category right up to the redline. In doing so, it has enabled many Australians to obtain a satisfying and stylish kitchen on a very limited budget.

In the coming financial year it is likely the kitchen category that is just above Kaboodle's will prove to be at least as profitable. We could think about the Kaboodle offering as being "unbelievable value". The offering immediately above that is something like "surprisingly affordable luxury".

To explain why Bunnings could experience some difficulties in entering that market, we are providing some snaps below taken at Bunnings stores on a Saturday morning between 10am and 12noon.

They show one of Kaboodle's real achievements, which is an attractive compact display of many of its kitchen styles -- a great marketing tool. However, as shown in these pictures, these marketing units do not always get displayed to their best advantage.
A Kaboodle kitchen display in a Bunnings store
A Kaboodle kitchen display in a Bunnings store
A Kaboodle kitchen display in a Bunnings store

We do not intend these pictures to be critical in any way of Bunnings. We are not saying Bunnings or its store managers have made any kind of "mistake" at all here. These scenes are typical all over Bunnings stores, and are a result of the company doing restocking during its normal dayshift -- a practice that helps directly to reduce costs.

It is our impression that Bunnings customers actually like this kind of disorder. It gives the store a buzzy, market-like feel, and makes them feel comfortable and involved.

However, if you are trying to sell kitchens to people in the "surprisingly affordable luxury" segment, these kinds of displays are a complete buzz-kill. No matter what the price, it will not be possible for them to relate to the product and make a purchase. It is something, for example, that you just would never see at IKEA.
Putting the picture together

The standard riposte that Bunnings makes to analyses such as that put forward by Mr Woolford is that the company currently controls only 17% of a $45 billion market, and that there is thus -- to use a phrase from the managing director of Bunnings, John Gillam -- "lots of runway" in home improvement retail for expansion.

There is some truth to the claim. The essence of Mr Woolford's work, however, is that Bunnings' move to further expand its retail floor space is not the most effective -- perhaps not even an effective -- way of accessing that "runway".

Most of the $37 billion of the home improvement market Bunnings doesn't control is not in the products the company sells or the markets it currently reaches. To gain access to those markets it needs to actually evolve the stores themselves. More floor space selling the same products to the same markets does not address the problem.

The process of evolution is difficult, complex and intense. Bunnings may have capabilities in that area, but these are not currently especially on display.

This is just one example of the types of challenges Bunnings will face over the coming financial year. Almost every expansion into adjacent markets features a similar problem. It is going to be really fascinating to watch how Bunnings develops strategies to overcome these difficulties.

Not to mention seeing if Bunnings has developed an e-commerce strategy for 2015/16.

An article on Mr Woolford's analysis is available:
Fairfax Media
Masters: Horizontal

Early signs from Masters indicate that it will most likely be pursuing a horizontal strategy. James Aylen, general manager of the HTHG described the model store that Masters will be opening in Sydney in April 2015 as operating on a "stores-within-store" design, which is a classic configuration of a horizontal offering.

The vertical Bunnings strategy relies in large part on economies of scale to make it viable -- selling lots in a narrow range. A horizontal strategy relies on economies of scope -- selling fewer of each of a wide range of items, resulting in a larger overall sale.

In horizontal retail strategies, the retail outlet represents much more than the end point of an efficient supply-chain. It is a highly complex, competent tool that effectively promotes multiple, cross-line purchases. This model also relies heavily on advertising as a key part of the strategy.

While this model overcomes the very difficulties that Bunnings faces in terms of expansion into new product lines, it can suffer from one problem that Bunnings has never had: a lack of clear market definition.

This is the primary task facing Masters in the coming financial year: it needs to establish an identity. Hopefully, the stores-within-store format will help it to do this, if it is backed up with adequate advertising.

Beyond that, HNN really can't say much about Masters at the moment. As with Woolworths in general, it is very much a "wait and see" situation. Hopefully the company's strategy briefing will reveal more detail concerning future plans.
Mitre 10 & HTHG: Business-to-business service-oriented

Mr Aylen of HTHG has offered the clearest description of this strategy. He stated simply that there were customers who valued service, and those who did not, and that most tradies fell into the former category, and were thus a prime target market for HTHG.

It seems fairly evident that not only HTHG is heading in this direction, as Mitre 10 is ramping up its efforts to appeal even more to tradies as well. On the surface it is a fairly typical strategy of defining the target market as being other businesses rather than consumers.

One of the difficulties with the way both Mitre 10 and HTHG seem to be approaching this market is that it is seen as being more of a defensive than an active market-seeking activity.

The semi-independents that dominate these groups often seem to have a sense of having been "hard done by", as they have watched many of their homeowner customers gravitate towards Bunnings and other large retailers.

In 2015/16 we can expect to see that attitude begin to shift as these retailers more fully commit to the new realities. As this change occurs, attention will move to how to really get the most out of the tradie market.

One thing to consider is what "service" really comes down to, and what its true value is in relation to doing business. Many retailers seem to think it is largely a social capability, and that tradies would rather buy things from "friends" than from the more corporate sales force of other retailers.

However, what "service" really comes down to for many tradie businesspeople is the reduction or even elimination of some kinds of risk. Building especially, and the trades in general, are actually very risky occupations for all kinds of reasons.

There is the risk involved in actually doing the task itself, for example. This depends often on being able to adapt to unexpected situations that crop up while the job is in process.

Weather can completely wreck the best managed plans of any construction project manager. Accidents happen. Machinery breaks down. And, perhaps worst of all, sometimes people don't pay, or they don't pay on time.

A good relationship with a supplier for a tradie means that there can be a reduction in risk. That can translate directly not only into better peace-of-mind, but also more dollars in their pocket.

If there is a maximum amount of risk that is tolerable in any one job, then having the supply-based risk reduced means it makes more sense to take other risks, and thus expose a business to more potential for profits.

It is notable that US-based retailers use a variety of tools to help gain and maintain their trade customers. This includes special credit arrangements, the ability for tradespeople to "warehouse" orders for a time at their stores, and freely offered planning and business financial advice.

It will be interesting to see if Mitre 10 or HTHG manage to develop this kind of more active strategy.
Independents: Precision market fit

One of the more interesting statements HNN heard at the HTHG show came from Mark Hunter, the CEO of Spot-On Lasers and Tools when he was speaking about his product-line market strategy. In part he said:
Because we are the largest importer [of laser tools] in this country, our range is so diverse, going well beyond 80 products, so what we do is to customise those products for position points. We can actually give every retailer their little bit of autonomy, so they actually can have a point where they are making generous margins.

This is a concept HNN has heard from a range of importers and product developers, though Mr Hunter states it very concisely. Where larger retailers present customers with a wide range of products, independents are increasingly seeking out just the "right" products, some of them a little unique.

This approach satisfies those customers who are really looking for inside information on their purchases, rather than buying strictly on price or features. Will the product last, will it perform well, can it be repaired or serviced, is it the latest technology -- all these issues are concerns for them.

Aside from tradies, customers in this category include prosumers and homeowners who see home maintenance as important, but seek to reduce any and all frustrations and difficulties associated with it.

In this sense, some independent retailers are evolving into speciality shops where, while service remains important, expertise and personal advice are just as essential.
Summary

While FY 2015/16 promises to be a very interesting and exciting year for the home improvement retail industry, HNN believes it will end up being something of a preliminary to more major shifts in 2016/17.

We expect to see the market for smart home products develop momentum during that period, and with it a more technological focus develop as well.

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
Hthg
Home Timber Hardware Group Show 2015 - day 1
Pallet Lane, where suppliers offers deep discounts on bulk
HTHG offers helpful planning services for retailers
The Karcher stand - interview later
Click to subscribe to newsletter, delivered every Tuesday
So far, the show is looking pretty good, with a lot of suppliers staking their claim to some of the precious HTHG turf.

We've already recorded some videos with Stanley, Fothergills, Karcher, Spot-On, and a couple others, and these will be uploaded later.

For now, there is just this quick intro from HNN editor-in-chief Betty Tanddo.

