Editorial
Six ways to do better against Bunnings
Article on setting price points
Hardware News Network
How Bunnings provides online help
Set of four videos on deck construction from Bunnings
Give to Amnesty International
Over the past 15 years Bunnings has come to dominate the Australian home improvement retail industry. As HNN has described elsewhere, this was not a process that benefitted overmuch from luck, nor was it a case of a large company leveraging investment to control a market.

Bunnings' success has been built on risk-taking, experimentation, a lot of hard and diligent work -- and, we have to say, mistakes made by other major retailers in the industry. It bears repeating that at one stage Bunnings and Mitre 10 held equivalent market share in home improvement retail. Mitre 10 launched a programme to gain additional share. When that fell apart, Bunnings emerged with a dominant market position. Mitre 10, much diminished, was then acquired by Metcash, and chose to specialise in trade rather than DIY sales.
2016 will challenge independents - HNN

While these are known facts, a feeling persists among independent retailers that something not quite right has gone on here. They can't put their finger on it, but there is a sense that Bunnings somehow is not just another competitor.

They're right. What Bunnings did was not just to go out into the marketplace as a kind of "super retailer" and do everything retailers of the past had done, only better. What Bunnings really did was to restructure the market itself -- or, to put that another way, Bunnings actually changed the customer.

Having done that, while their competitors are still trying to sell to the "old" customer, they remain almost completely isolated from competition.
Getting back to DIY

Any analysis of the state of the home improvement market today is going to conclude that there is one thing that is essential and vital: home improvement retailers outside Bunnings need to think about ways to expand their sales revenue gained from consumer DIY. That is, without doubt, the strongest growth area, not just in revenue, but also margins and hence profit as well.

HNN is quite certain that if we all could get a look at the longer term plans of Bunnings and Wesfarmers, what we would see is an intent to build the retailer up to be twice its current size, through expansion first in the UK and later elsewhere in Europe. That kind of scale is going to give the company extraordinary advantages in the supply-chain.

It might take Bunnings a bit longer than it is presently ready to admit to get the UK business going, more like five or six years than three, but it is highly likely to succeed. That means that Australian retailers have something like a three or four year "grace period" to reclaim market share, and set themselves up for the future.

HNN has six concrete suggestions about how retailers might get started with that process. Before we can get to that, however, we have to delve a little deeper into Bunnings, what it did to change the home improvement market, and what Bunnings really has come to represent to its customers.
The "Bunnings people"

When we discuss market strategies here at HNN, we quite commonly find ourselves mentioning the "Bunnings people". While this is a little hard to define, we all know what is being referred to by that. Go to just about any Bunnings on a busy Saturday or Sunday, and you'll find them there, wandering through the aisles, having a sausage out the front of the store, a coffee in the cafe, their kids trailing after them with a free balloon, or their faces painted to resemble a lion.

It's an energetic scene, and customers at Bunnings quite often experience the store as an energising place. It is also unique, in Australia, in home improvement retailers. Mitre 10 and Home Timber and Hardware stores might bustle and feel active, but there is seldom that kind of Bunnings energy to them.

To understand how Bunnings has come to occupy this position in people's lives, it's necessary to look back a little in history, and understand some features of Australian society and culture as they have developed over the past 50 years and more.
Post-war: the distributive economy

When Sir Robert Menzies began his second term as Prime Minister of Australia in 1949, he set in place an economic and social system that would arguably dominate Australian culture for the next 30 years and more. It was based on Australia operating as a primary producer of agricultural and mining commodities for export, while high tariffs were introduced on imported goods so as to protect domestic industries.

This was what could be described as a "distributive economy". By introducing inefficiencies in terms of the supply of manufactured goods to the Australian populace, high employment was maintained, and the Federal Government retained a range of levers with which it could control business and industry.

It is worth quoting what remains the signature statement of the Menzies government, a definition almost of a core set of Australian beliefs. It's an extract from Sir Robert's speech on what he called Australia's "forgotten people":
I do not believe that the real life of this nation is to be found either in great luxury hotels and the petty gossip of so-called fashionable suburbs, or in the officialdom of the organised masses. It is to be found in the homes of people who are nameless and unadvertised, and who, whatever their individual religious conviction or dogma, see in their children their greatest contribution to the immortality of their race. The home is the foundation of sanity and sobriety; it is the indispensable condition of continuity; its health determines the health of society as a whole.
The unravelling

The fatal blow to the systems set in place by the Menzies Government occurred when Britain joined the forerunner of the European Union, the European Economic Community (EEC) in 1973. What is not widely understood is that Britain was required to sever its economic ties with Australia (and other Commonwealth nations) as a condition of entry into the EEC -- it had twice been rejected at the behest of France's President, Charles de Gaulle, in 1963 and 1967.

The German-born, Australian-based academic Oliver Marc Hartwich describes the effect of this move in an article in The Guardian newspaper:
After Britain had joined the EEC Australian butter exports dropped by more than 90 per cent; the Australian apple trade declined from 86,000 tonnes in 1975 to just 27,000 tonnes in 1990. The economic consequences of Britain's European ambitions for Australia were severe.

For the next 20 years after this event, Australia's economic history is dominated by efforts to somehow balance the expensive social programs put in place by the Menzies Government and enhanced by subsequent governments, with the increasingly dire economic realities.

This began with broad-based cuts of 25% in most tariffs in 1973. These cuts were later continued through the 1980s.

The Australian dollar was floated in December 1983, and in 1986 the Australia Acts were passed in both Australian and British Parliaments, severing the paternalistic legal relationship between the two nations. The latter year was also the occasion for then-Treasurer Paul Keating to make his infamous "banana republic" comment, pointing out that inflation and a rising trade deficit were destabilising the nation. The US stock market collapse of 1987 helped plunge Australia into deeper trouble.

A recession resulted from these factors. This lasted from September 1990 through until September 1991. Full recovery did not arrive until late in 1992. However, the changes made during this period did stabilise the economy, and by 1994 a period of prosperity had begun that lasted for 11 years.
Cultural changes

In many ways, today's "Bunnings people" have inherited many of the cultural biases of the Menzies Era's "forgotten people". They, too, are family-orientated, non-trendy, and regard building a good life for their children as important.

Where they differ is that they are also ambitious in ways the "forgotten people" were not. In Australia, however, that ambition does not show itself in the same manner as the ambitions of family people in, say, Los Angeles, London, or Paris.

In most other nations, this kind of ambition translates fairly directly into earning more money at a better job, then spending that money to enhance family life. For these Australians, it's not all about money. It is clear to them that working longer hours at a stressful job cannot possibly create a pleasant life. Instead they have followed a kind of "middle path". They want a good, well-rewarded job, but they also want time at home, and leisure in which to enjoy life.

In the end, their ambition is all about gaining valuable and rewarding life experiences. It is in this sense that Bunnings has come to play an important role for them. When they buy an impact driver, a mitre saw, flooring, decking materials, paint or lighting, their goal is to use these to enhance their dwellings, usually for the purpose of garnering more of these experiences.

They are less interested in the impact driver as a tool, and more as a helpful mechanical device which means they can put together a deck in less time. The purpose of that deck is likely to entertain people, to gather friends close around on certain warm summer evenings, to experience that kind of life. Bunnings makes all of this more possible.

In doing so, Bunnings has become their ally, their aid. Walking into a Bunnings they are not thinking about a lot of dreary chores they have to get done. They are thinking instead about opportunities.
Retail culture

Many independent home improvement retailers today have been more heavily influenced by the way Australian retail operated in the recent past than they know.

If we think back to the time when tariffs were still used to heavily distort the market economy -- which is a scant 30 years ago -- one of its characteristics was that retail really didn't make much sense. Instead of quality, design and manufacture being the main determinants of a product's price, the most important aspect was whether it was made in Australia or elsewhere.

Products also tended to have very similar prices across manufacturers, usually set a specified amount below the tariff-inflated price of superior imported products. There were no, or only very limited, opportunities to work the supply-chain more efficiently to get a product imported at a better price.

So, given high levels of price similarity, how did retailers differentiate themselves? Largely they did this through service, and through building lasting relationships with customers. A butcher became "your" butcher, a shoe store "your" shoe store -- and a hardware store, "your" hardware store.

While the vestiges of that approach have all but died out in most of Australian retail, they still linger in home improvement retail. There is a strong expectation on the part of those retailers that want customers "really" want is personal, informed service to help them make their purchases.

Right from its inception, Bunnings had the idea that this was perhaps not really needed anymore. Freed from the influence of most tariffs, and launched into the aftermath of a recession in 1991, Bunnings understood right from the beginning that it could use price as a strong differentiator. It wasn't really, though, all about selling "cheap stuff". It was just as much about delivering unexpected quality at familiar price points.

That's the deep background. Now let's explore the six key points of what retailers need to do in order to compete more effectively with Bunnings.
1: Service

Virtually any conversation you might have with an independent hardware retailer about Bunnings will begin with the complaint that they provide better service, which customers just don't seem to appreciate.

There are pretty much just two alternatives going on here. Either the retailer is simply right, and they do provide better service, and the customer doesn't appreciate it, or else Bunnings does provide decent service, it's just that it is in different ways than the retailer does.

Such as, for example, renovating an entire house, and making videos about every step of that process, which can be downloaded from their website. And, indeed, that is just what Bunnings has done. It also offers regular DIY workshops. A new feature HNN has seen developing is that Bunnings offers those workshops in a range of languages, such as Portuguese and Mandarin Chinese.

We're not saying that the service offered by Bunnings is equivalent to that of the best independent hardware retailers, but it is often good enough for customers to get what they are looking for.

In any event, whatever is going on, the numbers truly indicate that if an independent retailer is trying to use service as the main differentiator with Bunnings, it just isn't working in the majority of cases. It might be one, helpful ingredient, but much more than that is needed.
2: Community

When you speak about community with independent hardware retailers, they will mention the direct support they give back to the regions where their stores are located. They might support the local under-16s footy or cricket team, donate to a charity, repair the equipment in a local playground free of charge, and so forth. All that is very worthwhile and highly commendable.

When you speak about community at Bunnings, however, while it might involve some of those aspects as well, it is as much about the kind of community that gets created in-store. Every decent sized Bunnings warehouse has a cafe, a playground for children, and a room for DIY classes, sometimes grouped together in a single "community pod".

This helps to establish the Bunnings store as not just a place to buy stuff from, but as a fun place to visit. Consequently, people will save up little purchases -- lightbulbs and batteries -- to get at Bunnings, at the same time they pick up a coffee and their children play in the slides at the play-space. And, as we all know, one of the cardinal rules of retail is that often small purchases lead to big purchases.

Obviously, smaller retailers can't afford to set up their own cafe. But one retailer we know of sets out a couple of picnic tables in an open space beside the store on sunny days. The local bakery doesn't have a great place for people to sit outdoors, and it is quite common to see a few Mums and Dads drinking a coffee at the tables on a sunny Saturday morning. This is also community.
3: Segmentation

The issue of segmentation in establishing a market is a deep and rich one. As HNN has pointed out in the past, the strategy that Bunnings pursues is very much an unsegmented one. In determining its market activities, Bunnings just has two questions it asks: Who is not coming to our stores, and how do we get them in? And, of those people who do come to our stores, what are they still buying elsewhere, and what do we need to do so that they buy from us instead? This is what is known as a segmentless approach.
Segmented, unsegmented market advantages - HNN
Segmentation could replace price as market driver - HNN

One of the retail principles that can be borrowed from asymmetric (guerrilla) warfare, is that when you are facing off against an overwhelmingly superior force (like Bunnings) you should never compete on the same terms that they do. So, if Bunnings is using a segmentless approach, to compete effectively you may need to consider a segmented approach.

Segmentation often just doesn't make sense to smaller retailers. Their instinct is that by specialising in one key area, they are turning customers away from other areas where they could also be earning revenue.

To understand why segmentation works for smaller retailers, you have to understand that it has three key parts to it. Firstly, it enables the retailer to establish a clear point of difference from other retailers. That means the retailer is giving potential customers a good reason to at least check out what is in their store if they are buying that particular product.

Secondly, segmentation is all about taking a set of limited resources, and using them in the best way possible to get the maximum return.

Thirdly, segmentation is a key element in developing a means of marketing your retail operation on an expertise basis, thus avoiding the issue of low prices or price comparison.
The lawn mower example

To see how all those advantages might play out, let's take lawn mowers as an example. Developing a differentiated, segmented offering in standard lawn mowers is very hard to do. At the same time, if you are just selling ordinary lawn mowers, will you really ever be able to compete with Bunnings on price?

What if, however, a store chose to segment and specialise in cordless electric lawn mowers? The store is still competing with Bunnings in this area, and Bunnings does have some winning products there, but its range is quite limited as compared to regular lawn mowers.

Also, this is one area where it is likely the staff at Bunnings are not going to be all that well informed. Do they know how long each mower will run for? Do they know the types of lawns they are most suited to? Can a prospective buyer turn one on to see just how quiet and vibration-free they are? (No, because of health and safety requirements.)

The display area that the store previously used for a range of lawn mowers that really didn't sell all that well suddenly becomes a dedicated area for a very attractive product range -- a better use of that space. Instead of training staff to understand the general characteristics of three brands and six models of petrol lawn mower, they are learning the basics of how the electric lawn mowers work. This is more limited, but it's a better use of their skills as they can go deep instead of broad.

Consider also how this plays into marketing. External banners, product leaflets, mailbox flyers, online websites -- all these benefit from this kind of specialisation. Segmentation gives a particular shape to the business, and can attract customers who are not going to buy an electric mower, but are sort of interested in the technology, and might buy something else.
4: Pricing

Once again, applying the core technique from asymmetric warfare, don't match the big competitor's strategy. Bunnings pursues an everyday low price (EDLP) strategy, so retailers need to consider the alternative, which is generally High-Low (HL) pricing.
Tool price plateaus at Bunnings - HNN

Most retailers think that they know how HL pricing works, but often it turns out they don't have that clear of an understanding. Sophisticated HL relies on establishing a set of expectations in the customer, then breaking through those in such a way that it triggers a "buy" event.

Typically this is done by establishing pricing brackets across a product range. A retailer has, let us say, three different impact drivers of low, intermediate and high quality, priced in steps at $180, $130 and $99. The differences between the three products are real and meaningful -- perhaps the high end product has two-speeds and is brushless, the intermediate is brushed with two speeds, and the low end is brushed and one speed.

If these are the regular prices of the tools, when you are executing a HL strategy, which tool gets the discount? It's not uncommon to find retailers discounting the low-end, $99 tool, on the basis that this is the tool that attracts the most price sensitive customer, and will thus produce the best sales results from discount.

It is also not uncommon to see retailers discounting the top-end tool. This is often on the basis that they are carrying the most margin on that tool, and discounting will have a slightly lower effect.

In both these cases, for customers thinking about buying one of these tools, which markets are being attracted? Discounting the high-end tool will attract those customers thinking about buying it, and also those who were considering the mid-range tool. Discounting the low-end tool will attract those considering the low-end tool anyway, and also possibly those considering the mid-range tool.

However, if you discount the mid-range tool, you attract customers interested in it, in the high-end tool, and also those interested in the low-end tool.

The discount buy-trigger isn't really a moment of price rebellion in the midst of a carefully bracketed price structure. It is a pricing technique that makes the most out of that bracketed price structure as possible.
5: The margin is the outcome

"The margin is the outcome" is something the CEO of Bunnings, John Gillam, finally said to investment analysts when he was being questioned about range and pricing. What he meant by this is that Bunnings does not set out to get products on the basis of what their margin is going to be. The retailer pretty much knows from its data what kind of feature-set and price combination is going to actually sell in its stores. The actual margin is the outcome of providing an attractive and quick-selling product, rather than the reverse, where margins are predetermined and this limits the choice of products.

While smaller retailers cannot really pursue that particular technique, as it only works really well in consistent high sales volume environments, there are some aspects of this approach that need to be studied and applied.

Most retailers know they need to solve a certain mathematical problem when they set about pricing a product. What is the optimum price/volume relationship that will provide the most profit for a particular product? It comes down to considerations such as knowing if you charge $20 you will sell only 40, and if you charge $15 you will sell 80, and the base cost to you is $10. Price/volume relationships like this typically are on a curve, which means it is likely the best price is actually somewhere between those two.