Products
No grout shower floor
Corian's shower floor has fully integrated linear drainage from Stormtech's Marc Newson line
Stormtech
The Marc Newson designed grate comes in a choice of stainless steel or white coated finishes
The linear grate helps creates a streamlined look for contemporary homes
SpotOn is your source for laser levels and other tools
A new shower floor made from Corian(r) has been released, featuring fully integrated linear drainage from Stormtech's Marc Newson series.

The Corian floor tile comes as one solid piece with no grout lines, for easier cleaning and a smoother finish than traditional tiling. Packaged with the linear grate, it creates a streamlined look for contemporary homes.

Offered in Corian's "Glacier White", the floor's surface is warm and sensual to the touch, adding a sense of tranquillity to spaces. Available in seven sizes, the floor comes configured with a threshold or wall aligned drain to balance any bathroom design.

The Corian shower floor along with the drain can be installed flush with surrounding tiles and, importantly for bathrooms, is a non-porous surface that is also stain and slip resistant.

The drain features Stormtech's award-winning Marc Newson designed grate in a choice of stainless steel or white coated finishes.

Linear drain design was invented by Australian company Stormtech to allow for a wider range of floor surfaces and flooring configurations than is possible with traditional centre wastes. Managing director, Troy Creighton said:
We expect this new Corian shower floor to be welcomed by architects and designers specialising in both residential and premium commercial developments, including hotels and resorts.
For home renovators, this grout free surface presents a modern and low maintenance solution for ensuite and bathroom makeovers.
Reports
More women doing DIY in New Zealand
Mitre 10 NZ research found almost 95% of women said they did some form of DIY
New Zealand Herald
Research found that couples talked about DIY in terms of building their relationships
Almost 30% of men surveyed still felt DIY was a task reserved for the bloke of the house
Subscribe to HNN weekly e-newsletter
Research conducted 10 years ago by Mitre 10 New Zealand found 61% of women had done DIY in the past two years. This year, the hardware chain's research found almost 95% of women said they did occasional, some or a lot of DIY. Just 5% did none.

It found that 66% of women disagreed or strongly disagreed that DIY was a man's job, compared to 38% of men.

But while women were increasingly confident about getting stuck in, men were not in a hurry to hand over the tools. Almost 30% of men still felt DIY was a task reserved for the bloke of the house.

If the Mitre 10 survey is anything to go by, women are getting better at DIY with every generation.

It found 61% of women think they are better at it than their mothers, compared to 47% of men who rate themselves as being more skilled than their fathers.

But men are still more confident about their abilities. Nine per cent of men rated their skills "excellent", compared to just 1% of women and, while half of the men surveyed say they're "above average", just a quarter of women say the same about themselves.

Mitre 10 New Zealand CEO Neil Cowie says the survey's findings still show a gender gap, but it is closing. He said:
We started researching this more than a decade ago, and back in 2004 we saw a noticeable increase in women getting into DIY and acquiring more skills.
Now we're seeing that the skills gap has closed, but women tend to underrate their knowledge and abilities.

Cowie says there are differences in how men and women approach their DIY work. He said:
Our research shows women are happy to ask their partners for help with DIY but men almost never do. Men are more likely to visit a home improvement or building supply website to get the information they need.
We discovered that men are comfortable with a multitude of tasks across the board, in particular building and construction, repairs and using power tools.
Women, however, are happy tackling gardening, painting and wallpapering but otherwise don't rate their knowledge with other DIY tasks.
DIY nation

New Zealanders are more likely to get into DIY than people in other parts of the world.

Kiwis spend about NZ$1 billion a year at DIY stores and it is a big part of the country's popular culture, reflected in television shows, such as Grand Designs, The Block and the latest in the genre, Our First Home.

And with rapidly rising house values, many are using the extra equity in their home to renovate rather than searching the competitive market for a new property.
National identity

University of London senior lecturer Dr Rosie Cox has researched DIY and gender in New Zealand, and says mastering DIY is a big part of Kiwis' sense of identity. She said:
Home ownership and the tradition of working on houses - including building houses from scratch - is part of the history of European settlement of New Zealand.

But it has traditionally been a man's story.
There has been a tendency for this history to be told in male terms and this can mean women's contribution to the practical aspects of home building and home maintenance, and their proficiency at DIY, is overlooked.
It turns into a simple story of New Zealand identity whereby what it means to be a 'proper Kiwi bloke' is to be good at DIY and there is little space for women.

But she says it should not be surprising that women are embracing the image of a New Zealander being someone who can mend anything. She said:
The question that remains is how Kiwi men will deal with this: will they cling to the idea that DIY is men's work or in 10 years' time will we see even more couples working on their homes together, enjoying the fruits of being the most 'handy' nation on earth?

When Cox started her research, she was surprised at how much practical work Kiwi women were doing. She said:
I had never been to New Zealand and I thought it wouldn't be different from the UK but it was.

Of the people she spoke to, the only person who did not do any DIY was a woman married to a builder.

Younger people told her DIY was a part of their social life - a group of friends would come over and work on someone's home, pour the concrete for the driveway, then have a barbecue. The next weekend it would be someone else's turn. She said:
People talked very much about how social it was. It was part of being a good family member or friend.

Couples talked about DIY in terms of building their relationships, "making a little world together". That was driven by how expensive housing in New Zealand is, she says.
It's increasingly common to find somewhere that isn't up to scratch and have to work on it.

One man told Cox that while his wife was pregnant, he felt painting the house was a way to make a contribution. Cox expects the gender split on DIY will become less apparent over time. She explains:
If children see mum and dad working together on their house, they're more likely to think that's what you do.

Dr Virginia Braun, associate professor of psychology at Auckland University, says gender differences in New Zealand have traditionally been less stark than in some other countries. She said:
The first female European settlers pitched in to get things done in a way they might not have done in their home countries.

She says it's not surprising women are taking on more DIY, in part because there are fewer traditional heterosexual relationships. She said:
There are many contexts in which women are not in a relationship with a man and DIY might be necessary. And that's aside from situations where women in relationships with men might want to do it as well.
Products
Timber coatings online
The new Sikkens website acts as an online resource for timber coatings
Sikkens
The "What's your project?" tab on the site is interactive
The "Gallery" tab showcases a wide variety of interior and exterior projects
SpotOn is your source for laser levels and other tools
Interactive, educational and inspirational, the revamped Sikkens website acts as an online resource to provide users with informative step-by-step guidelines, how to videos, useful tips and answers to regularly asked questions.

Whether coating a deck for the first time, maintaining exterior and interior trims, or rejuvenating outdoor furniture, visitors to the site can utilise the interactive "What's your project?" tab. It helps ensure the correct processes and products are being used for the type of timber and project.

After users select their chosen project type, a step-by-step guide is generated with information on recommended products and tips on achieving the best results.

Confusion and commonly asked questions around timber types and industry terminology are also addressed on the website, helping consumers to be well informed before commencing their projects.

The "Gallery" tab showcases a wide variety of interior and exterior projects to demonstrate the end result when using Sikkens' high quality coatings. It also includes a collection of project videos featuring Sikkens in Network Ten's latest renovation series, The Home Team.

The new website also offers how to videos demonstrating various Sikkens products and how to use them effectively. Video content includes tutorials on how to clean, maintain and recoat decks, as well as staining and protecting timber windows and doors.
Regions
Construction to begin in Providence
Construction will soon start on the 7000-home community in the Ripley Valley, Ipswich (QLD)
Queensland Times
The start of housing construction would be a windfall for local builders and tradies
The Ripley Valley will accommodate 10% of south-east Queensland's population growth
Give to Amnesty International
Amex Corporation, developers of the 7000-home community in the Ripley Valley, Ipswich (QLD) say they will be hitting the go button on housing construction this month.

Providence project director Michael Khan said construction on up to 300 homes is expected to start during the next 12 months. That's on top of millions of dollars' worth of construction on parklands, road networks, playgrounds and a neighbourhood centre. Khan said told the Queensland Times:
At our peak this year, we're expecting more than a thousand workers at any one time to be actively building on site. Right now, construction has just started on a 24-home display village and work will soon begin on the homes of our first residents...

Khan said the start of housing construction would be a windfall for local builders, and create hundreds of jobs for locals. He said:
The building industry has believed in us from the very beginning, with land in the display village completely selling out on the day of release to the builders.

Amex said Providence will be developed over the next 20 years and eventually house up to 20,000 people. It will also include two primary and two secondary schools, a health and wellbeing precinct and 200 hectares of retained bushland and landscaped open space.

Over the next 25 years, the Ripley Valley is projected to accommodate 10% of south-east Queensland's population growth, with a projected population of 120,000 people and significant employment opportunities for the western corridor.
Reports
BIM represents future of construction
BIM allows contractors and designers, architects and engineers to use one data platform
Sydney Morning Herald
Digital technology lies at the heart of BIM
The Victorian chapter of the Master Builders Association uses large-scale BIM models
Subscribe to HNN weekly e-newsletter
The Victorian chapter of the Master Builders Association has a Building Leadership Simulation Centre in Port Melbourne. And its general manager Marc Lyons is adamant that Building Information Modelling (BIM) is the future.

The centre uses large-scale BIM models such as a 24-storey office and two residential homes as part of its training.

Digital technology lies at the heart of BIM, where a building is digitally designed from the ground up in 3D. The traditional 2D drawings are transformed into 3D representative models.

All the players in a project -- contractors and designers, architects and engineers -- use one data platform, the same 3D design.

Architect Jason Howden is the technical BIM manager at Warren and Mahoney, which has about 200 employees in Australia and New Zealand. He is using BIM in the reconstruction of earthquake-hit Christchurch.

Howden said BIM technology was quite advanced but the process -- using the technology -- was not as advanced. He told Fairfax Media:
Everyone in design and construction is trying to get their head around the technology. For large companies, the process takes time. Smaller firms can adapt more quickly.

Howden said, basically, BIM was a "big boys' Lego set". The various parts are manufactured separately and put together on-site.

This approach encourages prefabrication. With certainty about how the building is going to fit together, complex parts of the building can be made in a factory, then transported to the site where they are put together.

Howden said BIM also had implications for workplace safety, as working in unsafe places -- such as scaffolding or at the top of rafters -- became a thing of the past.

Melbourne architectural practice Hayball pioneered the use of BIM locally, introducing the technology in 2005. Hayball director Tom Jordan said:
We haven't looked back since. It immediately demonstrated its usefulness and its economy, particularly on large-scale projects.

Lyons said BIM was mostly a design tool for architects at present but was used less by builders. But this is mainly because the clients are not demanding it. He said:
Builders are adapting it but still have to wear the cost themselves.

In other countries, such as Britain and Singapore, the demand for BIM was more client-driven. There, clients received the 3D model of the building once the project was completed and used it for management and upgrades. Lyons said:
This is the full BIM life cycle.

Howden said the use of BIM generated 10 to 30% efficiency gains compared with traditional building methods. He said:
But it's a question of how you use the efficiency gain. You can gain time, but that extra efficiency can be used in other ways, such as taking longer to do the design work. It's hard to see the actual cost.

Australian architectural firm i2C has joined forces with British company Ryder Architecture, which owns half of the BIM Academy in Britain with Northumbria University. This will bring BIM Academy's skills to Australia's shores.
Editorial
The emerging Masters strategy
Valspar store setup in a Canadian Lowe's
Apple has tried out store-in-store
Store within store suitability chart
Give to Amnesty International
For nearly the past year Masters Home Improvement (Masters) has been, to put it nicely, quiescent. Given the struggles of its parent company, Woolworths, questions have been raised if it is really a sustainable business.

Masters' strategy seems to have been more "duck and cover" than anything else recently. The managing director of Masters, Matt Tyson, appears at quarterly earnings conferences, but says nothing.

The red ink keeps getting redder. Many of its retail operations fail to impress. Its marketing efforts are lacklustre. Store expansion has slowed.

Yet HNN believes none of this is accidental, or the result of neglect. Indeed, anyone who thinks Masters is down and out hasn't yet understood just how wily Mr Tyson can be.

Much of the underlying, real strategy can be discerned in a single, apparently throw-away line repeated constantly by both Mr Tyson and Grant O'Brien, the managing director of Masters parent company Woolworths. Masters, they both tell us, is a startup.

Given the copious losses by Masters so far, it is tempting to think this is just another diversion, among many.

In fact, Mr Tyson's reference to Masters as a startup is likely a very exact one. If we probe deeper into this we can discern something of both Masters' current strategy, and its strategies to come.

It is a line of thought that leads us directly to the significance and potential of Masters' upcoming Rouse Hill retail outlet.
Masters as a startup

Home improvement retail is similar to, but also very different from supermarket retail. Shortly after the UK-based Mr Tyson arrived in his new position, he understood that, for Woolworths, home improvement was a radical new venture, and not an extension of existing business processes.

This meant that Woolworths needed to take the business back to basics and virtually start over. However, this development had to take place in the context of work already completed. Mr Tyson needed to find a way to evolve a new business from inside the shell of what was essentially a poorly managed, near-failed enterprise.

Nowhere was the previous waste of resources more evident than in Masters' real estate choices. Many of the existing Masters stores were in poor locations that would require significant expenditure before they would return a real profit.

Wisely, Mr Tyson cut back on future expansion, lessening expenditure, and also enabling Masters to be more choosy about where and what it built.

He also put in place a series of interim strategies. Financial analysts had criticised Masters' poor marketing, particularly the inconsistency of its campaigns. But Masters launched a single, consistent campaign that, while it was quite bland, was inexpensive and did the job of keeping the Masters name in front of the public.

A similar set of interim strategies went into managing the Masters stores themselves. As near as HNN can tell, stores were triaged into one of three tiers. Stores that were in reasonable locations received good management and careful consideration of stocking. Stores in less promising areas seem to have been maintained to standards, but not managed quite so effectively.

The third tier consisted of new stores that had been previously planned and occupied good locations, such as in Adelaide's airport district. These received a revamped and re-imagined layout that improved on prior Masters stores.

Meanwhile, concealed from public view, the real activity in terms of strategy was taking place on another, fourth tier of stores. This represents the real startup that Mr Tyson has been working on, the home improvement Phoenix set to rise from the ashes of the first stage mistakes.
The road to Rouse Hill

In late April or early May 2015 Masters will open a new store concept at the Sydney Business Park near Rouse Hill. Few details of this store have yet emerged. The most significant comment came from James Aylen, general manager of Woolworths' Home Timber and Hardware Group, who described the concept as being "store within store".

It is HNN's belief that the Rouse Hill store is something much more than just Masters' most advanced retail space -- though that would be enough in itself. One of the features of the Rouse Hill location is that it is an absolute hotbed of retail competition -- we think of it as the equivalent of a retail cage-fight.

There is Masters. There is Bunnings. There is also Costco. And if that's not enough, there is an IKEA outlet as well.

What this really is likely to be is a testbed store for Masters. In this environment the company will be able to test out new ideas with direct competition every day, as well as closely watching to see how the competition responds to its own initiatives.

But let's take a look at what we are likely to see in this store.
Store within store

The end retail model that Masters seems set to implement is store within store (sws). This would be unique to the home improvement retail industry in Australia, though variants on it have been tried elsewhere, including the UK and the US.

While sws seems simple, it is actually a quite complex retail strategy. The basics are that a retail store leases out floorspace to (usually) a supplier/manufacturer of a product. It is then responsible for most aspects of selling the product, including supplying staff, product, customer service, setting pricing, and so forth.

The two core factors at work in making a choice between sws and normal retail are the issue of the margin, and the issue of efficiencies.

In normal retail, margin is extracted at least twice (supplier and retailer) and often three times (supplier, agency, retailer). In sws margin is extracted only once, by the manufacturer.

In the sws situation the supplier/manufacturer is directly facing the consumer, and thus able to directly adjust margin/volume to achieve the optimum setting, with the added advantage of a far wider range of settings than in normal retail.