What is interesting is that if you have enough data and you graph these relationships, you frequently find that the price/volume curve has two optimal solutions. One is a lower volume/higher margin solution, and the other is a higher volume/lower margin solution. (This occurs because of cost optimisations brought on by volume discounts, and certain supply-chain efficiencies.)

Most retailers instinctively gravitate towards the lower volume solution, because they are aware both that it carries the least risk (higher volume sales in most categories can create additional risks relating to supply-chain, stocking and so forth), and because they know that high volume sales have certain opportunity costs that it is hard to capture in a pricing model. The staff is busy with the sale, so they might miss other sales, there is more space consumed in the stock room, more traffic congestion in the store, and so on.

Bunnings, however, if given the choice, will tend to choose the higher volume solution to the price/volume problem. This holds even if that solution is not as optimal in terms of profit as the low volume solution. That is partly because Bunnings is set up for high volume sales, so the additional risk factor is very small. The main reason, though, is that Bunnings is constructed to take advantage of high traffic flow through its stores. Creating that kind of flow by choosing the high volume solution is likely to create secondary benefits, that are, again, a little difficult to capture in the complete pricing model.

Smaller independent retailers can make use of the high volume solution as well, on selected products and under special circumstances. This is very different from HL pricing strategy, and is, in fact, actually mixing a bit of the EDLP strategy into HL.
6: DIY = Projects

One of the big opportunities that remains almost unexplored in home improvement retail in Australia is doing more to view customers in terms of the projects they are seeking to complete.

There are really four key project areas that DIY consumers pursue: kitchens, bathrooms, deck/outdoor space, and storage. When you identify those four areas, you are probably looking at (easily) over 60% of DIY purchases made. One technique that HNN sometimes uses in assessing a retail space is to take each of those project areas and to count the number of steps a customer would need to take to find everything they need to complete such a project.

Kitchens usually do well, and bathrooms do OK, but both deck/outdoor space and storage are often very poor. Even where there is, for example, a space dedicated to storage solutions, it can turn out you need to walk all over the store to find the things you really need to get the job done. Decking is by far the worst, however.

It would actually be possible to establish an entire home improvement retail operation that offered nothing but tailored solutions to each of these project types. Failing that, it is a relatively simple store optimisation to consider providing some kind of grouping of the components of popular projects.
No magic bullet

It is tempting to find yourself yearning for something of a simpler time for retail. Having to resort to differential calculus to solve a complex dual-hump price/volume curve was probably not so much of a priority in the 1950s. But the reality is that today, we really do need to consider this kind of complexity. Because, of course, Bunnings didn't just change the customer, they also changed the entire business of home improvement retail.

Until next time,

Betty

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

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Bigbox
Wesfarmers-Bunnings Q3 2015-16 results
Bunnings results for 2015/16 Q3
Wesfarmers
Horticulture Week comments on Merrill Lynch report
No doubt one of PJ's favourite Homebase ads
Click to visit the ITW website for move information
Wesfarmers announced its sales figures for the third quarter of its FY 2015/16 on 21 April 2016. Bunnings returned good results, with sales reaching $2,594 million, up by 11% over the previous corresponding period (pcp), which was the third quarter of FY 2014/15. Store-on-store (comp) sales also grew, by 8.3%. In the pcp sales had grown by 10.5% and store-on-store sales had grown by 7.6%.

For the financial year to date, sales are now at $8,100 million, an increase of 10.9% over the first three quarters of the previous financial year. Two smaller format Bunnings stores were opened during the quarter.
Bunnings results for 2015/16 Q3

Coles recorded supermarket sales of $7,518 million, up 5.9% over the pcp. However convenience store sales fell to $1448 million, a decline of 8.9% over the pcp. This meant the division's overall result was an increase of 3.2% on the pcp.

Kmart recorded good growth of 17.9% to reach $1,105 million, while Target sales rose by 2.3% to reach $678 million. Officeworks increased sales revenue by 7.8% over the pcp to reach $512 million.
The Masters effect

During the presentation to investment analysts, the managing director of Wesfarmers, Richard Goyder, was asked if discounting from Woolworths' Masters Home Improvement, which may be winding down, had affected the Bunnings result. He replied that it seemed not to have had any material effect, but repeated the warning from Wesfarmers' half-year results announcement that discounting could affect results in forthcoming quarters.
Merrill Lynch on Homebase

According to a report in the UK-based horticulture website Horticulture Week (HW), Merrill Lynch has released an investment report which is highly critical of the acquisition of UK big box home improvement retailer Homebase by Wesfarmers.

Authored by the redoubtable David Errington, the report suggests that Wesfarmers' strategy as regards Homebase is deeply flawed. Mr Errington makes three main points. The first is that there is a high degree of environmental risk. Should the UK choose to exit from the European Union when it votes in a June 2016 referendum, this could lead to a strong slowdown in the housing market, and have other negative effects.

The second point Mr Errington makes is that the Homebase business is so much unlike Bunnings' core business in Australia, that, while Bunnings has a strong management team, it will struggle to make the UK business work. The points of difference he outlines are as follows:
  • Homebase stores are smaller
  • Sales per square metre are currently far below the competition
  • Margins are less than competitors
  • Rebranding all the stores in the network could cost over $1 billion

  • The third point he makes is that Bunnings will be competing with Kingfisher, which has three times the sales of Homebase in the UK, and a total of seven times its sales across all its European stores.
    Analysis

    While HNN would agree with Mr Errington that Bunnings has perhaps been overly optimistic in its projections regarding the total required expenditure and the amount of time it will take to bring Homebase into profit, we do believe he may be in error as regards the overall wisdom of the investment.

    The real essence of the way Bunnings does business, we believe, is not a formulaic approach based on store format and margin potentials. It is far more based on being able to rapidly and effectively respond to the market as it presents itself through sales in its own stores and those of its competitors.

    While we would agree that Kingfisher is a formidable (in both the French and English sense of the word) competitor for Bunnings to face, HNN is not convinced direct competition with Kingfisher will be key to Homebase's success over its first two or three years. As we have pointed out in a past analysis, there are two other, smaller home improvement retailers in the UK market that would be easier to compete with.
    Homebase acquired by Wesfarmers - HNN

    Finally, while Mr Errington is certainly correct to point out the considerable environmental risk in European politics, it's unlikely that the results of a British exit from the European Union would be unmanageable.

    Perhaps as importantly, this should be balanced against some of the developing risk in the Australian home improvement environment. Modelling by HNN suggests that there could be a considerable slowdown in the renovation market coming between 2018 and 2022. This would be caused by the after-effects of the 2008 Global Financial Crisis.

    Building of new dwellings slowed considerably in some markets, in particular Sydney. This means the housing stock that should be feeding the renovation market post-2018 will not be there.

    While this is unlikely to generate a crisis, it could knock more than a few percentage points off retail growth in the home improvement market. Coincidentally, HNN modelling also shows that the UK market, due to its different renovation and building patterns, should be entering a good period around 2019. It is possible, that Homebase/Bunnings UK could end up ameliorating certain risks, rather than just being a net contributor to overall risk.
    Bigbox
    Big box update
    The new Bunnings Bundamba store in Queensland has just opened
    HNN Sources
    Bunnings is believed to be working with Charter Hall to jointly bid for parts of Masters
    The Square Reader device is being sold through Bunnings
    Click to visit the ITW website for move information
    The $44 million Bunnings Bundamba store in Queensland held a sneak peak for tradies before it officially opened; sources have told The Australian that Bunnings is working with Charter Hall to secure Masters' property assets; Bunnings' move into the British market has triggered a response from some of Britain's established players including DIY chain Wickes; a UK-based DIY retail consultant speculates whether the price war has already begun; Homebase staff "streamlined" again; Wesfarmers boss backs Bunnings' move to lift the wages bar in Britain; and the Square Reader is being sold through Bunnings.
    New Bundamba store set to open

    Staff from Bunnings Booval have moved to their new 13,800sqm base at Bundamba ahead of its official opening. Bunnings has already made its presence felt in the local area by undertaking three community projects.

    Complex manager Nathan Robley told the Queensland Times that in recent months the team had donated "buddy benches" to Bundamba State School, painted the locker rooms at West End Bulldogs at Basin Pocket and painted the rooms of the Ipswich Redbank Goodna Lions Club.

    Robley said the warehouse's design is innovative in the installation of energy-efficient LED lighting, rainwater harvesting tanks and particularly with the works to reduce the impact of a flood.

    An under-croft carpark for more than 380 cars has been built underneath the store, allowing the main store to be raised above the designated flood level. Robley said in a future flood event, the design allowed floodwaters to run through the carpark without compromising the building and with minimal impact on the store.

    The large doors at the main entrances are designed the seal the lower level entrance foyer, protecting the lifts and escalators leading from the carpark. All electrical services have also been installed above the upper level.

    The project involved major works in realigning Bundamba Creek at the site which the company said would improve flows and enhance the local ecosystem. Major revegetation works on the creek banks have been carried out after several gum trees were removed from the creek banks before construction.
    Bunnings' accord with Charter Hall

    Bunnings is believed to have struck an alliance with the listed property fund manager and developer Charter Hall to jointly bid for parts of the Masters home improvement chain.

    It is understood Charter Hall is bidding for all of the 43 properties in the Masters portfolio that are owned by Woolworths. However, the widely held view is that Woolworths has plans to divest the operating Masters business in conjunction with the sites.

    Along with Bunnings, Charter Hall is known to be close to Harvey Norman and Automated Holdings, Australasia's largest car dealer group, both of which could be interested in occupying some of the less successful Masters sites. A source also told CNBC that US retail giant Costco was also part of the bid group.

    Charter Hall, along with Blackstone and Abacus Property Group, were revealed by the DataRoom column in The Australian as interested buyers of the portfolio. Other interested buyers including Melbourne-based Spotlight. Some believe a deal for the property portfolio could attract bids up to $1 billion, although others say half that sum is more realistic.

    There are also reports circulating in the market that the performance of the Masters business has improved in recent weeks. Shoppers have been descending on the stores in the hope of securing merchandise at fire sale prices.
    UK DIY retailers prepare for Bunnings

    The biggest players in Britain's hardware retail industry -- which has been valued at GBP38 billion (AUD71 billion) -- have promised to slash prices upon Bunnings' arrival in the market.

    DIY chain Wickes, which is the third-biggest player in the home improvement space with more than 200 stores across Britain, recently told its investors it is ready to reduce shelf prices as it braces for Bunnings' arrival and the transformation of the newly acquired Homebase stores. John Carter, chief executive of Wickes owner, Travis Perkins said:
    I'm not against good competition as it helps drive the market forward. Competition is going to heat up but we think we have a good plan. If we have to adjust and invest a little bit in price, we are willing to do that.

    Wickes, which sells hardware, garden and outdoor products, is estimated to have a 9% share of Britain's GBP13bn DIY market, slightly behind Homebase, which has 265 stores in Britain and Ireland.

    Clive Black, head of research for the London-based Shore Capital, told The Australian that Homebase had traditionally been a smaller player in the British DIY hardware and home improvement market. He said:
    The British DIY market has really been dominated by Kingfisher's B&Q and builders' merchants for some time. Homebase was a much softer proposition, really competing more with leading homeware players such as John Lewis and Habitat of old.
    We will watch with considerable interest to see Bunning's arrival, where it pitches between the highly consolidated and masculine 'hard' end of the market versus the more feminine and softer homewares market that is still highly fragmented.
    The financial wisdom of its (Wesfarmers) decision will be judged over a longer period; the consumer economy may have peaked in its present cycle whilst the UK faces the debacle at the moment of the EU referendum.

    Wickes, which traces its origins back to 1854 when two brothers opened a timber business in Michigan, US, first came to Britain in 1972. The Wickes British chain, which employs about 7000 staff, has built its reputation on low prices and stocking almost exclusively home brand tools and products. This is very different to the Bunnings model which has a strong showing of well-known brands throughout its stores.

    Related:
    Travis-Perkins FY 2015 results - HNN
    DIY price war in the UK?

    Earlier this year, Steve Collinge, managing director of the UK-based Insight Retail Group and Insight DIY e-newsletter presented at a BHETA (British Home Enhancement Trade Association) forum on the subject, "Avoiding the race to the bottom". He discussed the risks to both retailers and suppliers in chasing down prices in an effort to boost perception to home improvement consumers.

    The presentation can be accessed here:
    Avoiding the race to the bottom - Insight Retail Group

    Collinge and his team recently pointed to the widespread price reductions (up to 5,000 products) that Homebase was beginning to make across key categories. They saw the first evidence of Bunnings taking on B&Q and Wickes head to head and coming out on top, with Dulux.

    Read for more details here:
    Homebase undercuts the competition on Dulux - Insight DIY

    Collinge believes situation has since escalated, with the benchmark being dropped to new levels. Both B&Q and Homebase recently reduced the price of a single can of Dulux 2.5L coloured emulsion to just GBP8.47, a price not seen in the market for many years.

    To put this price into context, the B&Q own brand 2.5L coloured emulsion is GBP13.94, with a buy 2 for GBP18 promotion, the Homebase own brand equivalent is GBP11.97 per can and the Wickes own brand is GBP15.99 per can, on a Buy 2 for GBP22.
    Has the DIY price ware begun? - Insight DIY
    More staff cuts at Homebase

    Wesfarmers will axe a number of head office functions at Homebase. This follows the "clean out" of the executive ranks at the home improvement retailer. The loss of nearly 20% of the workforce (around 149 roles) will affect a range of roles across the back office, buyers, marketing and other support staff.

    UK industry publication Horticulture Week has reported that Homebase's new owner believes a different support structure is needed to help better serve the 265 stores within the group's retail network. Homebase told Horticulture Week:
    Earlier this month we updated our team about a proposed restructure of all store support functions. Obviously we will need to speak to the people whose jobs will be affected first and it would not be appropriate to give details while we are involved in a consultation process.
    What we can say is that we are not simply making across-the-board changes. Rather, we are reshaping the support resource to allow us to help the stores in the best manner possible.
    We have committed to our team that we will move forward as quickly as we can and that we will treat every team member affected generously and with respect.

    Homebase also said there were no current plans to end its Garden Academy where 30 students joined in April 2016 and 40 in November 2015.
    Support for Bunnings' wage increase in Britain

    Wesfarmers chief executive Richard Goyder has backed a decision by Bunnings to extend the national living wage to workers aged under-25 at Homebase.

    Speaking to The Australian, Mr Goyder said the higher wages bill, triggered by giving the youngest Homebase staff access to the living wage, had been factored into Wesfarmers' $704 million purchase of Homebase earlier this year.

    He argued it would send a strong message to Wesfarmers' newest business about its commitment and foster the Bunnings culture -- which has been marked by some of the lowest staff turnover rates in the Australia -- in Britain. He said:
    I think it was a strong signal to the Homebase team about our strong commitment to them, and you know Bunnings has a terrific employment brand in Australia, which we certainly hope over time will make it a strong employment brand in the UK as well.
    One thing I have said all along is that we are taking arguably our best business overseas and there is a reason for that. [Bunnings] staff look and sound like they just love working for the business, and what a difference that makes to the customer.
    It's still very early days [in Britain] but, I think there has been a very positive response.

    Britain's national living wage that came into force on April 1 sets a floor of GBP7.20 (AUD13.24) an hour for workers aged 25 and over. However, for workers under 25 the national minimum wage still applies. This ranges from GBP5.30 an hour for those aged 18 to 20 and as low as GBP3.87 an hour for under 18s.

    One of Bunnings' first decisions when it took control in March, under the leadership of new Bunnings managing director in Britain, Peter Davis, was to offer the national living wage to under 25s as well, setting itself apart from the pack in the British retail hardware sector.

    The move comes as Bunnings' biggest British competitor, Kingfisher has been fighting a battle with its own staff over a decision to reduce overtime pay and benefits to offset the cost of the national living wage.