A number of efficiencies also occur in sws. The retailer is no longer concerned about the financial implications of inventory, and inventory concerns are minor for the supplier/manufacturer.

The supplier no longer has to train people who then pass on their knowledge to retailers -- it has a direct relationship to the customer.
Substitutability, return on customer service and traffic

A number of interesting analyses of this system have been published. One of the best, simply entitled "Store-Within-a-Store" by two US-based academics, Kinshuk Jerath and Z. John Zhang, was published in the Journal of Marketing Research in 2010.

A draft version of the paper can be obtained as a pdf online at:
Store within store paper

It is an interesting paper because it contrasts sws with "normal" retail, and a mixed sws and normal retail system. These contrasts are driven by considerations of game theory (and the interesting mathematics that goes with that). Beyond the abstract content, however, there are some very useful practical conclusions drawn.

In particular, the authors propose that there are three main forces at work in determining the viability of the sws model. These are: the substitutability of a product (how unique it is in the market); the effect that customer service has on sales of the product; and the degree to which offering the product improves overall store traffic.

In terms of the first two elements, the paper's basic modelling conclusions are summarised in the following graph:
Comparison of retail models

While there are a number of subtleties to this graph, what it clearly communicates is that products with a higher degree of uniqueness (less substitutability) are more suited to the sws system.

One of the main reasons for this is that in commodified, easily substituted products, the degree of competition at the wholesale level is higher than at the retail level. This can lead to high levels of margin on consumer purchases, and the retailer will be better off taking advantage of these directly.

In terms of return on service (a measure of the extent service contributes to sales revenues), sws is most suitable for products that have a moderate to high requirement. The reason for this is similar the one for substitutability.

If a product responds well to the provision of high levels of service, there is likely a potential to boost margins substantially. The retailer is better off taking direct advantage of these margins.

Traffic is very straightforward. If including a product on a sws basis improves store traffic, then this is a good thing for the store as a whole. More traffic means not only more sales and more revenue, but also increases general demand, which should lead to higher margins.
Effects on inter-store competition

Given the store's situation in Rouse Hill, and Masters' overall difficulties in facing down Bunnings, the other big question that needs to be answered is whether sws is effective in dealing with competition.

The conclusion of the paper's authors is that it is, overwhelmingly so. The three factors that are mainly considered are the degree to which one store's products can substitute for the other store's, the general substitutability of the product and the return on service.

Where the inter-store substitutability is high, the in-store product substitutability low, and the return on service high, sws is strongly indicated.
What we can expect at Masters

If we presume that some of these conclusions form the basis of how Masters will implement sws in Rouse Hill, it is possible for us to look at some ranges of products and imagine how these might be presented.
Paint

Paint is probably the easiest category to look at on a sws basis. It would be a simple transition for Valspar to begin to sell its paint on a sws basis inside Masters.

Valspar already has staff trained in customer service working in Australia. Its in-store sales presentation platform is already extensive enough that it could easily convert this to a full in-store offering.
Power tools

In keeping with the analysis above, it is likely that Masters would continue to sell its 909 and Wesco house-branded tools, as these represent the highly substitutable, commodity-end of the market, where the company could benefit from better wholesale margins.

In the areas above that, it is likely to adopt a staggered, tiered approach to products, with different brands given access to a particular price/quality niche exclusively.
Kitchens

Kitchens, like paint, should be relatively easy to convert to a sws sales model. One change might be the introduction of more than one kitchen supplier, with the product lines geared towards different markets.
Appliances

This will probably be one of the trickier areas to convert to sws. The tension will be between treating it in the same way power tools are likely to be treated, offering a tiered brand niche to each supplier, or allowing direct competition between brands.
Competition with Bunnings

Will this strategy help Masters take the fight to Bunnings? It is difficult to say. Certainly there are good competitive advantages in the sws model.

Where Bunnings is expert at getting suppliers to reduce prices, the sws model effectively provides a direct incentive for suppliers/manufacturers to accept low prices if it makes sense in the market.

In economic terms, you would say that what would happen would be a conflict between Bunnings' economies of scale, and Masters' economies of scope. But one thing is for sure: it is going to take a real lot of scope for Masters to begin to dent what scale provides to Bunnings.

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
Statistics
HNN Index for 20 March 2015
HNN Home Improvement Index for 20 March 2015
HNN Sources
Myer did not have a good couple of weeks
Metcash has clawed back some of its value
Click to visit the HBT website for more information
The HNN Home Improvement Index recovered from a dip over the past two weeks, but did not return to its previous high from 20 February. On 20 March 2015 it stood at 1023.81 points, up 13.09 points on the previous week.

In contrast, the underlying ASX 200 index climbed from 5814 points to 5975 points, or 1081 points to 1112 points on the comparative scale to the HNN Index.

Myer Holdings was the worst performing stock, losing 14% of its value through the week. Metcash recovered nearly 8% of its value.
Market events

The following companies reported news of significance during the indexed period.
Boral
Share buyback

Boral plans to buy back around $236 million of shares over the next 12 months. The company is in a position to make the buyback after the conclusion of a number of positive deals, including a joint venture with CSR to make bricks.
Boral in The Australian
Leighton Holdings
Name change?

As Leighton finds itself embroiled in a number of corruption scandals, it may be planning on a name change. Leighton Holdings lodged an application to trademark "Cimic" with IP Australia, the government agency that administers intellectual property rights, on March 3. It filed a similar application to trademark "Pacific Construction Contractors" and "PCC" on March 12.
Leighton in Fairfax Media
Lend Lease
Malaysian joint venture

Lend Lease has entered into a joint venture with the Malaysian government body 1MDB. The venture will be involved in the development of The Lifestyle Quarter at TRX in Kuala Lumpur. The development is estimated to be worth $2.8 million.

Lend Lease will be responsible for 60%, while 1MDB will carry the remaining 40%. 1MDB is thought to be under financial pressure, with it coming close to not paying an important loan payment.
Lend Lease in The Australian
Myer Holdings
First half 2014/15 results

Myer reported a poor result for the first half of 2014/15. Earnings before interest and tax (EBIT) fell by 20.8%, coming in at $100.2 million. Net profit after tax (NPAT) fell by 23.1% to $88.8 million. The company also reduced its future earnings projection, giving guidance for second half NPAT of between $13 million and $18 million, as contrasted with $17.5 million for the previous corresponding period. A key factor in this decrease is an expected increase in costs during the period.

The company's newly appointed chief executive, Richard Umbers stated that:
We acknowledge that in recent years, cost growth has outpaced sales growth, and profits have declined. At a macro level, the challenges are well known, particularly the globalisation of retail which has brought new competitors to our shores.
Digitisation has both empowered the consumer and created new channels to market. Customers have changed the way they shop and their expectations of retailers have changed significantly.
Some elements of the existing strategy represent solid retail fundamentals. However, overall it did not deliver a business model able to respond to this new retail environment and we have lost relevance with some customers.
There is strong evidence that department stores can transform and be inspirational to customers. Our international peers have responded to disruption by leading in omni-channel, by reinventing the in-store experience, overhauling the range, and by differentiating through innovation.
Our new strategy to bring the love of shopping to life will be guided by a clear vision and a plan to win back marketshare, to respond faster to change and deliver a sustainable recovery in earnings.
An extensive customer research project using internal and external data sources has delivered a detailed analysis of the current and future Myer customer, and the merchandise and services they want to enrich their lifestyle.

The company's share price fell from a high of $1.90 in early March, to $1.35 on 20 March 2015. This has raised speculation that the company may well be a takeover target.
Myer Holdings results
Pact Group
Digital printing for packaging

Pact Group has installed and commissioned a new digital printing platform. The company says that the direct-to-container process is more efficient and flexible than traditional off-set and in-mould label methods. It is particularly useful in short-run promotional packaging runs.
Plastic News
Wesfarmers
Target moves out of pricey St Kilda digs

Wesfarmers' underperforming sub-department store Target has moved out of expensive office space in Melbourne's St Kilda. Some jobs have moved to Geelong, and others will be serviced by a hot desking space above the retailer's Bourke Street store in the Melbourne's CBD. The move could save Wesfarmers as much as $1.2 million a year.
Target in Fairfax Media
Westfield
Free WiFi offers two-way information flow

A deal with Optus will see customers at Westfield shopping malls able to download one gigabyte of data each day through provision by the listed technology company SkyFii.

As part of the service, SkyFii will be able to track the whereabouts of customers using the wireless network as they move through the shopping mall. SkyFii will also be able to serve personalised content to shoppers.
Westfield in Business Insider
Woolworths
Woolworths close to completing system-wide software upgrade

Woolworths will soon complete a $100 million upgrade to its merchandising software. Codename Project Galaxy, the upgrade will make it easier for the various branches of the company to consolidate orders. The new system from SAP will underpin Woolworths' customer relationship management, performance reporting, buying, and store-ordering processes.
Woolworths in Australian Financial Review
Statistics
ABS housing statistics to Jan 2015
Home sales graph for year to January
ABS
Global prices for housing
The growth of apartment dwellings
Click to visit the HBT website for more information
One of the things that can seem vaguely worrying in statistics is when measures that really shouldn't normally be synchronised are synchronised.

That is the chief difficulty with this month's housing graph. The grey line, the number of building approvals, should be predictive and therefore out of phase with the other two lines, which measure the state of the current market.

For example, if you look at the numbers for year ending 2011, the change in numbers of dwellings and value of dwellings are both negative, while building approvals are over 15% positive.

In the numbers for year ending 2012, the numbers and value are positive, as predicted, while the building approvals are back in the negative, predicting the flat results for 2013.

As the chart shows, for the last three years the January year to date lines have been closely tracking each other. That could indicate that the building market is finding it difficult to predict what is going to happen next, and is drifting along, responding on the basis of a shorter timeframe.

Just to add to the cheerful news, there is this graph from Business Insider, originally composed by Fitch:
Graph of international nominal house prices

You can read some commentary on the Business Insider pages:
This chart shows how ridiculous Australian house prices are.

"Spooky" is not actually a recognised statistical term, but it seems the most appropriate one to apply.
Retailers
HTH emphasises the "hard" in hardware
The pergola features in this Home Timber & Hardware ad
Home Timber & Hardware
An ad in the new HTH advertising campaign focuses on the feature wall
The carport is the focus in the one of the new ads from HTH
Click to visit the Globel Industries website for more information
Tradies remain front and centre of Home Timber & Hardware's latest advertising campaign. The ads feature a number of men next to "harder" versions of themselves who encourage them to tackle home renovating problems head on.

The ads show clean-shaven tidy men contemplating tasks such as building a car port, painting a feature wall, building a pergola and a bathroom renovation. They are confronted by their "harder", more hairy and rugged counterparts who spur them on to take on the home improvement projects with the right advice. This underpins the tagline "Put The Hard Back Into Hardware".

HTH believes the campaign goes to the heart of what a hardware store should represent: quality product, service and advice. It uses a touch of Aussie larrikin humour as way of differentiating the brand in the marketplace.

The latest campaign sticks with the brand's successful tagline "Go Where The Tradies Go" and adds to the reasoning behind why tradies shop at Home stores. Kevin Lillie, head of marketing, Home Timber & Hardware explains:
It's about owning what we're good at. This campaign identifies Home as the only place that really understands quality hardware, service and advice. Trade is integral to our DNA and this new campaign talks to our strengths in servicing this market.
It's an engaging new campaign that says it as it is. It gives Home a real point of difference in the market and we're confident it will resonate strongly with our core customers of tradies and home renovators.

Home's new brand creative came about following the appointment of Cummins&Partners as its new advertising agency in December 2014. Cummins&Partners executive creative director Ben Couzens said:
Somewhere along the line, hardware has turned soft. It's hardware, not software. We think a true hardware store should resemble one, not an extension of the hardware aisle in the supermarket. 'Putting The Hard Back In Hardware' says that if you're a man who likes to tackle the tough jobs in the right way, with the right gear, come to a place that's giving hardware its balls back.

The campaign launches with four TV commercials and will be used across catalogues, TV, radio, in-store POS and digital.

To view the TV commercials, simply click below:




Companies
Debco retail now part of Scotts Australia
Scotts Australia has purchased the Debco retail business
Inside FMCG
A leasehold interest in two manufacturing facilities is part of the deal
Scotts Australia believes it is a an opportunity to expand the business in Australia
Subscribe to HNN weekly e-newsletter
Inside FMCG reports that Scotts Australia, a subsidiary of The Scotts Miracle-Gro Company, has entered into a definitive agreement to purchase the Debco retail business. Debco is a manufacturer and marketer of potting mix and associated products.

The deal will see the lawn and garden company acquire the Debco retail brands, as well as a leasehold interest in two manufacturing facilities in Sydney and Melbourne. Debco will retain ownership of its commercial business.

Scotts Australia owns brands including Osmocote, Lawn Builder, Miracle-Gro, Defender and Roundup. Phil Jones, senior vice president - North America and international told Inside FMCG:
The addition of Debco is complementary to our existing lawn and garden business and aligned with our strategy to provide quality products to more consumers in the Australian market.
We are excited to offer an even stronger portfolio of lawn and garden products to consumers and are working towards a seamless transition for our retailers.

Andrew Martin, general manager of Scotts Australia, said the purchase of Debco's retail business is a great opportunity to further grow the business in Australia. He said:
And with the strength of Debco's brand added to Scotts' existing product portfolio, we are elated to offer an even broader range of products to our valued customers and consumers.
Companies
Record 2014 results for TTI
TTI's power equipment business grew in sales by 13.0% to US$3.6 billion in 2014
TTI
Its Milwaukee Industrial Tool business grew 22.2% globally
The floor care and appliance business grew 3.8% to US$1.2 billion in sales
Subscribe to HNN weekly e-newsletter
Hong Kong-based global power equipment and floor care company Techtronic Industries (TTI) recently announced its results for the financial year ended December 31, 2014. Sales rose by 10.5% over 2013 to a record US$4.8 billion.

TTI's largest business unit, power equipment, grew in sales by 13.0% to US$3.6 billion. This accounted for 74.7% of total sales. It improved operating profit by 16.7% compared to 2013.

Specifically, the Milwaukee Industrial Tool business grew 22.2% globally.

The floor care and appliance unit grew 3.8% to US$1.2 billion in sales with operating profit increasing 15.4% from the previous year. Gross profit margin improved for the sixth consecutive year to 35.2% from 34.2% in 2013. Cost improvement initiatives in purchasing, supply chain, value engineering and manufacturing contributed to this result.

In 2014, earnings before interest and tax increased by 15.4% to US$351 million, with the margin improving by 30 basis points to 7.4%. Joseph Galli, CEO of TTI said:
We enter 2015 with our strongest product lineup ever and are at the forefront of the shift to lithium cordless products across the industrial and consumer tool, outdoor products and floor care segments...

TTI's brand portfolio includes Milwaukee, AEG and RyobI power tools, accessories and hand tools, Ryobi and Homelite outdoor products, Empire layout and measurement products, and Hoover, Oreck , Vax and Dirt Devil floor care and appliances.
Products
Bosch surface grinder offers extra power
The Bosch CSG15 Surface Grinder uses maximum 12.5 amp, 9300 RPM power
Bosch Tools
It has a comprehensive guard/shroud system for collecting dust
The Bosch Surface Grinder includes a case, a diamond cup wheel and an extra brush ring
SpotOn is your source for laser levels and other tools
The Bosch CSG15 Surface Grinder employs maximum 12.5 amp, 9300 RPM power for additional push in harsh concrete applications. This power and speed is combined with constant response electronics to deliver soft-start with smooth operation and speed, under load and overload protection.

What separates this grinder from others is its comprehensive guard/shroud system for collecting dust. The Bosch CSG15 has an innovative shroud with a proprietary guard-opening system that allows flush grinding up to walls. This is critical in some jobs where the entire surface needs to be removed.

When there are obstructions to work around and hard-to-reach areas, it is necessary to have a grinder powerful enough to get the job done, but small and light enough to handle easily.