    Mr Davis was reported in the British press as promoting Homebase's more generous wages offer to under 25s to "provide a better overall income'' for employees, increased contracted hours and "create more permanency''. He said:
    This is a strong investment creating the culture we want for our teams and a business we can all be proud of. Retention and development is key to our long-term success.

    Mr Goyder said he was constantly hearing praise for Bunnings staff from executives he spoke to. He said:
    I think it's one of the great things about Bunnings. I was at a function...and someone talked about going to a Bunnings store. The person said they were happy employees.
    And this is from a person who is a senior executive at a well-known Australian company. That's my experience whenever I run into someone at Bunnings.
    Bunnings selling Square Reader

    Since launching in Australia in March, Square has announced that the Square Reader device is now available in-store and online through more than 490 retail stores across Australia including Bunnings, Officeworks and Apple.

    The device allows retailers to process credit and debit card payments via smartphone or tablet. Ben Pfisterer, Australian country manager for Square told Power Retail:
    Businesses shouldn't have to wait weeks to be sent a card payment terminal, or spend valuable time on the phone registering for an account and completing long, arduous application forms.
    They shouldn't have to be worried about their terminal going down and having to wait days for a replacement. With availability in 490 retail stores across Australia, Square is making it simpler for business owners to accept card payments, and significantly reducing the time that is traditionally taken to start accepting card payments.

    Jack Dorsey, founder and CEO of Square and co-founder and CEO of Twitter, was in Australia spruiking the Square Reader launch.
    Careers
    Seeking opportunities
    The Gardena and Neta field sales manager is a dual leadership and key account management role
    HNN Sources
    The national operations manager at Haymes Paint is a senior executive role
    Super Retail Group is searching for a senior buyer for its BCF team
    Visit the Mecca Website
    The Husqvarna Group has an opportunity for a field sales manager to join its Gardena and Neta sales team; A Ballarat-based national operations manager is required at Haymes Paint; and Super Retail Group needs a senior buyer for its BCF stores.
    Selling Gardena and Neta brands

    The field sales manager at the Husqvarna Group is a dual leadership and key account management role. It involves the "profitable achievement of sales objectives for key account customers" and "effective management of their respective third party vendor merchandising team". The ideal candidate will have a minimum five years of business development experience in retail hardware.
    Husqvarna Group is searching for a field sales manager
    Haymes seeks operations manager

    The national operations manager at Haymes Paint is a senior executive role. The main purpose of the position is to manage and oversee the manufacturing, supply chain planning, procurement and national distribution functions. The successful candidate will contribute towards the development and execution of the company's corporate business strategy.
    Haymes Paint has a national operations manager role to fill
    Senior buyer for BCF

    Super Retail Group is searching for an experienced category manager/senior buyer for its BCF team based in North Brisbane (QLD). The successful candidate will "live and breathe the outdoors which encompasses boating, camping and fishing". The individual will have demonstrated experience in leading and executing promotional planning, range planning and negotiating trade partner agreements.
    Super Retail Group is seeking a senior buyer for BCF
    News
    Indie store update
    TradeTools has grown from one store in 1987 to the current network of 14
    HNN Sources
    The land where the Banner Mitre 10 store is located in Norwood (SA) is up for sale. Banner's Mount Barker store is pictured.
    The Mitre 10 store in Mooroopna (VIC) will soon close its doors
    Click to visit the HBT website for more information
    Queensland-based TradeTools' success has come about without the help of banks or lawyers; the land where the Banner Mitre 10 store sits in Norwood (SA) is up for sale; and a regional town in Victoria is losing its Mitre 10 store.
    An individual approach

    Greg Ford has built his $100 million tool business without ever going to a bank. TradeTools has grown from one store in 1987 to the current network of 14.

    With turnover approaching $100 million, Ford's unconventional, plain-speaking approach has seen him succeed in a sector dominated by big box chains. He told the Courier Mail:
    The company has never been in debt and owns all its own stores. I suppose we are more of a property company now.

    Ford said TradeTools thrived by avoiding financiers and debt. He explains:
    I don't trust banks and I don't trust lawyers. When we started in the late 1980s, the economy was quite strong and that helped. Our competitors had dropped the ball and we took advantage of that. Instead of dealing with wholesalers we went straight to the factories overseas in Japan and Taiwan.

    After coming to Australia from Britain as a fresh-faced 21-year-old, Ford worked on building sites and had only planned to stay for about a year.

    But after his parents joined him from England, he and his father opened a tool shop, Glenfords, at Slacks Creek (QLD). Ford said: "My dad had been in the tool business in the UK." He has a collection of old tools sold by his father on display at TradeTools' head office.

    When Glenfords was sold, TradeTools was born in 1987, and the company has seen the ups and downs of the often volatile building sector. Ford said:
    We are a litmus test for the economy as a whole, and at the moment we are enjoying a prosperous time because the construction industry is quite strong.

    He said the expansion of hardware chains such as Bunnings had created pressures on the company and wiped out most of its competitors.
    It forced us to become more specialised...Seventy-five per cent of what we stock they don't stock. It would be very hard to start this business today because of the buying volumes required. We have to buy millions of dollars of stock just to be competitive with the likes of Bunnings.

    TradeTools is also a manufacturer, with a factory near the company's Ormeau (QLD) headquarters producing its own brand of air compressors. He said:
    We are probably more famous for our air compressors than anything else...We sell 200 a month.

    Ford said customers would buy Australian-made goods if they were of good quality and represented value.
    What we have to do in this country is make things like we used to...Without making things, no economy can survive.

    Ford said when he eventually stepped back from the business, he would have a large group of potential successors.
    We have 36 shareholders, most of them sales staff. If you've been here for 10 years, you get shares in the business.

    He aims to double TradeTools' turnover to $200 million over the next decade.
    Mitre 10 site on the market

    The land where the Banner Mitre 10 store is located in Norwood (SA) is up for sale. The hardware store could potentially make way for a 10-storey retail and apartment block, after the site was placed on the market recently.

    JLL South Australia managing director Jamie Guerra, who is heading the sale, said Mitre 10 had a lease and it was only the site -- not the business -- that is on the market. He told Adelaide Now: "We are just selling the property, the businesses there currently are protected by their lease."

    He would not reveal the length of the lease. But he conceded there was "room for development in the next couple of years".
    Mooroopna Mitre 10 shuts down

    Sources have revealed to the McPherson Media Group that the Mitre 10 store in Mooroopna (VIC) will soon close its doors.

    Greater Shepparton City Councillor and regular customer, Dennis Patterson described the news as ''devastating for the town,'' and said the store was a ''Mooroopna institution''.

    He said the store had always seemed to be busy, that customers would now need to travel an extra 20 minutes for specialty hardware and that the store would be sorely missed.

    Cr Kevin Ryan said he was ''flabbergasted'' to hear the news and that it highlighted the need for people to shop local and support local jobs.

    About 10 full-time jobs could be lost as a result, while the store is expected to close by the end of June, according to sources. Ryan said: "Smaller shops in towns can't afford to carry the wide range of products. This is a fact of life...It's going to continue to impact on smaller towns."
    Bigbox
    Lowe's brings unicorns, flamingos to life
    Lowe's latest campaign features a unicorn
    Ad Age
    Another spot stars a lawn flamingo
    Frogs feature in one of the six spots
    Click to visit the ITW website for move information
    Lowe's is injecting some humour into its brand with its latest campaign called "Make Your Home Happy." The first spots bring inanimate objects like lawn ornaments or magnets to life.

    One commercial features a unicorn lamenting that his "tiny unicorn legs" don't afford him a better view of the lush green lawn. Another features a preening lawn flamingo. The home improvement retailer is planning a total of six spots in 15-and 30-second variations with more commercials to continue throughout the year.

    You can view one of the commercials here:


    Marci Grebstein joined Lowe's as chief marketing officer last year after stints at Food Lion and Staples. She told Ad Age:
    [The campaign] provides reasons to believe, proof points, about how Lowe's demonstrates its passion around helping consumers bring their visions to life.

    She noted that the humour in the ads would appeal to both Lowe's core customer who is a little bit older, and the emerging millennial consumer who may be a first-time home buyer. She said: "The humour has a different slant than we've had in the past."

    To further engage customers and keep its content fresh, Lowe's has created alternate endings for the spots that will run online. The retailer worked with BBDO, its lead creative agency, on the campaign. Tim Bayne, executive creative director at BBDO New York, explained via email:
    The 'Make Your Home Happy' campaign is a way for Lowe's to communicate the different ways they go above and beyond to help people bring their home improvement visions or projects to life.

    He added that the marketing "allows us to inject some humor and personality that resonates with our emerging customers, without alienating our current customers."

    The new branding replaces Lowe's "How to" series. The retailer also uses the tagline "Never Stop Improving," introduced in 2011. Grebstein declined to say how much Lowe's is spending on the push. The company spent USD315.4 million on measured media in the US last year, an 8% decline from 2014.

    Sales for home improvement products in the US are expected to rise 4.4% in 2016 over 2015, according to research from trade group the Home Improvement Research Institute and information company IHS, which estimates 2015 sales to be around USD318 billion.

    In the fourth quarter of last year, Lowe's reported net sales of USD13.2 billion, a 5.6% rise over the same period, a year earlier. The company is forecasting growth of 6% this year.
    Retailers
    Ace Hardware develops fulfillment capacity
    Ace Hardware is leveraging its physical footprint to help meet the needs of online shoppers
    Chain Store Age
    Since March 2015, Ace has been offering same-day in-store pickup of online orders
    Ace supports e-commerce transactions with an eBay Enterprise platform
    Click to visit the ITW website for move information
    Independently-owned retail cooperative, Ace Hardware is known as the "helpful" hardware store. The company has been leveraging its physical footprint to help meet the needs of online shoppers. Mark Lowe, e-commerce marketing and digital department manager at Ace Hardware, explained in an exclusive interview with Chain Store Age:
    We will ship to the consumer's home for online orders, and also offer two flavours of buy online pickup in store. We have been shipping online orders from the retail support centres to local stores for customer pickup since 2003.

    Since March 2015, the retailer has also been offering same-day in-store pickup of online orders using store stock. He said:
    We are using the inventory at our stores as an e-commerce fulfillment channel. We give consumers the ability to pick up online orders from their local store that day, and so far it's working really well. It reduces the amount of time it takes to get products to the consumer. We're close to the customer - with 4,400 stores we can get items out relatively quickly.

    On the back end, Ace supports e-commerce transactions with an eBay Enterprise platform. To offer omnichannel pickup options, the retailer ties that platform to an internal warehouse management system and SAP fulfillment software. Lowe said:
    Part of our brand promise is to be helpful and connect to the customer. We do that well for in-store purchases, so how do we grow it in the omnichannel space?

    Lowe said so far Ace has gotten a positive response to its omnichannel fulfillment offerings, with most customers preferring to pick up online orders in store. The retailer's inventory of hardware and home goods often lends itself to customer pickup.
    We sell a lot of big, bulky items like patio furniture. It's difficult to ship to the customer's home but much easier for them to come pick up at a store.

    Looking ahead, Ace is currently running a small test of delivering online orders to customer homes using local stores as fulfillment centres. Lowe said:
    We want to understand what it means operationally and how much consumer demand there is. We're always evaluating how to leverage our fulfillment network to expedite online orders.

    Related:
    Same day delivery at Ace Hardware - HNN
    Ace Hardware partners with eBay - HNN
    Bigbox
    B&Q campaign stars zebras
    B&Q has a new strapline, "Let's Create"
    The Drum
    It showcases how the retailer has helped unlock creativity in its customers
    The campaign stars a zebra family
    Click to visit the ITW website for move information
    B&Q is putting creativity at the centre of its latest campaign with a strapline that encourages DIY fans to move beyond thinking in "black and white".

    The campaign stars a zebra family and introduces the "Let's Create" strapline, which aims to convey the message B&Q is not just a warehouse stacked with DIY products but a "treasure trove" full of materials that can transform a home.

    It is shot in the style of a mockumentary to showcase how the retailer has helped unlock creativity in its customers, who in this case happen to be zebras. The son Fred creates a colourful first home after growing up in his parent's black and white world.

    You can view the commercial here:


    B&Q's change in strapline follows on from the departure of customer and marketing director Chris Moss in October 2015. Under Moss, the company launched an "Unleash the B&Q in you" strapline.

    The latest campaign has been created by WCRS. Customer and marketing director at WCRS, Natasha Gladman has filled Moss' shoes at B&Q. She said:
    Building on customer insights, B&Q's new 'Let's Create' campaign will engage with customers in a different way - it's all about projects and the way we can help and inspire customers to create homes to feel good about. With a more down to earth tone, the campaign creates more optimism, energy and encouragement.

    It was launched through Facebook and TV commercials. The campaign spanned press, radio, catalogues and banners in store to support the TV push. Activity will also include an increased use of digital and social channels.

    Creative director at WCRS, Steve Hawthorne, added it had been "great fun" to work with B&Q, taking the brand in a "new, exciting direction". He said:
    DIY is evolving and B&Q are leading the way by encouraging people to create homes that are unique to them. The campaign continues B&Q's fun, accessible approach to home improvement by showing people what's possible with a bit of ambition and a little help from B&Q.
    Companies
    Growth in online home services
    Amazon said orders for home services increased 20% per month since its launch
    Fortune
    Amazon home services are available in 30 US metropolitan cities
    Amazon's local services are a direct threat to home improvement stores
    Subscribe to HNN weekly e-newsletter
    Amazon said customer orders for home services such as plumbing and mounting TVs had increased 20% per month, on average, since the online retailer launched the platform in the US last year.

    Adding local services to its offering makes sense for Amazon, which has said that over 85 million US customers shop for products that require additional services like installation.

    Erika Takeuchi, a spokeswoman for Amazon Home Services, declined to disclose the number of contractors that have so far signed up for the service but said it now offers 36 million pre-packaged services on the site, up from two million when it first began offering local services in 2015.

    Customers buying appliances like washing machines or TVs can choose to include professional installation services at checkout, making it attractive to buyers who might ordinarily make similar purchases at home improvement stores.

    Amazon's local services are a direct threat to the likes of Home Depot and Lowe's that also offer similar installation and repair services. It's a prime example of Amazon's attempt to encroach further onto territory traditionally belonging to such brick-and-mortar stores, which still account for more than 90% of retail sales.

    Amazon said home services are now available across the USA in 30 metropolitan areas and customer orders have been particularly brisk in New York, Los Angeles and Washington, DC.

    Related:
    Amazon launches at-home repair/installation services - HNN
    Amazon expands home services offering - HNN
    Companies
    DIY start-up ManoMano to challenge B&Q
    France-based ManoMano is targeting the UK market
    Telegraph
    (l&r) ManoMano founders, Christian Raisson and Philippe de Chanville
    https://www.crunchbase.com/organization/manomano#/entity
    Subscribe to HNN weekly e-newsletter
    French online DIY, gardening and renovation retailer ManoMano has set its sights on the UK market with a GBP10 million fundraising.

    The company, which was founded in 2013 by venture capital investors and DIY enthusiasts Philippe de Chanville and Christian Raisson, allows customers to buy DIY products online from its network of merchants. It has built a community where DIY fans can get advice and support for their projects. de Chanville said:
    Unlike domestic players in the UK, we don't have shops or hold stock. We have nothing to slow us down.

    ManoMano has raised EUR13 million (GBP10.4 million) in a round led by Partech Ventures, the French venture capital fund behind upmarket furniture retailer Made.com.

    Philippe Collombel, managing partner of the fund, claimed that the start-up's launch in the UK could be "bad news" for Kingfisher-owned B&Q in the UK. He said:
    The execution has been perfect, the team is fantastic. The company made EUR1 million [revenue] in its first year, EUR15 million in the second and EUR32 million in the third. It will more than double that this year.
    It's an execution by the book without many cash injections. This could be bad news for B&Q. This is a really interesting company.

    According to de Chanville, the UK is the company's fastest-growing market to date, beating its home territory.

    Some estimates value the DIY industry as being worth EUR40 billion in the UK, compared to EUR60 billion in Germany and EUR30 billion in France.

    ManoMano lists products such as screws and drills from thousands of merchants, including small specialist retailers and subsidiaries of multinational corporations. The website shows all the items currently in stock.