The Bosch CSG15 Surface Grinder features a wrap-around auxiliary handle that offers multiple grip positions for even the most difficult tasks.

A four-stage sealing system integrated into the output shaft and double-sealed ball bearings effectively seal the gear housing and protects against dust. A sealed switch extends life and epoxy-coated field windings add to overall system protection.

For optimum dust collection and ease of use, the Bosch CSG15 comes with a brush ring where the shroud contacts the concrete surface. The brush ring combines with air vents on top of the shroud to further channel dust. This allows the necessary air to be pulled into the shroud so that the dirty, dust-filled air can be sucked through the dust port and into a vacuum.

The brush rings also allows the shroud to collect dust over slightly uneven surfaces. The dust port is 1-3/8-inch diameter, which fits Bosch dust extraction vacuums.

The Bosch CSG15 Surface Grinder includes a case, a diamond cup wheel and an extra brush ring. Adaptors are available to configure the dust port to other common vacuum hose nozzle diameters.
Products
Pocket door locks from Baldwin
Baldwin Hardware's pocket door lock range includes four collections in 18 finishes
Market Wired
The collections include Santa Monica, Palo Alto and Boulder
Baldwin is part of Hardware and Home Improvement, a division of Spectrum Brands
SpotOn is your source for laser levels and other tools
Baldwin Hardware launched its pocket door lock (PDL) product line at the 2015 Architectural Digest Home Design Show. They will come in four collections -- Santa Monica, Palo Alto and Boulder - and in 18 finishes.

Each has crisp, clean lines and multiple configurations to fit a wide range of designs and applications including privacy, passage and key entry doors.

In addition, Baldwin launched a playful social media campaign encouraging show attendees to snap pictures of its new PDL and share them with the hashtag #BaldwinPDL. Baldwin is also rewarding fans for commenting and sharing images of the PDL.

Hand forged and meticulously designed, Baldwin's PDL provides architects and designers with many design opportunities.

The Santa Monica line puts a visual emphasis on vertical and horizontal lines, with a focus on pure geometry. It is available in both large and small varieties. The Boulder collection features rustic undertones, while the Palo Alto products blend soft lines with a contemporary flair.

Baldwin's PDL offers design flexibility and longevity with its patented Limited Lifetime PVD Finish[tm] (Physical Vapor Deposition) warranty. The advanced finishing technology creates a finish highly resistant to the effects of weather and normal usage.

The patent-protected PVD technology is 89% thicker than the nearest competitor and is especially resistant to salt-air corrosion. The PDL range is available in three finishes with this warranty: polished nickel, satin nickel and polished brass.
QuickShip

Baldwin also unveiled its QuickShip program which is designed to expedite shipping of its most popular styles to customers in the United States and Canada. Nearly 600 SKUs will be available through Baldwin QuickShip beginning in April, and customers can expect orders to be processed and shipped within five days.

The mix of products will include Baldwin's best-selling handlesets, preconfigured knobs and levers and hinges. QuickShip is exclusive to the Baldwin Estate portfolio.

Baldwin is part of Hardware and Home Improvement, a division of Spectrum Brands Holdings.
News
Interesting links
Lend Lease residential project, Alkimos Beach has gained a six-star Green Star rating
HNN Sources
Research from Winning Appliances indicates growth of renovations intentions
Construction Skills Queensland has launched an app for tradies
Click to visit the HBT website for more information
An additional roundup of home improvement stories. The Lend Lease Alkimos Beach development in Perth has been awarded Australia's first six-star Green Star rating for a housing project; research by Winning Appliances shows renos are on the rise; industry body launches free training app for local tradies; PPG's Sikkens wood finishes is changing its name; and Sika makes an acquisition. More stories below.

For further information, simply click on the images provided.
Local News
Residential project earns six-star rating

A joint venture between Lend Lease and LandCorp, Alkimos Beach is a 710-hectare master-planned community which has gained a six-star Green Star rating. The project includes smart-water initiatives and fibre-to-the-premises internet to help people work from home. Rebates and financial incentives will be given to new residents to encourage use of energy-efficient appliances and solar panels.
Lend lease project, Alkimos Beach has gained a six-star Green Star rating
Appliances research shows more renos

Sixty-six per cent of Australian homeowners are planning to renovate their homes in the next four years, according to research from Galaxy that was commissioned by Winning Appliances. Broken down, 28% of those homeowners expect to get their hands dirty in the next 12 months and 57% are planning an upgrade down the track in one to four years.

Winning Appliances' Renovation Intention Study was conducted by Galaxy among 1,636 Australians nationwide, aged 18 to 64 years.
Winning Appliances commissioned a renovation study
Tradies get training app

Construction Skills Queensland has launched myCSQ, a new app which lets tradies keep track of their careers and work experience from their phones. It has a number of features to help tradies track their training and build their resumes using their phone. They can send a resume to prospective employers, request an endorsement, and tag their status, skills and location.
The myCSQ app lets tradies keep track of their careers
International News
Sears hardware struggles in Q4

Sears Hometown and Outlet, the franchise-model hardware retail company that spun from Sears Holdings in 2012, posted a comparable store sales decline of 7.7% in its fourth quarter. It. Operating income swung to negative $9.7 million, compared with positive $7.8 million in the same quarter last year.
Sears Hometown and Outlet posted a comp-store sales decline of 7.7% in Q4
PPG changes Sikkens name

PPG's exterior wood finishes brand is changing its name from Sikkens to Sikkens Proluxe. The product formulation will not change. The newly labelled product will be available at approximately 700 major home centres and more than 1,200 independent dealer locations across the United States and Canada.
PPG's Sikkens brand has changed to Sikkens Proluxe
Sika acquires Axson Technologies

Sika has agreed to purchase Axson Technologies, a maker of epoxy and polyurethane polymer formulations. It supplies the automotive, aeronautical, nautical, renewable energy, sports & leisure and construction markets. This acquisition will broaden Sika's product range in the global tooling and composites business.
Sika has agreed to purchase Axson Technologies
Spraymate integrated into Rust-Oleum

RPM International has acquired Spraymate, a leading spray paint for consumer and industrial use in South Africa. Spraymate will become part of RPM's Rust-Oleum Group. Spraymate has annual net sales of about US$5 million, but is not sold in the United States. The transaction is expected to contribute to earnings within one year.
RPM's Rust-Oleum has acquired Spraymate Group
Self-cleaning paint created

Researchers at University College London, Imperial College London, and Dalian University have succeeded in making a superhydrophobic paint that can coat various materials and survives damage.

Superhydrophobic materials are self-cleaning because they repel water so strongly, that any water that hits them just beads and rolls off, taking dirt away with it. The researchers have tested their paint on various materials, including steel, glass, cotton, and paper, and all of them became self-cleaning.
A superhydrophobic paint has been created that can coat various materials
Electrolux appliances get "smart"

Electrolux AB is attempting to build an intelligent home around its appliances. The Swedish company will start selling an oven that downloads instructions on how a roast should be cooked from a recipe app. It films the job too, so home chefs can keep one eye on the process on a screen while entertaining guests.

Jan Brockmann, chief operations officer at Electrolux, said 2015 may be the year when appliances finally get smart after decades of false starts. He's predicting they'll make up 10% of the market in five years' time, from less than 1% today.
The Electrolux smart oven will be able to film cooking jobs
Companies
DuluxGroup moves production base
DuluxGroup is moving its production base from Queensland to Melbourne
Sydney Morning Herald
The sale of DuluxGroup's Glen Waverley (VIC) site will help fund the new factory
Linfox will build, own and operate DuluxGroup's new distribution centre in NSW
Subscribe to HNN weekly e-newsletter
DuluxGroup's "state of the art" paint factory about to be built in Melbourne will produce nearly all of the company's water-based decorative paints that are currently made at its 50-year-old plant Rocklea (QLD) site.

The Rocklea factory would operate at "a reduced manning level" once the Melbourne factory was complete in late 2017.

Managing director Patrick Houlihan said the new factory would set up the group's Australian paint business for decades. He told Fairfax Media:
We've been doing a lot of global benchmarking against companies like PPG and we are always looking to improve our business and take it to the next level. This investment further strengthens our product quality, innovation, customer service and cost competitiveness.

According to Dulux estimates, cost savings will come from automation, efficiency in raw materials use and freight savings. Operationally, the company said the new factory will enable it to produce more advanced paint products using higher technology resins for increased quality.

The investment is also being seen as a way to reduce the current risk of water-based paint manufacture being interrupted by fire. The Rocklea facility currently co-locates this type of production with solvent-based paint manufacture.

Houlihan said that no jobs would be lost for at least two years and he expected the Melbourne factory to create 200 jobs during construction and 64 permanent operating jobs. He said:
We will relocate people to other jobs if we can...We are the company kicking against the breeze with a lot of manufacturing companies exiting Australia. We have 13 sites and are now building a new one.

The $165 million cost of building the new factory is expected to be offset by reduced capital expenditures at Rocklea and the sale of DuluxGroup's Glen Waverley (VIC) site. The total net cost is expected to be $130 million over three years.

Construction of the factory is expected to commence late in 2015 on 17 hectares at the Merrifield estate, north of Melbourne.

Dulux said that the project would be "at least" net present-value neutral, meaning the investment would not destroy shareholder value.

Houlihan said the group would maintain its 70% dividend payout ratio and the capital expenditures would not constrain pursuit of other growth investments including acquisitions.
Consolidation of DCs

A new distribution centre to replace Dulux's NSW distribution centre at Padstow and Selleys' national distribution centre at Moorebank is also planned.

The centre will be built, owned and operated by Linfox. It will be based on DuluxGroup's specifications, in line with a similar arrangement that operates in Victoria.

Linfox and DuluxGroup have expanded their partnership with the announcement of the latest warehouse management deal. In addition to the distribution centre in Victoria, the logistics company takes care of transport services in Western Australia and Queensland for DuluxGroup.

The distribution centre is expected to take about one year to build and will be about 23,000sqm once completed.

DuluxGroup said consolidating its Dulux and Selleys operations at one site will lower costs, but the move will come at the expense of jobs at the existing centres. Provisions for redundancies related to both projects will be recognised this financial year. Houlihan said:
The new...Sydney distribution centre allows us to maintain and further improve our customer service levels in a cost and capital effective way, catering for the ongoing growth in our Selleys and Dulux businesses.
Retailers
Falling sales at Homebase
UK home improvement retailer Homebase suffered a decline in sales
Yahoo Finance UK
Chief executive John Walden expects results to be at the top end of market expectations
The number of store closures is ahead of Home Retail Group's schedule
Click to visit the Globel Industries website for more information
Like-for-like sales at UK home improvement retailer Homebase fell 0.9% in the eight weeks to the end of February, the last two months of owner Home Retail Group's financial year.

In the same period, total sales declined by 4.7% to Stg193 million and net closed space reduced sales by 3.8%.

The drop in sales was mainly due to store closures and chilly weather hitting DIY sales. Weak DIY sales are being offset by a better performance from Home Retail Group's household goods chain Argos.

Chief executive John Walden said he still expects full-year, pre-tax profits to be at the top end of market expectations.

Homebase suffered a 0.7% decline in full-year sales to Stg1.5 billion. Full-year like-for-like sales increased by 2.3% and net closed space reduced sales by 3%.

Gross profit margin was 100 basis points lower as the company slashed prices to clear stock ahead of store closures.

There were 30 store closures and three store openings in the year, reducing the Homebase store?portfolio by 27 stores to 296. This reduction is ahead of Home Retail Group's previous guidance for the current financial year. Walden said:
We are pleased to have delivered another full-year of like-for-like sales growth in both Argos and Homebase. Although our sales performance was weaker in the final short trading period, we managed the business effectively during this period and achieved a good performance in both gross margin and costs.
As a result of this, we expect that group benchmark profit before tax for the FY15 financial year will be towards the top end of the current range of market expectations of Stg120 million to Stg132 million.
Products
Key and tool free chainsaw
It's the season to consider the WORX 40V WG368E chainsaw
WORX
Users can plug the powerful blade in without the need for keys and tools
The 40V lithium-ion battery means users can be back out on the job in just one hour
Click to view details of the SpotOn golf ball competition
It's the time of year again to remind retailers of the WORX chainsaw that allows users to plug its powerful blade in without the need for keys and tools, thanks to the exclusive proprietary 2-in-1 assembly system. This will give operators more time to shred backyard branches rather than searching through the toolbox to get their chainsaw up and running.

This WORX model is ideal for less experienced users who are unsure about chain tension. The unique AutoTension feature keeps the chain at the exact optimal tension while in use, ensuring efficient cuts and long chain life.

WORX has added the QuickStop function for increased safety while using the 40V chainsaw. Just in case operators find themselves in a tricky situation, the brake stops the chain within a fraction of a second, giving them total piece of mind while working on the job at hand.

Weighing in at just 3.8kg, WORX's 40V chainsaw is suitable for DIY backyard jobs. With a 30cm bar length and 3.8m/s chain speed, operators can be sure it can get through the tough stuff.

The swift charging 40V lithium-ion battery also means users can be back out on the job in just one hour.
Careers
Executive appointments
prefabAUS has gained a new CEO
HNN Sources
Spectrum Brands has appointed an incoming chief executive
Home Retail Group has installed Echo Lu as managing director for Homebase
Visit the Mecca Website
Warren McGregor has been appointed chief executive of prefabAUS; Spectrum Brands promotes internally for new CEO; Homebase installs managing director with experience in Asia; and latest appointments at Fletcher Building.
Prefab body gets CEO

prefabAUS, the peak industry body representing the off-site construction sector, has gained a new CEO, Warren McGregor. He is former general manager of the Asian region for KPMG and senior advisor for Thinc Projects.

McGregor will help manage and facilitate the continuous growth of prefabAUS which was established in 2013. He will work to connect suppliers, clients and allied interests both in Australia and internationally.

Currently pre-fabricated construction represents around three per cent of all housing construction in Australia, according to the association. This is expected to climb to between 10 and 15% by 2023.
Warren McGregor is the new CEO at prefabAUS
Spectrum announces next CEO

Spectrum Brands has appointed Andreas Rouve as chief executive, succeeding Dave Lumley, who is retiring.

Rouve was most recently chief operating officer of the company, whose hardware and home improvement brands include Kwikset and Black & Decker. He also held positions as president of the company's international division, and senior vice president of the European battery division. Previously, Rouve worked at Varta AG, a German company that produces batteries for the industrial market.

Lumley announced his plans to retire in January, and will remain on the company's board.
Andreas Rouve is Spectrum Brands' incoming chief executive
New leadership at Homebase

Home Retail Group has introduced Echo Lu as managing director for Homebase. Lu has significant experience in retailing both in the UK and Asia, and will take up her new position on 20th April.

Lu joins Homebase from Tesco where she worked over the past ten years across different markets and a broad range of functions. Her most recent roles were as group business planning & insight director and property director for Tesco UK & Ireland. She was also a member of the UK board.

Prior to these roles, Echo held a number of roles in Tesco's Asian business including chief operating officer for China, operations director - East China and commercial buyer for grocery.
Echo Lu is the new managing director at Homebase
Fletcher's new executives

Fletcher Building has hired Matt Crockett to run its heavy building products division, one of two executive roles created when the company restructured its building and infrastructure products units in October 2014.

Fletcher also appointed Francisco Irazusta, formerly head of CRH Plc's European building products business, to run light building products as part of a number of new appointments.
Retailers
Indie store update
Cornwell's Paint Shop opened in 1928. Photo supplied: Cornwell's Mitre 10
HNN Sources
Thrifty-Link Turramurra Hardware celebrates 40 years in business
Porters employee Tom Adams recently celebrated 40 years of service
Click to visit the Globel Industries website for more information
Mitre 10 store in Brunswick (VIC) will compete directly with a Bunnings store across the road; Turramurra Hardware in NSW celebrates 40th anniversary; and a Porters employee in Mackay (QLD) has served the business for 40 years.
Small vs. big in inner Melbourne

Bunnings will open a smaller-format store almost directly opposite Cornwell's Mitre 10 in the Melbourne suburb of Brunswick. The Mitre 10 store originally opened in 1928 as Cornwell's Paint Shop and still operates from the same location. The new Bunnings outlet is due to open in mid-2015.