    The company gathers hundreds of data points about its customers to make sophisticated recommendations. de Chanville explained:
    If you don't do DIY, a big, expensive drill may not be the right item for you, even though it's the best on the market. You may need something light and cheap and easy to use.

    The marketplace is run in tandem with the community network. de Chanville said:
    We don't pay them, these are DIY enthusiasts who want to help people out. People who need help with a project can get up to 10 answers in real time. That's better than asking one person in a shop, who may just be trying to sell you something.

    ManoMano is poised to launch a new service on the back of this community called SuperMano. It is where users can post small DIY jobs such as fixing a leaky tap or putting up a shelf and experts can pitch for the work. de Chanville explained:
    It's a bit like TaskRabbit in the US. We'll launch it later this year. People set their own prices and customers can rate them.

    Alongside Partech, other investors in ManoMano include Bpifrance and CM-CIC Capital Prive as well as a British VC Piton Capital. de Chanville said:
    We wanted to have British VC because we have high hopes for the UK.

    He and Raisson have both spent a decade living in London. de Chanville added:
    We understand the market and have a huge attachment to this country.
    Careers
    Seeking opportunities
    A business manager is being sought for AEG Power Tools
    HNN Sources
    The brand manager for PPG Industries will oversee marketing activities
    The national account manager will manage Yates' relationship with Bunnings
    Visit the Mecca Website
    A business manager is wanted to join AEG Power Tools based in Mount Waverley (VIC); PPG has an opportunity for a brand manager to be part of its architectural coatings team at Villawood (NSW); and a national account manager is needed at Yates.

    For further information, simply click on the images provided.
    Managing the AEG business

    An opportunity exists for a business manager to join AEG Power Tools. Responsibilities will include driving the strategic direction in product development, value engineering and future planning. The ideal candidate will also have advanced Excel skills and experience with ERP Systems, preferably SAP.
    Business manager required at AEG Power Tools
    Brand performance at PPG

    The brand manager for PPG Industries will be responsible for implementing effective ATL (above the line) and BTL (below the line) in-store marketing strategies. This individual will grow market share for PPG's brands in the retail/DIY and trade/professional sales channels in the specialty, texture and woodcare categories, for the Australian and New Zealand markets.
    PPG Industries need a brand manager
    Managing Bunnings for Yates

    Reporting to the channel business manager, the national account manager will manage and develop the Yates relationship throughout the Bunnings network. The successful candidate is entrepreneurial in their approach, and will aim to identify new business opportunities as well as build on the strength of existing relationships. This will be achieved by providing innovative customer solutions and deep technical expertise.
    The Yates national account manager will be responsible for Bunnings
    Companies
    TTI continues growth
    Video interview of Joe Galli by Bloomberg Asia
    TTI Group
    TTI results for full year FY 2015
    TTI regional sales distribution 2015
    Subscribe to HNN weekly e-newsletter
    Hong-Kong listed, US-based, Chinese manufactured power tool, hand tool, floor-care, and cordless technology company Techtronic Industries (TTI) has reported strong results for its FY 2015. It has described these results as "record-breaking".

    The company's respected CEO, Joseph (Joe) Galli, highlighted the good performance of the company's team in Australia, in particular its successful advancement of TTI's AEG brand. Mr Galli also mentioned the good performance of Australian big-box home improvement retailer Bunnings.
    Results

    Reporting in US dollars, the company shows sales for 2015 as USD5038 million, up 6.0% on its sales for the previous corresponding period (pcp), which was FY 2014. Removing the effects of the strengthening US dollar exchange rate during 2015, sales would have grown by 10.5%, the company reports.

    Earnings before interest and taxation (EBIT) came in at USD400 million, up by 7.4% over the pcp, while net profit (after tax) was USD354 million, up 18.0% over the pcp. Earnings per share (EPS) were reported as USD0.1937, up 18%.

    TTI divides its operations into two main segments: power equipment and floor care. For 2015, sales for power equipment increased by 11.8% over the pcp, reaching USD3972 million. Removing currency fluctuations, the increase would have been 16.8%, TTI states.

    Sales of TTI's floor care products decreased for FY 2015. They fell by 11.2% over the pcp to reach USD1066 million. Removing currency fluctuations, the decline would have been less, at 8.1%. According to TTI's chairman, Horst Pudwill, the decline in floor care results is largely due to one-off, non-recurring items.
    TTI results for full year FY 2015
    Performance metrics

    Performance indicators were largely positive for TTI during 2015. Gross margin increased by 0.5% over the pcp to reach 35.7%. Operating profit for its power equipment division increased by 29.7% over the pcp, though it fell considerably for floor care, down 64.6%.

    In his remarks, Mr Galli pointed to the overall gross margin trend for the past seven years, which has seen it increase steadily. Mr Galli said:
    So look at this chart. This is my favourite part of the presentation. It is again gross margin back to 2011. To go from 32.6 in a fiercely competitive industry, where our competitors have been in place for decades, and we are talking about large global companies like Makita in Japan, Bosch in Germany, Stanley Black & Decker in the US. And here we are taking all this market share and driving the gross margin up to unprecedented levels.

    Mr Galli's point (as he further clarifies elsewhere) is that, as TTI is gaining market share while while still increasing its gross margin, it is not "buying" market expansion through discounts. Rather, the company is finding markets that are willing to pay a premium for the technological advances TTI is introducing.

    Below is a chart of the increases in the gross margin from 2011 onwards:
    TTI Gross margin, and percentage change in gross margin

    As can be seen, the rate of increase for 2015 is less than for the preceding three years. This is likely due to the effects of currency exchange rates.
    Operating profit

    One of the more notable metrics to emerge is TTI's operating profit growth in its power equipment segment. This came in at 29.7% for FY 2015 as compared to the pcp. A similar measure of growth for FY 2014 was 16.7%, and for FY 2013 it was 14.2%.
    Working capital/inventory

    As he did a year ago, Mr Galli went to some lengths to explain why the company has chosen to expand its inventory:
    So we added five days of inventory. Why? Because we already have a reputation at TTI, which Horst created, of being the best service level, best supplier to retail partners like Home Depot. Or Bunnings in Australia. And we have so much new product coming in the first half of this year, and we have so many commitments from our retail partners that we just couldn't take the chance, and we decided we would put the inventory in. So for me this is a very positive element of our announcement because it shows that we are not short-sighted.

    Mr Galli also explained why the increase in inventory will have no net effect on the company's outcomes:
    [T]he implication of that inventory build on our balance sheet is zero . . . because the suppliers we are now paying our bills in 84 days. Ten years ago we paid our bills in 20 days. So we now have such an aggressive purchasing organisation that we have been able to extract very favourable terms from our suppliers. And don't think this is TTI being a bully, and being rough and tough with our suppliers. We are pretty good negotiators. But this is, when you show numbers where we are growing double-digit, the suppliers say, "well of course we will accommodate your request, improve your terms."
    Productivity

    TTI offers a rough measure of productivity by comparing its increase in sales to its increase in headcount. According to the company, even as sales increased by 10.5% (exclusive of exchange fluctuations) the headcount rose by only 2.2%.
    Regional performance

    North American sales (US and Canada) grew by 11.2% over the pcp to reach USD3772 million. Sales for Europe, the Middle East and Africa (EMEA) declined by 11.1% over the pcp, to come in at USD861 million. The company reports that, accounting for currency fluctuations, sales would have grown by 5.1% over the pcp.
    TTI regional sales distribution 2015

    Sales for Rest of World (ROW), which includes Australia, grew by 3.5% over the pcp, and would have grown by 18.9%, TTI states, were it not for currency fluctuations. Mr Galli was careful to point out in his remarks on the results that the ROW results were "led by Australia, but not only Australia", possibly indicating that some areas of Asia were also positive contributors.

    Mr Galli was particularly enthusiastic about the potential for further growth in Western Europe:
    Europe up 5% [in sales outside currency fluctuations] and that was after the floor-care situation. Europe was up strong double-digit in power equipment. And we see Western Europe as a massive growth opportunity for the company. We love developed markets where there is a focus on safety on the jobsite, and where the consumer that we sell to has the right level of disposable income to buy our high end products.

    He added to this comment later in his remarks, highlighting the fact that TTI continues to thrive in Europe despite gloomy economic predictions:
    However in Europe where we are -- where Milwaukee was an afterthought brand five years ago, Europe was up 24% [for Milwaukee sales]. This is a market where every headline says, Europe is slowing down, the economy is bad, there is one issue after another in the European Union, and we are up 24%. We don't let our managers read these headlines anymore, we cancelled all newspaper subscriptions, we just want people focused on new product, right Horst, so we ... sometimes it is best not to look at some of these gloom and doom headlines, because we have so much new product and it is so exciting that we are leading a stampede and a revolution away from corded tools to cordless.

    Mr Galli also reminded analysts that the company had decided some years ago to pull out of Brazil, and to proceed cautiously in both Russia and China, strategies that he believes have been very effective.
    Power tool brands
    Milwaukee

    Mr Galli called out the performance of the company's high-end power tool brand Milwaukee as being particularly good. Exclusive of exchange fluctuations, sales of Milwaukee products grew by 23.7% for FY 2015 as compared to the pcp. Commenting on this result, Mr Galli said:
    A key highlight was our Milwaukee growth, where we yet again exceeded 20%: 23.7% growth in Milwaukee power tools worldwide. This is in a mature industry where these kind of growth levels have never, never been seen. How are we doing it? Well we are doing it with new product. We have so much new product coming into Milwaukee, largely cordless, largely high technology cordless, that is well ahead of our competitors' capabilities. With all those cordless products we are launching, we have been able to generate growth that, again, that you have never seen in the industry.

    To read more, please tap/click on the Full Text button.
    Editorial
    Kitchen Wars
    Real Living editorial on IKEA
    HNN Sources
    Australian House & Garden Kaboodle editorial
    Kitchen as a living-room from the Freedom Kitchens catalogue
    Give to Amnesty International
    From now through to the end of FY 2016/17 the kitchen renovation sector is going to be busy cooking up some major changes.

    At the lower to middle part of the market, the next 15 months will be shaped in part by a battle between the Bunnings-exclusive flat-pack kitchen manufacturer Kaboodle, and the Swedish-based "King" of flat-pack, IKEA.

    A little higher up the price incline, there is a better than 50% chance that the German-listed, South African based homewares retailer Steinhoff will acquire privately-held Australian retailer The Good Guys. Steinhoff already owns Freedom Furniture, and therefore the Freedom kitchen business. A combined company could exert a significant force in the $25,000+ part of the market.

    Just to add even more spice, there is the exit of Masters from hardware retail, along with its Principal kitchen service. This will release a certain amount of revenue into the market -- but only after an initial period of discounting on many kitchen-related products, which could temporarily depress prices on goods such as benchtops.

    The final sprinkle of chilli flakes comes from two main companies in the independent market, the Home Timber and Hardware Group (HTHG) and Mitre 10. HTHG is definitely on the market, as part of the exit by Woolworths from hardware. Mitre 10 could well be spun off by its owner, Metcash, as well.

    There is also speculation that Mitre 10 and HTHG might be combined as a new company to be listed on the ASX. Whatever happens, it is likely that these hardware operations might seek to enhance their retail consumer offer, and kitchens could be a part of that.
    The exit of Masters

    Part of the "headline news" that will affect this segment of the home improvement industry is Masters' exit from home improvement retail. As with all aspects of the company's exit strategy, this is likely to have a two-stage effect: an initial dip in demand/price, as Masters discounts its existing stock, followed by an increased share of the market for some other participants.

    In normal circumstances, it would be reasonable to expect that the Home Timber & Hardware Group (HTHG) would be able to pick up a considerable amount of the ex-Masters business. However, given the current circumstances, with Woolworths selling HTHG, that seems unlikely to happen. Making it happen would require a decent investment into the business, and it's likely management will not see that delivering an immediate return in terms of the end sale price.

    The kitchens sold by Masters did come supplied with DIY instructions, but they are regarded as requiring skills at the higher end of DIY capabilities. It's likely that over 70% of these kitchens were assembled by contractors rather than home owners. That means that much of the business that gets released by Masters exit is likely to go to companies such as Freedom Kitchens and The Good Guys, as well as smaller, regional kitchen companies.

    Mitre 10 might also be in a good position to collect some of the ex-Masters business, but with its ongoing focus on trade rather than consumer, this opportunity is likely to slip past.

    The Bunnings-linked Kaboodle will probably pick up more than 10% of this business, but it is likely to suffer somewhat from Masters' discounting during calendar 2016. This particularly applies to areas such as benchtops and some cabinet fittings. Bunnings itself will likely also be hit by Masters' discounts on plumbing fixtures such as taps and sinks.

    One of the surprise beneficiaries of the Masters' exit from kitchens is likely to be IKEA. One of the real benefits of the Masters' kitchens was their use of Hafaele fittings, which enabled customers to select some very sophisticated and useful configurations. That is an area where IKEA excels, particularly with its new range of Metod kitchens. IKEA has also worked hard to better integrate assembly services -- using HI Pages -- into its offering. It is quite likely the Swedish company could pick up 20% to 25% of the former Masters business.
    Kaboodle and IKEA

    These two companies have become engaged in a classic "scissors" competitive action in their retail sector.

    Kaboodle -- along with Bunnings -- has put a lot of work into moving the classic "value" kitchen maker into the next category up in the market. Kaboodle has developed a series of well-planned, attractive kitchen designs at positive price points. Bunnings has given Kaboodle displays extra floor space, and used this to create interesting vignettes of kitchens.

    In some stores, such as the Epping (VIC) Bunnings Warehouse, it has devoted a great deal of space to displaying the Kaboodle options. At others, such as the Mentone (VIC) Bunnings, it has provided a display of the basic components as a guide to construction.
    Bunnings Epping display of Kaboodle surfaces

    These ongoing developments have been backed up by a magazine advertising campaign, with occasional TV commercials at key moments of series such as Channel 9's "The Block". The magazine campaign has grown steadily in terms of design and execution over the past two years, and become one of the more effective campaigns by a home improvement brand today.

    Meanwhile, IKEA has been moving in the opposite direction to Kaboodle, penetrating into the "value" end of the spectrum. That has become increasingly evident in its magazine advertising, backed up by the occasional web video campaign as well.

    IKEA also has the considerable backup of its huge warehouse display stores, which offer far more space than the average Bunnings for kitchen display.
    IKEA display kitchen

    It also has the advantage of selling a respected home brand of appliances custom made for its kitchens. This is backed up by a website which, as it is designed specifically for homewares, does a better job of displaying the kitchen merchandise than the Bunnings website.
    The market shape

    What has brought about these changes in the market?

    The graph below gives some indication of the changes that have occurred:
    Number and cost of kitchens in new homes - HIA

    The graph shows the cost of kitchens in new homes, as this is the data the Housing Industry Association (HIA) has made publicly available, but this usually tracks within 10% of the average cost of kitchen renovations. What it indicates is that there has been something of a "reset" when it comes to the costs of the average kitchen over the past three to four years. It's worth remember that around 2003/04 the average cost of a kitchen renovation, in today's dollars, was around $30,000.

    Many commentators continue to persist with this older view of how the kitchen market works. Commenting on kitchen costs, they regard anything costing under $25,000 as a "minor" renovation, or one that is "basic" or even "bargain", and regard $35,000 as somehow representing the average cost.

    Not so. Not at all. The average cost is really around $20,000, and will likely stay at that level for some years to come.

    As purchase prices tend to be distributed around a normal curve, this means the "hot" price category with the highest density by customer numbers is now where kitchens cost between $15,000 and $25,000. In the past, Kaboodle had established itself as a leader in the $10,000 to $20,000 area, and IKEA had established itself as a leader in the $20,000 to $30,000 area. With the shift downward in the average price, Kaboodle is now reaching out to the $20,000 to $25,000 market, and IKEA is reaching for the $15,000 to $20,000 market. This is what is sometimes called a competitive "scissors" action.
    Kaboodle

    Over the last three years, through a lot of hard work, Kaboodle has built itself an expanded role in the flat-pack kitchen market. It has moved from being the "budget" alternative, to something of a reference point for many people renovating their kitchens.

    For renovators who plan to spend less than $20,000 on their kitchen renovation, at least looking to see what Kaboodle has to offer has become very common. It is growing in popularity for those planning on spending between $20,000 and $30,000 as well.
    The Kaboodle strategy

    One of the discoveries that Kaboodle seems to have made early in its quest to expand its market upwards is that it had two strong advantages it could use: a sense of fun, and a strong sense of style.

    More expensive kitchens have a tendency to be austere, functional, and refined. What Kaboodle brought to its less-expensive kitchens was a bit of a sense of play and fun. While the underpinnings of the kitchens, the basic, machine-made forms that make up the cabinets and shelf supports, remained the same -- simple but useful -- Kaboodle rapidly evolved the facade, introducing fanciful and bold approaches to kitchen appearance. These include:
  • Rustic
  • Modern
  • Cottage/Farmhouse
  • Industrial/Warehouse
  • Cafe/Bistro
  • Heritage/Traditional
  • Hamptons
  • Colour based

  • These kitchen styles are now used by some renovators as the basis for their design of much of their dwellings. They might have an attraction to something like "industrial" design elements, but be unsure how to execute such a design. The "industrial" style Kaboodle kitchen provides them with a set of visual guidelines they can follow throughout their dwelling.
    Kaboodle ad design

    A challenge that Kaboodle faced in expanding its appeal is one that many Bunnings product lines face: how do you extend over more of the market, while clearly retaining links to the "base" market?

    Kaboodle has handled this by splitting its marketing into two different types of advertising. One form of that advertising, which is usually a double-page spread, sets out the practical steps involved in choosing and designing a Kaboodle kitchen. This is usually illustrated by a "before and after" set of photographs:
    Kaboodle explanation

    The other style of ad Kaboodle uses is more of a style/glamour ad which emphasises the design choices available:
    High-design Kaboodle ad
    Kaboodle media buy
  • Better Homes & Gardens/March 2016

  • Kaboodle's major advertising presence in Better Homes & Gardens (BHG) is a double-page spread right before the editorial section on kitchens, using the practical ad. BHG has done, in general, a good job with these editorial pages. The magazine manages to combine overview photographs to give a sense of a kitchen, with numerous details about how the kitchen was put together, and additional elements that might work with the kitchen style.

    As is usual in these editorial specials, kitchens by both Kaboodle and IKEA are used, though they are not always identified as such. In the previous kitchen special, which appeared in the September 2015 issue, while Kaboodle kitchens were used in the editorial, the company was not mentioned al all. (IKEA was mentioned, but not specifically in relation to a product.)

    In this issue both Kaboodle and IKEA are mentioned specifically in relation to products. The spread where Kaboodle is named uses an image that is taken from one of the Kaboodle glamour ads.
    Kaboodle editorial in Better Homes & Gardens

    In fact, Bunnings is all through this issue of BHG. There are two other ads for Bunnings homewares. Kaboodle is also used as part of a "granny flat" feature at the back of the magazine.
  • Australian Home Beautiful/March 2016

  • BHG is published by Pacific Magazines, and the other home design publication from Pacific is Australian Home Beautiful (AHG). It's not always easy to clearly identify kitchens, but as Kaboodle is not identified as a supplier by the magazine, it would seem no Kaboodle kitchens are featured in the editorial.

    Nonetheless, Kaboodle has made a considerable advertising buy in this edition. There is a double-page spread glamour ad, a one-page glamour ad, and a third-page ad promoting Kaboodle's kitchen designer software.
    Kaboodle glamour ad, Home Beautiful

    This expenditure does make sense, as AHG really defines the upward market that Kaboodle is aiming at, with kitchens that start at around $25,000. AHG does also offer the most comprehensive coverage of any of the magazines from this autumn season, with over 40 pages of coverage in its "2016 Kitchen Lookbook" feature. Of the 10 kitchens featured, four cost $60,000, there is a $26,500, a $40,000, a $50,000, and three from $66,000 to $80,000.

    For Bunnings, there is also a one-page Brilliant ad for lighting, and a one-page ad for Heatstrip outdoor heating.
  • Australian House & Garden/March 2016

  • Bauer Media's Australian House & Garden (AHG) offered a surprising good kitchen section in this edition. It profiled four kitchens, providing three pages of coverage for the first two, and a double-page spread from the last two. The first two are, as you might expect, deluxe kitchens, the first being a classic Sydney kitchen that has been featured frequently -- with good reason.

    The last two are budget kitchens, including one which uses recycled elements, including a shop counter as a kitchen counter. The final of the series is a Kaboodle kitchen (clearly identified as such), using a "semi-industrial" look.
    Australian House & Garden Kaboodle editorial

    Kaboodle has one glamour ad in a double-page spread,
  • Real Living/April 2016

  • This is also a Bauer Media title. The magazine surprised HNN by offering one of the better kitchen features for the Kaboodle/IKEA sector. In part that is because the magazine approached the feature as one that was all about flat-pack kitchens, rather than relegating them to a small section of a larger kitchen feature.

    Beyond that, however, the editorial team has obviously really invested time and energy in sourcing some more unusual and interesting photographs of flat-pack kitchens (no recycled ads here). To add interest, each of the five kitchens features a unique table and chairs combination, not sourced from the flat-pack provider, as well as an interesting range of appliances and accessories. The colours used and overall design approach is very engaging. Below is one of the two Kaboodle kitchens featured:
    Kaboodle kitchen in Real Living magazine

    Kaboodle has two double-page spread glamour ads in this edition. Bunnings also has a single-page ad for its designer lighting, and another single-page for a bathroom-related product.

    As Kaboodle develops its advertising further, it might look to this kind of treatment as a possible way forward, especially for the more upmarket magazines.
    IKEA

    Where Kaboodle has been nimble in adjusting its approach to capture a larger and developing market, IKEA has lagged somewhat in adjusting to the new realities of the kitchen renovation market.

    Prior to 2012, IKEA's main market was for renovators who started off budgeting for kitchen ideas that would end up costing $45,000 (and could easily run to $60,000), then cut back to a budget of $30,000. With a few compromises and the odd "luxe" touch, they could make IKEA kitchens "do", until the next renovation in 12 years, when they would finally get "the kitchen of their dreams".

    That market has been in steady decline over the past three to four years. It's been replaced by renovators who begin with a budget of $30,000, and are quite happy to end up spending under $25,000.

    In addition to this, the market that IKEA is to some extent missing consists of those renovators who are seeking to upscale from kitchens they might have installed when first purchasing a property 10 or 12 years ago. They're ready to spend $20,000 to $25,000 on a kitchen, but they really want to have an exciting addition to show for it. They are less interesting in something timeless, elegant and highly functional, and more interested in a kitchen that feels dynamic and fun.

    With this market, the company has not been especially effective with its approach. IKEA is a big, well-established, multi-national company, which can bring resources to areas such as marketing and media materials -- something its competitors struggle to match. Where it gets into trouble, however, is when it fails to get its localisation strategies right.

    IKEA kitchen advertising universally applies muted tones, with a lot of white, off-white and grey, delivering a distinctive modern European look, with a hint of legacy to it. This stands in stark contrast to many of its current store displays of kitchens, which will typically make use of the vibrant colours and interesting, dynamic designs.

    It seems likely that the in-store design has been successfully localised by store managers based on experience in what sells, but this localisation has yet to feed back to the advertising design, which is likely determined on a more global scale.
    IKEA strategy

    While these are considerable challenges, IKEA also has considerable resources at its disposal. Perhaps the strongest point of difference that IKEA does have over Kaboodle and other kit kitchens on the market is the sheer variety of fittings it offers. This extends to the arrangements of shelf and drawers, and the inserts that are available for these. These modules simply plug into the overall IKEA layout, and so enable the renovator to come very close to custom kitchen design. While they do cost, not only are renovators free to select what they can afford, but it is also a fairly simple matter to "upgrade" to better fittings a year or two after the kitchen has been installed.

    Another great resource IKEA has, which cannot (as yet) be matched by competitors such as Kaboodle, is the form factor of its kitchens. As HNN has mentioned previously, in expanding into the lower budget end of the kitchen renovation market, IKEA has employed a strategy that comes directly from its European roots: highlighting "stand alone" kitchen components. These are units that are not built into corners, but instead are freestanding against walls. As anyone who has put a complete kitchen together knows, this saves the effort spent getting the kitchen to fit into corners which are simply never really square at 90 degrees. The only interface between the kitchen bench and the room is its backing onto the wall, where out-of-square angles can usually be easily resolved. Easier DIY translates directly into cost savings.

    In its most recent promotional material, IKEA has gone one better on this design, and introduced the freestanding kitchen "pod". The pod is made up of back-to-back kitchen units that can house most of the kitchen necessities -- sink, stove, appliances -- without the need to rest against any wall.
    The IKEA kitchen "pod"

    While this might seem a slightly exotic solution in Australia, it is a common one in Europe. In part this is because one form of dwelling rental (common in France and Italy, and not uncommon in the UK) has the renter supply the fittings for the kitchen when they move in. One solution for this situation is kitchen "pods", with suppliers in Europe providing some very well-designed solutions. The pods can fit into any space, and can thus be moved by the renter if and when they move elsewhere.
    Dune kitchen pod - not IKEA
    IKEA advertising

    There is a marked shift in IKEA's advertising for autumn 2016 as compared to its spring 2015 advertising. That comes down to one element: price. Where in September/October 2015, all of the kitchens featured in its advertising had a starting price of over $10,000, in March/April 2016, the most common ad is for a kitchen costing $5200.
  • Better Homes & Gardens/March 2016

  • IKEA managed to scoop Kaboodle to get the inside front cover double-page spread for this issue, and it uses that space to run its most common ad for this season:
    IKEA ad in BHG

    Like Kaboodle, IKEA also picks up some editorial usage and mentions. In fact, it is the "pod" concept that gets the editorial mention:
    BHG IKEA editorial

    Interestingly enough, while Kaboodle is listed as a supplier for this editorial feature, IKEA is not.
  • Australian Home Beautiful/March 2016

  • IKEA's presence in this magazine is much less than that of Kaboodle. There is only one ad, the same double-page spread that appears in BHG. It is the third of six double-page spreads that start off the magazine, in order: Smeg, Temple & Webster, IKEA, Miele, Freedom Furniture, and Bed Bath & Table.
  • Australian House & Garden/March 2016

  • IKEA again runs the same ad, this time at around page 136-7 of the 194-page magazine. The only editorial mention seems to be for an IKEA kitchen stool.
  • Inside Out/March 2016

  • Not a magazine that Kaboodle chose to advertise in. IKEA has the second double-page spread at the start of the magazine, after Temple & Webster and before The Home. IKEA runs one of its lowest priced ads, which features the mid-wall unit.
    IKEA Inside Out ad for mid-wall unit
  • Real Living/April 2016

  • With Real Living, IKEA went for a splashy spend, using the inside front cover position to create a trifold opening, giving them four pages of ad content. The ad features both the configurability of the IKEA kitchens, and one sleek, modern design.
    Start of IKEA tri-fold
    Inside of IKEA tri-fold

    Like Kaboodle, IKEA also picks up editorial coverage in the flat-pack kitchen feature, with three of its kitchen designs featured to Kaboodle's two.
    Real Living editorial on IKEA
    Semi-custom kitchens

    Outside of the two major flat-pack contenders, the semi-custom kitchen market could be set for something of a disruption as well. Since November 2015 there have been rumours that appliance/kitchen retailer The Good Guys might be arranging to be taken over by South African-based and German-listed retail conglomerate Steinhoff International. This is significant as Steinhoff owns Freedom Furniture in Australia, and therefore also controls Freedom Kitchens.

    The Good Guys (TGG) is currently Australia s third largest consumer electronics and appliance retailer, after Harvey Norman and JB Hi-Fi. It is also among the top ten privately-owned companies in Australia.

    Steinhoff International NV listed on the Frankfurt stock exchange in early December 2015 (it has a secondary listing on the Johannesburg, South Africa stock exchange). It is now the second-largest retailer of household goods in Europe.

    [To continue reading, please click/press the Full Text link]
    Regions
    Coomera residential development
    Stockland has agreed to acquire a 116ha property north of the Gold Coast
    Courier Mail
    It will be a residential development called Waterway Downs in Coomera (QLD)
    Stockland's nearby Highland Reserve at Upper Coomera is nearing completion
    Give to Amnesty International
    Property developer Stockland has agreed to acquire 116ha, incorporating a 98.2ha residential development site, at Coomera (QLD) for $40 million.

    Known as Waterway Downs, the property fronts the Coomera River and has approval from Gold Coast City Council for the construction of up to 747 residential dwellings. It will be a mixture of traditional detached homes and town houses.

    In a statement, Stockland said Waterway Downs will be a masterplanned, riverside community surrounded by a 50ha conservation area. The acquisition also includes two adjacent islands within the Coomera River and the suburb of Hope Island -- the 10.1ha Foxwell Island and 8.1ha Thomson Island.

    The primary development site will enable Stockland to increase its presence in the high growth Gold Coast north corridor. It expects to achieve the first settlements from Waterway Downs in 2017-18. Stockland chief executive residential Andrew Whitson said:
    This is an excellent acquisition, which reaffirms our strategic commitment to southeast Queensland and will enable Stockland to maintain its strong presence in the Gold Coast residential property market.
    Waterway Downs will provide us with a very good opportunity to generate positive sales momentum from the current upswing in the southeast Queensland residential market, and we expect to achieve incremental internal rates of return and an operating profit margin above our hurdle rates.

    Coomera area councillor Cameron Caldwell said the new project would be a positive addition to the Coomera community.
    This acquisition for Stockland is a great thing for the Coomera, it will continue the growth story of the area and will bring more housing stock and jobs to the northern Gold Coast.

    Future residents will benefit from the convenience of its location, less than 2km from Coomera train station and less than 4km from the M1 Motorway.
    Products
    Smart lock for apartment owners
    Latch smart door lock is made for apartment dwellers
    Digital Trends
    The lock is operated by passcode and smartphone integrations
    No keys are required for Latch smart door lock
    Click to visit the HBT website for more information
    Start up company Latch is making its first smart door lock available to real estate developers, so that apartments will come fully equipped with the high-tech entry system. Because Latch is a smart lock, there are no keys required so the lock is operated by passcode and smartphone integrations.

    For most city-dwellers and apartment-renters, installing their own high-tech smart lock is out of the question, because the landlord needs to be able to access the apartment too. That's why Latch is targeting luxury apartment buildings in order to give tenants access to the lock through their standard rental agreement. (The company is also trying to do deals with some offices and other commercial spaces like gyms.)

    Latch is even going so far as to discourage renters from passing out keys, unless a tenant insists. That way keys can't be lost and buildings don't have to change the locks when someone moves out.

    Latch can open with a traditional key, but its creators stress the passcode as the primary operation for locking and locking the door. Tenants will be able to issue temporary passcodes to visitors and family members. And as with other smart locks, Latch features setting options that will unlock the door as soon as the tenant's smart phone is within range.

    Some of the obvious concerns with Latch-equipped apartments have to do with privacy and security. Theoretically, building owners and managers would be able to access Latch's detailed logs of door activity, including each time a specific Latch device is opened or closed.

    Owners of large apartment buildings have the benefit of a sort of attendance log in case incidents or emergencies take place, but renters, who have access to their own information as well, have little choice about the tracking of their presence within Latch apartments.

    Latch door locks also have hidden cameras that snap pictures of guests at the door. Luke Schoenfelder, co-founder and CEO of Latch, told Digital Trends in an email:
    Latch deeply values consumer privacy and intentionally limits the data they collect to increase the security and safety of the building.

    So far, Latch has raised a total of US$16 million in funding to bring its first smart lock to market. Much of that funding came from real estate partners who have invested in Latch in order to secure early or exclusive access rights to the system. Two buildings in New York are already slated to implement Latch in the 435 units shared between them.

    In the future, Latch is considering marketing its product to individual consumers, although that's not a part of its early business model.
    News
    Homebase acquired by Wesfarmers
    Bunnings about to takeover Homebase
    Wesfarmers
    UK Renovation Forecast percentage growth
    UK Major Home Improvement Retailers
    Click to visit the HBT website for more information
    Wesfarmers has offered GBP340 million (around $705 million) for the Homebase home improvement retail operations of the UK-based Home Retail Group. The offer is highly likely to be accepted by Home Retail Group's shareholders, with the transfer taking place in early April 2016. Homebase will be managed by the Bunnings team at Wesfarmers. After an initial period of operating Homebase as Homebase, there will be a rollout of a Bunnings-branded retailer in the UK, using the retail real estate currently operated by Homebase. As part of these changes, Michael Schneider has been promoted to be in charge of the operations of Bunnings in Australia, as managing director. Peter ("PJ") Davis has been promoted to be in charge of Bunnings operations in the UK and Ireland, also as managing director. John Gillam will oversee all of Bunnings' operations, and his title is now Bunnings chief executive officer (CEO). Wesfarmers has indicated it hopes to retain many of the current Homebase retail staff. The current managing director of Homebase, Echo Lu, who was appointed in April 2015, has agreed to remain with the company in the interim.

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    There is also a wide range of DIY videos:


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Related:
    Savvy, single and mature: the new female customer - HNN
    The handywoman - myth or reality? - HNN
    Companies
    Can Bosch Power Tools keep up?
    Bosch NanoBlade sabre saw
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    Subscribe to HNN weekly e-newsletter
    Bosch Power Tools (BPT) has recently released results for its FY 2015 year. At a press conference in Germany, the president of the power tools division, Henning von Boxberg, indicated that turnover for the year had been EUR4.5 billion.

    For its 2014 year, Bosch generated revenues of EUR4.2 billion, indicating a 7% increase for the current year. However, the company reports that it experienced nominal growth of 10%, or around 5% in local currencies, as contrasted with the previous corresponding period (pcp), which was FY 2014. BPT suggests that the background growth rate for the industry is 4%. Using these numbers, this would indicate the company has gained market share.

    Regionally, BPT saw its sales grow by 17% in Germany, contributing to an overall European sales growth of 5%. North American sales grew by 12%, while 3% was the number for Latin America, and 5% in the Asia-Pacific region (which includes Australia). The company regards the total market in which it operates as being worth EUR26.9 billion, with power tools making up EUR13.6 billion of this. Mr von Boxberg was quoted in a press release as saying:
    We sold around 50 million power tools in 2015 -- more than ever before. Our success is based on consistently focusing on the user. We know what their needs are -- in particular, making work easier for do-it-yourselfers, and productivity for tradespeople -- and so we can offer the users suitable solutions.
    Changing channels of distribution

    One of Mr Hennings more unexpected strategic decisions announced with the results was that BPT is changing its approach to sales channels. He said:
    Previously, the user's buying behavior was heavily influenced by individual channels -- DIY enthusiasts bought their tools almost exclusively from hardware stores while professionals bought their tools from specialist retail outlets. We offered our products accordingly, based on separate channels. This strict division no longer applies. For a long time now, our blue and green tools have been available side-by-side from online retailers. Furthermore, away from the internet, both DIY enthusiasts and professionals are now buying their tools outside of their usual channels.

    Speaking perhaps mainly of the European market, he went on to say:
    This means, for example, that, as of autumn 2016, we will sell blue power tools not just in specialist retail outlets but also in hardware stores.

    He clarified this by adding:
    I want to emphasise that the specialist retail outlets are still the most important channel for us when it comes to selling professional power tools. What is important is that the customer is offered the right products through all of the channels -- and, of course, that they are impressed by our power tools.

    Given that Bosch Blue tools have been sold in general hardware stores for some time in Australia, it is difficult if this will have any impact here. It may signal something of a shift in the company's approach to its future growth plans.
    A changing company

    Most longer term observers of BPT would agree that the company has gone through something of an innovation lull in recent years. In particular, the years from 2011 to 2013 were marked by ongoing innovations, but not in the same areas where Bosch's main global competitors, Stanley Black & Decker (SBD), Makita, Techtronic Industries (TTI) and Hitachi were innovating.

    The BPT report on its FY 2012 year illustrates this. A change of leadership had just occurred, with Mr von Boxberg appointed president of the division from 1 January 2013, replacing, Dr Stefan Hartung.

    Dr Hartung had been appointed president of Bosch Power Tools in 2009, after a storied career in the Bosch/Siemens Dishwasher division. Mr von Boxberg had worked for some years in sales and marketing for Bosch Power Tools prior to his appointment.

    At the FY 2012 results announcement Mr von Boxberg chose to highlight Bosch's considerable advances in its measuring tools. He also celebrated the tenth birthday of the Ixo cordless screwdriver, one of BPT's most popular products in the DIY market. Mr von Boxberg mentions, for example, the variants added to the Ixo, including a corkscrew, a spice mill, and (of course) a Swarovski edition.
    A little bling for the serious DIYer

    Meanwhile, over at SBD, the company chose to highlight its Gyro screwdriver, named by Time magazine as one of the best inventions of the year, the launch of the Black & Decker Matrix drills, and the newest DeWalt (brushed)18-volt cordless drill.

    At TTI, 2012 was the year the company launched what has proven to be one of the defining products in power tools, the Milwaukee FUEL range, which featured brushless motors. It also launched its Ryobi 12-volt Li-ion products, and relaunched its Ryobi One+ line with newly designed and configured tools. The CEO of TTI, Joe Galli, used the 2012 results announcement to launch the next stage of FUEL, its sub-compact, 12-volt range.

    For 2012, Makita continued to expand its range of brushless tools, building on the innovations it pioneered originally in 2009.
    Reinvigorating BPT

    While BPT has never characterised its activities in this way, the tool maker has spent its time since early 2013 working to catch up to a power tool market that was quickly speeding away from it.

    For example, surprisingly, BPT had yet to release a line of brushless cordless tools by the end of 2012. It released plans to do so in November 2012, announcing that the products would be launched under the "Core" sub-brand. It was over a year before the company did manage to launch the actual tools, including the DDS182 drill/driver, and a range of impact drivers. These did not become widely available at suppliers until early 2014.
    Wireless charging

    The first genuine innovation that was brought to market under Mr von Boxberg's leadership was Bosch's wireless charging system. Released as a Bosch Blue tool in October 2014, this employs a special battery and a charging cradle. To recharge the battery, all the user needs to do is to set the tool down in the cradle. Drills can be simply rested on the charger. For tools such as circular saws, the battery can be attached to a vertical surface, and the tool is then slotted into the cradle.

    In the current results announcement for FY 2015, Mr von Boxberg also released the news that wireless charging will be extended to BPT's 10.8-volt range of power tools. This amounts to adding a wireless charging battery to the range, as the existing wireless chargers will work with the lower voltage tools as well.

    While it might seem a relatively simple idea, developing wireless charging was a long and difficult research project. The first prototypes, made in association with the US-based company Fulton Innovations, were demonstrated at the Consumer Electronics Show in Las Vegas in January 2009.

    The original made use of a world standard for wireless charging known as "Qi". Bosch subsequently decided to develop its own, non-standardised system. One reason was that Qi was designed for charging with less than 5 watts, and the Bosch system needed to deliver over 50 watts.

    Development challenges including building a system that would not, for example, attempt to charge a bolt that had been accidentally dropped onto the charger. BPT's solution to that problem was patented in 2011.

    The standard use-case that BPT suggests for the wireless charger is the contractor who has to drive from job to job. Using a special charging cradle for vehicles, or an L-Box case configured for wireless charging connected to a vehicle's power plug, all the contractor need do is store the tool away properly, and it will be charged by the time the next site is reached.

    It is difficult to see this as a compelling use case when compared to, say, buying an extra battery and a dual-port charger, and remembering to take the two minutes to slip the batteries into the charger before driving off. This is especially the case as both the wireless charger and the special battery required are quite expensive.

    There are two more compelling cases for using this kind of charging system. The first is in a light industrial/assembly situation, where cordless has been adopted both as a safety measure and to help speed workflow. The assembler could naturally set the tool down in its charging cradle when it was not in use. This would almost eliminate the need for a spare battery at each workstation, as well as the need to manage complex cycles of battery recharging.

    This seems to be hinted at in some of the promotional images released by Bosch:
    Wireless charging promotional image from Bosch

    The other use case would be for the DIY/Prosumer user in their home workshop, or in the house while performing repairs.
    Bosch Pocket Assistant

    Released in early 2016, the Pocket Assistant is something of a catch-up effort by BPT. This smartphone app enables a user to snap a picture of the box in which a tool is packed, and to then access information for that tool. Additionally, the app can also be used to register tools to obtain an extended warranty.

    Many power tool manufacturers have had a similar facility for some time. Ozito, for example, has a QR code on each tool box since at least early 2015. If you access the code with one of the free QR code readers available for all smartphones, it will load a web page with the tool details.

    Which, of course, brings up the question: why didn't BPT simply use QR codes? The system it does use is similar to that on the Australian "Viewa" app, which enables readers to "snap" a magazine page and then read additional details, something also used in the IKEA app for its printed catalogue. In the case of power tools, it would seem to add an extra layer of complexity and expense.

    While HNN can only offer a conjecture, it seems likely that in considering QR codes, Mr von Boxberg and his team would have faced a considerable delay in getting these printed on the packaging. Using the existing image of the packaging likely eliminated that delay.

    If this conjecture is true, it goes some way to describing some of the difficulties faced at Bosch, as it attempts to bring BPT up to speed with the market. It also indicates some of the resourcefulness of the BPT team itself.
    Track My Tools app

    If there is one single development during 2015 that really outlines the struggles of BPT to catch up to the market, and how it has managed to both partly succeed and partly fail, it is the development of its Track My Tools (TMT) system.

    BPT was facing a severe technology deficit when it comes to the developing field of connected tools. SBD's premium DeWalt brand released its Bluetooth-enabled battery in mid-2015, followed by the release of the similar SmartBattery by its DIY brand Black & Decker later in the year (with the clever addition of a USB charging port). Milwaukee developed its One-Key system for Bluetooth enabled tools during 2015, and released it in February 2016.

    BPT really didn't have much to offer, so it -- very cleverly -- developed its TMT system, which it launched in September 2015. This combines a degree of crudeness with some elegance -- and, unfortunately, also illustrates the company has yet to really understand how the modern market works.

    The hardware part of TMT consists of small devices like the one pictured below:
    Bosch's iBeacon-like tool tag

    These are priced at EUR14.90 per unit, with a minimum purchase of 10.

    The tool owner sticks one of these onto each of the cordless tools they own. When we say "sticks", we do quite literally mean sticks. Each device comes with its own two-pack polymer glue. The user finds a suitable place on the tool and sticks the GCC 30 TrackTag Professional Bluetooth module (as it is known) to it. For corded tools there is a slightly more elegant solution which attaches the TrackTag to the cord.

    The TrackTag is similar to what Apple has designated as an "iBeacon". However, knowing how much Bosch likes to have proprietary devices, it seems unlikely it follows the iBeacon specifications. What these devices do (in general) is to send out a pulse of information at regular intervals, using the Bluetooth Low Energy specification. This information consists of a unique ID. (In the iBeacon specification, it is actually two IDs, a major and a minor one.)

    In Apple's iBeacon specification, an interval of less than a second is recommended between pulses. The BPT implementation sends out a pulse only once every eight seconds. This contributes to the device's extra-long battery life, which is estimated at three years. It might also indicate that the Bluetooth radio pulse being sent out is a little stronger than is usual in an iBeacon.

    Once the TrackTag is attached to a tool, the tool owner then logs into the web interface to the TMT cloud-based database, and enters the details of the tools. The owner then uses a smartphone app to associate that particular TrackTag with the tool entry in the database.

    The tool owning business can then track the tool using a web interface. Tools are assigned to specific users using this interface. Whenever a TrackTag is within range of a smartphone with the TMT software activated, the Bluetooth pulse with the ID is detected, and this information is forwarded to the BPT cloud servers. That information includes the ID, the time the pulse was received, and the location of the smartphone at that time. The web interface then shows, if not the exact location of every tool, at least their location when they last "called in".

    The actual tool user can use the TMT smartphone app to access information about the tools. The primary information is quite simply location. For example, if someone has borrowed a tool on the jobsite and taken it elsewhere, the user can access location information on the app and determine its likely location.

    The app also provides a reporting function, which means if the tool faults, it can be reported immediately.

    A little more controversial is the claim that the app can make sure, for example, that a contractor has packed all the necessary tools into his vehicle. The problem with this is that iBeacon-type technology really doesn't give any kind of reliable proximity reading. Smartphones do read the signal strength of the beacon, but this is useful for determining only four situations: the iBeacon is within 50cm of the smartphone, within 1.5m, over 1.5m away, and out of signal range (usually around 30m, with a clean line of sight). It gets even more complicated and less accurate if you are checking devices attached to large lumps of metal like tools, locked in storage boxes, or inside a metal vehicle, which stores lots more metal.

    It would be very easy for the TMT app to report that all tools were present in a vehicle, when in fact several of them were still on the jobsite, within 30m. The only sure thing to do would be to drive 60m away, and then check. In fact, it seems that Bosch actually edited its YouTube video about TMT that showed a workman using the app to determine he was missing a tool. The missing tool scenario is still present as shown below:
    One of the tools is missing

    However, the video now shows him finding the tool, but the scene where the app informs him that all the tools are in his van has been edited out.

    The DeWalt Bluetooth battery system is more advanced, and offers a range of features not found in TMT, but does not provide the same kind of inventory approach. However, TMT does not even come close to what Milwaukee is offering with its One-Key system. That provides not only much better inventory management, and a location-checking system that is much better at detecting theft, but also full integration with the tool system as well, so that tool usage can be determined, and tool settings can be made as well.

    That said, and while there are several problems with the functionality offered by TMT, it is quite an inventive approach to adding some kind of connected functionality to an existing fleet of tools. As a move to start catching up, it makes a lot of sense.

    Except that, in the end, it doesn't. That's because BPT has made the peculiar choice to actually charge for the online services it is providing. The smallest fee, for a fleet of up to 100 tools, comes to EUR300 per year, or a monthly rate of EUR30.

    This shows how far behind in understanding the evolving world of power tools Bosch really is. Milwaukee, as an example, does not charge for its far more extensive, and far more useful One-Key service. It is a very telling mistake, and indicates just how far Mr von Boxberg has to go in transforming the business culture of BPT.
    The Future of Bosch Power Tools

    In the results announcement, Mr von Boxberg seemed to have a focus on the Bosch Green DIY tools. This included the announcement of a revolutionary new wood cutting tools for DIYers, the NanoBlade jigsaws and sabre saws. These work somewhat like miniature, 4mm wide chainsaws, and make cutting wood a much simpler and easier task for DIYers.
    Bosch NanoBlade sabresaw
    The NanoBlade itself

    More importantly for trade/professional users, BPT announced that it would be releasing an integrated, Bluetooth-based tool system in the northern autumn of 2016. According to the brief description supplied, this would be a module that could be plugged into a new line of Bosch cordless drill/drivers and combi-drills.

    The module would enable Bluetooth connectivity through the standard BPT smartphone apps, similar to the TMT modules described above. However, it will also deliver some control over the tool to the user, enabling them to change settings such as kickback detection, and to detect problems, such as overheating tools.

    This is evidently an effort to better match-up to the Milwaukee One-Key system. Once again, this approach reveals some good thinking, but also the obstacles that the vast Bosch development infrastructure present. Where Milwaukee is offering a special line of tools, that includes four buttons to activate different pre-determined settings on demand, the BPT alterations will require little external redesign of the tools. Connectivity will thus be marketed as an option on some tool lines, rather than sold as an integrated part of a parallel tool line.

    It is an understandable set of compromises, but the question remains how tool buyers will respond.
    From product-centric to user-centric

    By far the most hopeful sign that BPT is committed to change, and taking such change seriously, can be found in a YouTube video the company has released of its User Conference (uConn) held in late February 2016. Creators and designers, UX (user experience) and marketing experts, and sales representatives of BPT participated in the conference, where the importance of making tools for users was emphasised.


    Speaking at the conference, Mr von Boxberg had this to say:
    User centricity in fact is the centre of our strategy. Only if we fully understand our user problems, requirements and needs then we can derive the best product innovations, which is the basis of profitable growth. But we have to shift, and we have a paradigm change from a more product-focused, to a more user-centric organisation. Surely we have to improve in order to make sure that we are deriving innovations which are meeting our user requirements. Zero distance to the user and no waste.

    Marc Jost-Benz, head of user experience, backed up Mr von Boxberg:
    The uConn is a very important platform for us to develop from a technology and product-driven company towards a truly user-centric company. We are very happy that this concept seems to work out, and we really hope that the people will bring home whatever they experienced here in the different break-out sessions to their home, and that they really share the spirit towards a user-centric company with zero distance to our users.
    Conclusions

    It is not uncommon for very large companies to develop the kind of situation that Bosch and BPT find themselves in for 2016. A dramatic transformation has occurred in their markets, their competitors and the potential for their products. Many companies in this situation react by actually promoting and appointing not the people capable of aiding change, but people who -- comfortingly -- represent more of a "business as usual" approach.

    Eventually good companies -- like Bosch -- "wake up", and realise they really do need to change. The difficulty is that today the pace of change is so intense and so rapid that waking up doesn't always guarantee success. Or, at the least, it can take a company four or five years to overcome a two-year period of reduced development.

    The difficulty facing Bosch is that it has slipped behind by two product cycles. When it releases its connected tools in late 2016, the systems it offers will not be as good as though released by Milwaukee in early 2016. What is more, Milwaukee will likely launch an improved version of its One-Key solution in the first calendar quarter of 2017.

    All that BPT can really do in these circumstances is to attempt to go from what will really be a version 0.5 of its connected product this year, to version 3.0 by the first half of 2018. That means the company will take something of a hit during 2017. The alternative would be to release a version 2.0 in late 2017, only to have Milwaukee release its version 3.0 in early 2018.

    And this scenario is leaving out whatever SBD will be doing, which is likely to be effective as well.

    One thing that does seem certain is that even though Bosch Power Tools is facing a tough period, the management team that has been put in place is making the right moves in the right direction. The question is how fast they can move, and whether the larger Bosch organisation can resist enforcing its old standards on a new line of business, as likely happened with the service fees tacked onto the TMT product.
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    Ideal for jobs like finish trimming of metal wire fencing
    Click to visit the HBT website for more information
    Angle cutter head can be positioned flat against surfaces for clean, nearly flush cuts

    HKP has designed a brand new Compact Bolt Cutter (CBC) that combats user fatigue by reducing force requirements. The CBC requires 50% less cutting effort compared to a pair of standard lineman's pliers.

    For greater efficiency and less strain, the recessed throat-notch clasps materials closer to the joint. And the heavy-duty spring return facilitates a measured cutting experience for high production applications.

    The extra wide, dual-material co-moulded grip can further enhance the user's comfort and experience. The HKP Compact Bolt Cutter is easy to use and is built to last, with induction hardened cutting edges for robust performance and extended working life.

    The CBC can cut through materials such as copper, vinyl, steel and aluminium (up to 6mm). So be it fencing (4mm), wire (6mm) or chain (4mm), the CBC will be suitable for most workloads.

    Its robust locking latch is also easy to switch with gloves on. With no nonsense straight-head and centre cut blades, this bolt cutter is designed to save time, reduce fatigue and assist with precision engineered functionality.
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    The new PP 490 power pack has been designed to be used with a number of products
    KHL
    The K 6500 power cutter has been upgraded
    The PG 680 RC floor grinder saw made its debut at Bauma Munich
    Click to visit the HBT website for more information
    Outdoor power tool maker Husqvarna has introduced a raft of new and updated products including a power cutter, power pack, floor grinder, diamond tools for surface preparation and more.

    They were revealed at Bauma Munich, a major trade fair for construction, building materials, mining machines, vehicles and equipment. It is held every three years in Munich, Germany.

    The K 6500 power cutter has a magnesium blade guard, improved water system and a new blade bolt concept. The latest model is equipped with Husqvarna's high frequency PRIME[tm] technology, making it the company's most powerful electric cutter ever. It can be used with Husqvarna's PP 65, PP 220 or PP 490 power packs.

    The PP 490 power pack has been designed to be used with the Husqvarna WS 482 HF wall saw, the CS 10 wire saw, prime power cutters and drill motor.

    The PG 680 RC floor grinder saw made its debut too. This product has unique oscillation function for greater productivity. In addition, two carts for power cutters were at Bauma Munich in the form of the Husqvarna KV 760 and KV 970/1260. They both come with pressurised water tanks and a guard retainer.

    The company also showcased its Redi Lock G 1400 range of metal-bond diamond tools for the Redi Lock system, used for surface preparation. The G 1400 model is specially developed for very hard concrete surfaces.

    At the trade show, Husqvarna gave a sneak peek at two prototype products not yet available on the market. They included the diamond micro trencher DMT700 for fibre installation jobs and the WSC40 wall saw chain attachment.
    Reports
    Construction measures show different views
    Residential construction shows signs of strength based the RLB Crane Index
    Financial Review
    The latest RLB Crane Index for March 2016 has been released
    There are currently 647 cranes across Australia
    Subscribe to HNN weekly e-newsletter
    Although the most recent AI Group-HIA performance of construction index (PCI) suggested Australia's construction industry is in decline, there are still signs of strength based on the latest release of the Rider Levett Bucknall (RLB) Crane Index.

    The index shows the number of cranes in Australian cities jumped around 20% at the end of March 2016. This translates to 647 cranes, an increase of 113 cranes since the last index was calculated six months ago.

    The national total of 647 cranes shows the construction industry's strong appetite for residential housing, which increased as high-rising housing projects grew to 81% of the total from 79% at time of the last count, at the end of September 2015. Commercial construction accounted for just 45 cranes, three fewer than six months earlier.

    The increase in the number of cranes on residential projects rose by 104 to 525 in March from September. Not only did the total grow, but the "churn" factor also revealed a frantic pace of activity, with 264 cranes being removed from residential projects around the country, and 368 erected.

    The rise in cranes in March paints a picture of strength in the sector belied by official figures showing that approvals of new apartments have peaked and slowing. RLB director of research & development Stephen Ballesty told Fairfax Media:
    It's not showing the slowdown that we're expecting. Not only is the number of cranes increased, but the cranes are active. I take heart from the churn rate that the cranes are not only out there, but they're required to move from site to site within a six-month cycle.

    But the figures reveal the lag that exists between approvals and current activity. The current number of cranes is the result of approvals passed up to three years ago, indicating that large numbers of housing-dedicated cranes will stay on the horizon well into next year.

    The latest crane index also reinforces the variations between regions in the strength of activity. Cranes erected on the east coast amount to nearly 84% of all cranes sighted in Australia and more than two-thirds of residential crane activity was located in Sydney and Melbourne.

    The number of cranes rose or was unchanged in every city with the exception of Perth, where the total fell by two to 45. Brisbane was unchanged at 104, although the market was active, with 83 cranes being taken down and the same number erected over the six months to March.

    Gold Coast recorded a boost, nearly doubling to 30 cranes from 16 at the end of September. Newcastle on the NSW central coast has previously been included as part of the Sydney total, but was broken out separately for the first time, reflecting a city that now has nine cranes -- equal to Adelaide and more than Darwin which has three.

    As the economy evolves and high-rise residential construction comes off the boil, the number of cranes is likely to fall even as other areas of construction [such as infrastructure] provide the impetus for continued growth. They won't use as many cranes, Ballesty said.

    The latest official figures show the value of residential construction work jumped almost 13% in the September quarter from a year earlier to $13.55 billion. He said:
    The underlying value of work in the market should continue beyond 2017 through infrastructure. Infrastructure will underpin workloads that probably won't be reflected in the crane index to the same extent, relative to its value.
    AI Group-HIA index

    The AI Group-HIA performance of construction index fell 0.9 points to 45.2 in March, making it the fastest decline seen in 13 months.

    The PCI measures changes in activity levels from one month to the next. Anything above 50 signals growth, while anything below that level means contraction.

    Activity levels in housing and engineering construction contracted at a faster pace while growth in apartment and commercial construction slowed sharply compared to one month earlier.

    According to Business Insider, the contraction in the sector would be significantly steeper without growth in apartment construction, an area that has caused some angst recently given warnings over potential oversupply in some major urban centres leading to price declines. Tighter restrictions on investor lending and higher interest rates are also being felt, further clouding the outlook for apartment construction moving forward.

    In terms of the activity subindices, new orders continued to decline, albeit at a slower pace, while firms shed workers at the fastest pace seen in 15 months. Peter Burn, Ai group head of policy said:
    With new orders across the sector also falling, the immediate outlook for construction is for further contraction.

    Geordan Murray, an economist at the HIA, concurs with this assessment. He said:
    While there is a good pipeline of work that should sustain an elevated level of residential activity throughout the first half of 2016, the falls in the PCI indexes for houses and apartments imply residential activity may ease in the latter part of the year.
    This is a concern because the ongoing contraction in mining-related work still has a way to go yet. It is unlikely that a pick-up in conditions in other sectors will fully offset the contraction in mining investment over the next few years, but we need to give non-resource businesses the best possible chance. Bolstering business confidence is the key.

    To read more about the latest performance of construction index, go to:
    Australia's construction sector is in a spot of bother - Business Insider
    Products
    DeWalt upgrades 20V MAX XR lineup
    DeWalt's 20V MAX XR Brushless line has been expanded and enhanced
    Pro Tool Reviews
    The new drills deliver 820 unit watts of power, a 25% increase from the previous model
    The hammer drill features 0-38,250 BPM (blows per minute)
    Click to visit the HBT website for more information
    DeWalt has expanded and enhanced its 20V MAX XR Brushless line as part of the company's Made in the USA with Global Materials initiative. The new additions include a Premium 3-Speed Drill/Driver (DCD991) and Premium 3-Speed Hammer Drill (DCD996). As nearly identical models, the DCD991 and DCD996 differ only in that the latter adds the hammering mechanism.

    The 3-speed transmissions offer greater control for specific applications. This can help prevent overdriving a screw or give users more speed when needed.

    The hammer drill features 0-38,250 BPM (blows per minute) and 2,250 RPM. It is up to 82% more powerful than the previous version and offers up to 2.8 times more runtime.

    A 60-Lumen LED light is standard on both units. It features three settings, which includes a spotlight mode with 20-minute delay option.

    DeWalt is also kitting the 20V Max XR Brushless Drills with 5.0 amp hour battery packs. The new drills deliver 820 unit watts out of power, which is about a 25% increase over the current model. That ends up being in the 885-inch pound (99.99157 N*m) range for maximum torque.

    Both models have a nitro-carburized metal ratcheting chuck that is easy to grip, and a comfortable handle that fits hands of all sizes. The coated and sealed switches are moisture and dust resistant.
    Products
    Hilti expands customer base
    Hilti's 12V products are its smallest and lightest range of cordless tools to date
    Pro Tool Reviews
    The Hilti SF 2H-A combination hammer drill/driver offers versatility
    The SID 2-A cordless impact driver has two LEDs located at the foot of the tool
    Click to visit the HBT website for more information
    Hilti has developed its smallest and lightest range of cordless tools to date to help customers reach higher levels of productivity, control and accessibility in everyday light-duty drilling and screw driving work. Although these tools seem to have been available for some time, Hilti is marketing them as a brand new range.

    Operating on a 12V battery platform and only weighing around 2.5lbs. (approximately 1.13kgs) each, the cordless hammer drill/driver SF 2H-A, cordless screwdriver SFD 2-A and cordless impact SID 2-A have been designed for working in tight spaces, dark corners, and occupied spaces where noise level is a concern.

    These tools are ergonomically designed for simple handling and working comfort including a slide style connection battery that makes it easier to handle. They also feature dual, built-in LED lights at the base of the tool to illuminate the task at hand.

    The 2.6 Ah Li-ion batteries come complete with State-of-Charge indicators so users will always know how much charge is left to complete their work.

    The 12V range is fitted with Hilti's lithium Cordless Power Care (CPC) system that features electronic battery management for extra-long lifetime and a rubberised, impact-resistant battery casing for durability.

    The 12V kits are offered with either a single 12V battery charger or a 12V battery adapter that will allow customers to use their existing Hilti 18V and 36V Li-ion chargers to recharge the 12V batteries.

    This 12 V line is built to provide long-term service under the most rugged conditions.
    SF 2H-A cordless 12V hammer drill/driver

    This Hilti SF 2H-A combination hammer drill/driver should give users the versatility to handle various drilling applications. It offers a precision clutch that provides control for intricate screw driving such as drilling small diameter anchor holes in hollow concrete block or brick, installing masonry screw anchors and drilling or fastening into wood based materials.
    SFD 2-A cordless screwdriver

    The cordless screwdriver is designed to reduce noise while providing reliable fastening performance with its 15-position torque clutch and rapid switch reaction features. The Hilti SFD 2-A is equipped with a voltage, current and temperature sensors to protect it during stressful tasks.
    SID 2-A cordless impact driver

    The Hilti 12V cordless impact driver can drive self-tapping screws up to 3/16" diameter in metal. Wood screws and lag bolts up to 1/4" are also on the menu. The SID 2-A shares similar features with the SF 2H-A and SFD 2-A. It has a compact design with two LEDs located at the foot of the tool, ergonomic grip, and rapid switch reaction along with voltage, current, and temperature sensors.
    Companies
    Micro modular apartments
    KASITA gives new meaning to the phrase "mobile home"
    KASITA
    Units are packed with amenities, smart home tech and custom furnishings
    The company is also working to develop interchangeable wall tiles
    Subscribe to HNN weekly e-newsletter
    KASITA is designing and fabricating housing that is more affordable, adaptable and efficient. It makes portable, prefabricated, pint-sized homes that are stackable.

    After three years of R&D, the Texas-based housing startup revealed its prototype at South by Southwest (SXSW) Interactive, where it was awarded the 2016 SXSW Innovation Award in the Smart Cities category.

    KASITA's futuristic metal and glass housing units measure approximately 300 square feet, catering to the increasing numbers of one and two person households in today's cities. Because they are mass-produced, construction costs are kept low and quality high.

    Each will unit come connected with smart devices including a Nest thermostat, Amazon Echo, Casper queen-sized mattress, View Dynamic Glass, and Hue lighting in addition to standard amenities like a dishwasher, induction cooktop, and convection oven. The company is also working to develop interchangeable wall tiles so people can slot in tiles with shelving, bike racks, or storage instead of hammering into walls.
    Part of the interior in a KASITA unit

    The units are quickly attached to a patent pending plug-and-play rack, which can be set up in days and quickly hooked up to utility lines. The racks slide into underutilised or unused urban lots that are too small for a conventional housing development.

    The homes are mobile, with a unique docking system that will let you take them wherever you want to move as long as the city you are relocating to has KASITA docks. You can slot in your house and stack them up to 10 stories high.

    KASITA founder and CEO Jeff Wilson said:
    Urban housing is perhaps the single most important factor in facing the economic, environmental and social challenges that face humanity today.

    Wilson is better known as "Professor Dumpster" because he lived in a 33 square foot dumpster for a year to determine how little space and stuff a person needs to live a happy life.

    He believes the status quo is failing, and failing badly. As the world's populations urbanise, urban areas are facing extreme housing shortages, driving up housing costs and driving out the middle class as well as artists, creatives, immigrants and young professionals; ie. people who can make cities great.

    So Wilson started working with an industrial designer from the firm Frog to come up with a different type of plan. They envisioned a form of housing that would be low-rent even in the middle of the city, mobile, allow for short-term leases, and let people avoid the annoyance of having roommates. He chose an industrial designer, rather than an architect, because he wanted to avoid expected solutions. Wilson said:
    Every aspect of KASITA -- from its high tech prefabricated construction to its ability to set up quickly on discounted land -- was designed to create both an amazing living experience and produce development and living costs that crush traditional site building in terms of affordability.

    He believes KASITA is a complete break from the current way housing is made and developed, bringing to bear the innovative spirit commonplace in tech to the housing market. He said:
    This is like the iPhone of smart homes.

    Named one of 2016's Most Innovative Companies by Fast Company magazine, a KASITA development is being built in Austin, Texas later this year.
    Reports
    Medium density housing gains traction
    In the 12 months to November 2015, medium density housing approvals jumped 33.9%
    Financial Review
    The increase in medium density housing approvals is centred on the capital cities
    The Bankwest analysis underlines the momentum toward medium density housing
    Subscribe to HNN weekly e-newsletter
    Approvals for medium density housing, including units, townhouses and semi-detached houses have overtaken those for free standing houses for the first time, according to the Bankwest Housing Density Report.

    It reveals that in the year to October 2015, there were 117,552 building approvals for medium density housing compared with 115,634 for freestanding homes.

    The report -- which each year mostly focuses on the 12 months to November -- found the scales then tipped back slightly in favour of stand-alone homes, but the trend towards medium density is clearly gaining momentum.

    In the 12 months to November 2015, there were 231,489 building approvals across Australia. Medium density housing approvals jumped 33.9% to 115,731 (from 86,430) sitting close to the 115,758 approvals for stand-alone homes. Growth in stand alone home approvals, for the same period, increased by a sluggish 1.5%.

    Bankwest private banking general manager Greg Caust said the results reflect a long-term shift towards medium density, which show no signs of abating. He said:
    That 12 month period to October was a record breaker. I have no doubt medium density approvals will shortly exceed approvals for stand-alone homes -- not just occasionally, but on an on-going basis.

    The increase in medium density housing approvals is centred on the capital cities, with rising prices driving buyers toward more affordable options. Canberra had the highest proportion of medium-density housing at 74.2%, followed by Sydney on 69.4%. In Brisbane the proportion was 64.5% and in Melbourne it was 57.9%. Caust said:
    Higher density housing trends may be developing due to affordability issues, however they also mean society is moving toward more sustainable living. If urban sprawl is contained, populations will be closer to infrastructure, including health and education services and public transport networks. These services then can be better patronised and more efficient.
    Products
    A backyard ally
    ECHO'S 2510 model reduces user fatigue
    ECHO
    It has an impressive power to weight ratio, offering more from a lighter unit
    UK-based ECHO has manufactured outdoor power equipment for over 60 years
    Click to visit the HBT website for more information
    ECHO's CS 2510TES 12" Top Handle Chainsaw has a 25cc engine that offers plenty of grunt. Weighing in at just 2.3kg, the 2510 model reduces fatigue so users can get the job done in one fell swoop.

    The G-Force Engine Air Pre-Cleaner system is a sophisticated mechanism, designed to significantly increase the lifespan of the engine. The 2510 chainsaw has an impressive power to weight ratio, offering more from a lighter unit.

    Despite operating at a lower weight than its competitors, the 2510 does not cut corners when it comes to function. The compact machine is easily manoeuvrable in tight spaces, comes equipped with a swing out lanyard ring that makes for better balance and climbing easier. A top mounted chain oil adjustment allows the operator to control oil flow, optimising operation.

    UK-based ECHO has manufactured outdoor power equipment for over 60 years, and its CS2510 should prove to be an instant classic.
    Quick specs
  • Engine Displacement: 25cc
  • Output: 1.11kW
  • Bar length: 25cm
  • Saw chain pitch: Carving - 1/4 Sprocket - 3/8
  • Guide gar Gauge: 0.050"
  • Dry weight: 2.3kg
  • Products
    Lawn tractors boast power and precision
    Cub Cadet says its XT2 Enduro range offers strength, durability and performance
    Cub Cadet
    These lawn tractors are expertly designed for ease of use
    Cub Cadet makes lawn tractors for home or commercial use
    Click to visit the HBT website for more information
    Cub Cadet's XT2 Enduro Series of lawn tractors (models LX46 and LX54) is visually bold, and its Signature Cut[tm] offers the user guaranteed mechanical longevity and a crisp lawn, every time. It is durable in build and ergonomic in design. And the new Cub Comfort[tm] slide capable high back seat with arm rests has a ten-degree chair incline. This means the operator can complete long mowing jobs in comfort.

    The XT2 Enduro Series has a refined and strengthened cutting deck with the latest extra-tough fabrication and an optimal catcher. Its hardy E-coating defence build is designed to withstand corrosion and weathering.

    The power and strength of these lawn tractors have been streamlined with an Auto Locking Differential system -- if one tyre starts to slip, the rear two will automatically lock into place keeping the user safe and stable at all times.

    Fitted with premium tread Multi-Trac tyres that distribute power straight into the ground for greater precision, less turfing and minimal slippage, even on wet grass. This is ideal for stabilising attachments like trailers and for towing.

    The Cub Cadet XT2 Enduro Series is expertly designed for ease of use. Operators just push down on the pedal and the Hydrostatic Transmission System will do the rest. Coupled with responsive handling technology, the user should have a smooth and commanding mowing experience.

    The XT2 Enduro Series Lawn Tractor is a versatile machine for challenging terrains, hauling or general yard maintenance.
    News
    HI News Vol. 2 No. 6
    Download the latest HI News, issue number six
    HI News Vol. 2 No. 6
    Ryobi's Ultra-Quiet Garage Door Opener
    Kingfisher chief executive, Veronique Laury
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/hinews-2-6.pdf

    Home automation is the central theme of the current issue of HI News and includes a closer look at Ryobi's Ultra-Quiet Garage Door Opener. Other articles explore the ways home automation could change a large number of categories in home improvement, and the current three big industry players: Apple. Google and Amazon.

    This edition also has a number of results presentations from home improvement giant, Kingfisher, builders merchant Travis Perkins and US retail co-op True Value. There are also financial and product overviews of tool companies, Hitachi-Koki and Makita.

    The latest big box update features Bunnings' rollout of new stores, the mainstream commentary about its smaller format stores and the lead up to its European summer debut through Homebase. There is a summary on the Masters property portfolio and the deadline for parties making bids for the business.

    In the independent sector, Stewart's Hardware has opened in Nowra (NSW) and Home Timber & Hardware wins a customer satisfaction award.

    There are also new products from garden tool supplier, Ames; window furnishings company, Luxaflex; and lawn mower specialists, Rover and Gravely.

    Companies highlighted in the job update include Home Timber & Hardware Group, DuluxGroup and AEG Power Tools.
    Bigbox
    Kingfisher FY 2015/16 results
    The CEO of Kingfisher, Veronique Laury
    Kingfisher
    Big box pilots
    Revenues by country
    Click to visit the ITW website for move information
    UK-based big box home improvement retailer Kingfisher has reported its results for its FY 2015/16. Total group sales declined by 2.6% over the previous corresponding period (pcp) which was FY 2014/15, to reach GBP10,331 million. However, using constant currency to remove the effects of fluctuating currency exchange rates, Kingfisher reports that its sales grew by 3.8% over the pcp. In like-for-like (LFL) sales measures, Kingfisher reports sales growth of 2.3%.

    Total profit for the group was GBP746 million, an increase of 0.7% over the pcp. In constant currency terms, Kingfisher reports the profit would be up by 7.4%. Kingfisher reports an operating margin of 7.2%, up from 7.0% in the pcp.

    During the year, Kingfisher closed 30 of its UK B&Q stores, a decline of 8%, and opened an additional 62 Screwfix outlets, an increase of 16%. Total selling floor space in the UK declined from 2,595 square metres, to 2,442 square metres, a fall of 5.9%.

    For the fourth quarter alone, Kingfisher reported total sales of GBP2,298 million, up by 0.7% on fourth quarter 2014/15. In constant currency terms, the increase would have been 4.7%, and 2.8% for LFL sales. Profit for the fourth quarter was GBP113 million, up by 35.7% over fourth quarter 2014/15.

    Presenting the year's results to analysts, the company's CEO, Veronique Laury, said:
    The second thing is we've delivered a good set of results. I am pleased with the results. I think we've delivered on expectation. And, even though we still have an underlying business which is volatile, because the things from customers' point of view haven't changed in a year, I am really pleased with the focus and the energy that the business has demonstrated to deliver those results this year.
    Regional results

    Ms Laury summarised the company's regional growth opportunities while speaking to analysts by saying:
    The other thing I want to remind you is that we have three strong businesses in UK, France and Poland and they are some of the biggest home improvement markets in Europe. And we have a growth engine with Screwfix.

    Summarising the results on a regional basis, the company's chief financial officer, Karen Witts, said they represented a
    ... mixed picture across our major markets, with good results in Poland and the UK, including a particularly strong performance from Screwfix, lower losses from our new developing countries offset by softer though stable market conditions in France.
    Revenues by country
    UK and Ireland

    Kingfisher's UK and Ireland region delivered the best results of all regions. Its trade sales business unit, Screwfix, recorded sales growth of 26.3%. Screwfix has a large online component to its sales, and represents over 10% of the company in sales revenues. This performance helped boost Kingfisher's performance in its UK and Ireland region to GBP4,853, a 5.5% increase over the pcp. LFL grew by 4.4%, the company reports.

    B&Q delivered an increase of around 1% in sales over the pcp, coming in at GBP3,799 million for the year. In LFL constant currency terms, growth was 1.9% over the pcp.

    Profit for UK and Ireland was GBP326 million, up by 18% over the pcp. Responding to a question from an analyst about growth in UK LFL sales, Ms Witts said:
    There are three contributing factors, I guess, to the LFL progression. One is the sales transference from our own store closures. Another is the sales transference from Homebase store closures. And then the rest is actually what we're doing.

    She also mentioned that there had been something of an uptick in sales of new kitchens.
    France

    Overall sales for FY 2015/16 fell by 8.4% to reach GBP3786 million. In constant currency terms, Kingfisher reports sales would have grown by 1.2%, but LFL sales would have slipped by 0.4%.

    Commenting on activity in France, Ms Witts said:
    This was in an ongoing soft market impacted by weak consumer confidence and subdued housing and construction activity. We may have seen the first positive movements for four years with housing starts up 2% and building permits up 4% but I say may, as this only happened towards the end of the year. Gross margins were up 10 basis points.

    She added that, for Castorama, LFL sales of outdoor seasonal products rose 1.1% and building products fell by 0.5%.

    Brico Depot outperformed Castorama in constant currency sales growth, growing 2.5% for the period, versus the latter's 0.1% growth.

    Ms Witts also commented that progress with enhancing the digital offer in France was pleasing:
    We've also made good progress with click, pay and collect in France, rolling this out to 161 of our stores versus the 34 we had at the previous year end and well ahead of the 114 that we were targeting back then.

    Profit for France was GBP311 million, a fall of 1.6% in constant currency terms over the pcp.
    Poland

    Kingfisher singled out Poland as one of its better performing regions. Sales came in at GBP987 million, down 6.4% on the pcp, but a reported increase of 3.3% in constant currency terms. LFL sales in constant currency grew by 3.6%. Profit came in at GBP113 million, down 4.0% on the pcp, but up 6.0% in constant currency terms.
    Russia

    In pure revenue terms, the worst performing region was Russia, which recorded an over 20% fall to revenues of GBP325 million. However, in currency adjusted terms, Kingfisher reports Russia recorded a 12.9% increase.
    Spain

    Spain suffered a 12.3% decline in sales revenues to GBP269 million, which in currency adjusted terms was still a loss of 3.2%, and 5% for LFL sales.
    Other regions

    Germany, Portugal and Romani all reported negative profits. Kingfisher's joint venture in Turkey returned a profit of GBP7 million, which represented a fall of 6.7% on the pcp in constant currency terms.

    Commenting on the Romanian situation, Ms Witts said:
    We booked an impairment charge, primarily relating to goodwill recognised on acquisition of our business in Romania, reflecting the loss-making performance of the business. The performance to date has been disappointing, but we've got a new management team in place in Romania and we're confident that losses will be significantly reduced this year.
    Screwfix

    Screwfix continues to be the star of the Kingfisher divisions. Commenting on the ongoing growth at Screwfix, Ms Witts said:
    We've already said that we believe that there is a capacity for around 600 outlets in the UK and we will open around 50 this year. We explained in January that Screwfix, which has just won multichannel retailer of the year, will be the benchmark for our brilliant basics digital program in our transformation. Screwfix mobile sales were up 100% on last year, from about 2% to 3% of total sales. This will have helped our growth in click, pay and collect sales, which were up more than 50% from 10% of total sales last year to 12% this year.

    Asked by an analyst for more detail on how Screwfix was achieving its good growth results, Kingfisher's chief digital and IT officer, Steve Willett, said that some of the growth was coming from store maturity, as the recently opened outlets achieved better numbers. He also pointed to key elements of the online business:
    We keep improving the customer experience and, quite frankly, as we speak we're rolling out a new website into Screwfix, by the way, that will be finished by the end of this week, which is basically moving that experience even further.
    ...
    And then the other thing we're doing is what we would call online range extension, which is actually driving the web and the ranging experience, but it's also helping us tune the ranges in the trade counters.

    Ms Laury also commented on the potential for Screwfix in its new operations in Germany:
    Then Screwfix Germany. Karen talked about it. We've opened more stores. I've been with Steve in Germany as well very recently. We are positive about the results. It's still early days but we've decided to continue to grow in Germany. We are seeing right now a week-on-week 10% growth, which is very encouraging and we've decided to double the number of outlets in Germany. To be breakeven with Screwfix as a model we need 50 stores. We may accelerate.

    Mr Willett expanded on the situation with Screwfix in Germany in response to an analyst's question:
    So what we're doing in Germany, so I think there's a few bits. One is that the market structure in Germany is structured slightly differently but it's the same as the UK and what you've got is this serious bottom end of the pro market, very serious hobbyist-type market. So we're seeing the same market dynamic. It plays out slightly differently.
    The other thing we're seeing that we weren't sure about is in the UK people got conditioned to catalogue shopping, probably by Argos, and we weren't sure actually how that would drop into Germany. Quite frankly, it's been a non-issue. And, in fact, they get it absolutely as soon as they've been through it.
    Bunnings

    In response to a question from an analyst, Ms Laury did go into some detail about her attitude towards Bunnings. She said:
    First, before answering your question I just want to say something about some of the selective quotes that have been in the press about my position around Bunnings. I'm very respectful of every kind of competition and I've always been. And I know the CEO of Bunnings very well. I had the opportunity to meet him a few months ago in London and I think he's a really good CEO. So all my respect to Bunnings.

    Ms Laury added a comment that Kingfisher had sent some people to Australia to take a look at Bunnings operations so as to better understand them as a competitor. In other remarks she mentioned that the company's newly appointed heads of sales and retail operations, Jean-Paul Constant, was at the time of the results release in Australia.
    Transformation program

    Ms Laury took time at the beginning of the presentation to analysts to revisit the goals of the five-year transformation plan she clearly outlined in calendar 2015.
    Cut the tail plan

    In her original analysis of what was troubling Kingfisher, Ms Laury and her team identified the very wide range of SKUs that were being offered, and the consequent cost in stock. She has reported good progress in changing this situation:
    I'm really pleased with the results that we've achieved because we cut the number of SKUs by 50% and we cut the value of stock by 40%, which I think is a very big achievement.
    ...
    The important thing that I need to tell you as well is that we've now put in place what we call a product lifecycle, so we won't be recreating the problems that we had. And, of course, as we move to unified and unique we won't have that proliferation of SKU creation in every business.
    Reduction in SKUs
    Developing big box best practice

    Ms Laury announced that there would be four big box best practice stores set to open over the coming six months. There is a store each in the UK, France, Russia and Poland. The goal of these stores is to experiment with ways of making big box retail work better. As Ms Laury explained it:
    What is this about? It's about really taking the best of what we do today in the Group and putting it together, and I will come back on what are the four key areas we have been working on. I think, again, this is a journey. This is not about the store of the future. As every retailer, we have to think about what do we need to do from a store perspective with the digital working together. Like every retailer, we have to do that but it is a step. I think it was -- this is a learning curve. We needed to work together as well and this has been a good exercise to make operational people working together.

    The four aspects of the stores that will be worked on are: Merchandising principles, which includes elements such as store layout; services; interaction between staff and customers; and efficiency.
    Big box pilots
    People

    Ms Laury took some time to outline the roles