Mitre 10 proprietor Ian Cornwell believes loyal customers will ensure his family's Brunswick hardware business survives. He told the Herald Sun: "Small, independent businesses are important. Once you have your duopolies, the consumer...and suppliers...are the one who lose in the end."

Cornwell said he would be naive to think Bunnings would not affect business, but that the fourth-generation family shop had a lot of loyal customers and offered familiar faces and good service. He said: "The manager, Byard Sheppard, has been with me for 10 years and he knows our client base extremely well. It is not abnormal for staff to not only take things on their way home to customers, but also install and put things up."

Bunnings' general manager of property Andrew Marks said there was ample room for businesses of all shapes and sizes in the home improvement and outdoor living market in Brunswick and surrounding areas. He said: "Almost everywhere we operate we have a number of successful businesses located close by to our stores which continue to thrive."
Achievement at Turramurra Hardware

Owner Don Wormald celebrated the 40th anniversary of his Thrifty-Link Turramurra Hardware store this year. Not much has changed in the store since it was first opened by Jim Walker in 1955 then bought by Russell Smith in 1992. Wormald told the Daily Telegraph: "Colour matching used to be done by eye and take around 20 to 30 minutes. Not we have a colour matching machine which does it in 15 seconds."

For his support for anti-graffiti efforts over six years, Wormald was awarded a NSW Government Community Service Award last year.
Forty years at Porters

Porters employee Tom Adams recently celebrated 40 years of service with the company. Adams has been with Porters since 1975 and has held various roles during that time.

Porters general manager marketing, Mike Allsop Porters said Adams is an exceptional team member and always provides customers with great service. He told the Daily Mercury: "Tom embodies the Porters' famous 'can do' attitude and is always friendly and helpful."

Adams is humbled by the support from Porters and the rest of the team members for his achievement. He said: "I love working at Porters and enjoy speaking with and helping our customers. Everyone is really friendly and it's a happy place to work."
Companies
Auction introduced at Las Vegas show
The National Hardware Show is bringing an auction format to the three-day event
HBS Dealer
No sign up fee is required, and there is no minimum reserve involved
The auction marks a new buying opportunity for National Hardware Show attendees
Subscribe to HNN weekly e-newsletter
For the first time, the National Hardware Show (NHS) is bringing an auction format to the three-day industry event.

During the May 5-7 show in Las Vegas, hundreds of different product lots will be sold at discounted prices.

The range of products will come from new, overstock, discontinued, seasonal change, and packaging change products from the categories featured at the NHS.

The launch of the Spring 2015 Outdoor Supply Auction is the result of a partnership between the NHS and RNO Exhibitions. Richard Russo, NHS industry vice president said:
This is an exciting new concept that is complementary to the National Hardware Show and enables our brand to continue to meet the industry's need for platforms to grow their business. Extensive research revealed a strong opportunity and together with RNO, we have built an auction event to meet this need.

The auction marks another buying opportunity for all NHS attendees. No sign up fee is required, and there is no minimum reserve involved.

It will be conducted via the NHS mobile app, which gives users the full details of every product lot and allows them to place bids.

The Auction Arena space for the event will occupy 50,000 square feet next to the international sourcing area in the Las Vegas Convention Center's Central Hall.

According to both companies, the partnership was established is to bring the best of what the trade show industry has to offer and blend it with the excitement and certainty of sale at auction.
Bigbox
Masters gains an additional $45m
Woolworths and Lowe's have added another $45 million into their Masters JV
Sydney Morning Herald
Woolworths reported that home improvement losses rose to $103 million in the December half
Lowe's maintains there is still opportunity for growth in the highly fragmented Australian market
Click to visit the ITW website for move information
Woolworths and Lowe's have added another $45 million into their Masters joint venture. This takes their total investment over the last five years to $3.02 billion.

According to a regulatory filings by their joint venture vehicle, Hydrox Holdings, Woolworths bought another 30 million shares and Lowe's 15 million shares at $1 a share earlier this month. It came days after Woolworths reported that home improvement losses rose 60% to $103 million in the December half.

The latest investment follows a $90 million capital injection by Woolworths and Lowe's in November last year which took their investment to $2.9 billion.

Hydrox is 67% owned by Woolworths and 33% owned by Lowes, which has a put option to sell its stake to Woolworths at market value any time after October 2016.

Analysts expect the home improvement business to lose more than $180 million this year, taking losses over the last three years to more than $500 million, and believe it may not break even until 2019 or 2020.

Masters stores are generating annualised sales around $18.5 million, well short of the $29 million to $30 million needed to make a profit.

After conceding last August that the home improvement business would not break even in 2016, as originally forecast, Woolworths has put the brakes on new store development. It is halving the number of new Masters stores opened each year and is sub-leasing space on Masters' sites to other retailers in an attempt to cut costs and generate revenues.

Masters is also expanding its product range, improving layouts to make stores easier to shop, and increasing floor space for faster-growing categories such as bathrooms, gardening and hardware.
Lowe's patience with Masters

Victoria Thieberger writes in Business Spectator that Lowe's believes the long-term value drivers of the joint venture remain intact because there is still opportunity for significant growth in a highly fragmented market.

Part of the opportunity is Australia's long-term obsession with housing and home renovating.

Lowe's said that its international operations in Canada, Mexico and Australia are focused on tailoring its approach for each market, and it takes a long-term view to obtaining "compelling" returns.

Lowe's head of international operations, Doug Robinson, said the group's partnership with Woolworths has enabled it to open stores at a faster rate in Australia than in either Canada or Mexico. However the time has come to slow the rapid pace of expansion. Robinson said:
With the establishment of a solid base, the emphasis now is on strengthening the core with an assortment adapted to fit the local market. Similar to the pause we took in Canada after a period of expansion, the venture is currently working to optimise the model and increase customer traffic and conversion rates.

To read the full article, you can go to the link here:
Lowe's sticking with Masters
Hthg
@HTHG: The Gala Night
The video of the gala night
HNN sources
The truck was a popular place to pose
The three women having fun onstage
Click to subscribe to newsletter, delivered every Tuesday
It was one of those balmy Gold Coast evenings, when the Home Timber and Hardware Group (HTHG) Gala Night was held, the air a little thick it seemed, with a big full moon coasting over the trees outside the Gold Coast Convention Centre.

We gathered, all of us, outside the vast arena room of the centre, in the wide halls and ante-rooms. Some champagne was consumed, and people crowded in small groups to chat and go over the past few days of the trade show that had passed. Then the doors were thrown open, and we began to drift inside, in twos and threes and fours.

The round tables were laid out beautifully, with the appetiser already in place. The real feature of the room, though, was a huge white semi-trailer truck with "Cement Australia" emblazoned on its tank, pulled up along one wall.

If you've seen some of the award videos HNN made from that night, you pretty know what happened during the first part of the evening. There were announcements and speeches, and people made their was to the stage through a dazzle of high spotlights, to be acknowledged and receive their plaques.

The musical entertainment began with a team of three women who danced to the music of a drum-assisted DJ, singing the songs of the seventies, eighties and nineties, while the lights strobed through the room.

As it turned out, they were only the opening act. We'd been promised a surprise that night, and it came soon enough -- Daryl Braithwaite himself, who opened his set with the most well-known song from Sherbet, the band he fronted in the seventies.
You told me I was the one
The only one who got your head undone
And for a while I believed the line that you spun
But I've been looking at you
Looking closely at the things you do
I didn't see it the way you wanted me to
Daryl Braithwaite
How, how, howzat?
You messed about
I caught you out, howzat?

It was a great evening, but if you want to find out what it was really like, you do need to watch the compilation video HNN made.


User Name:Password: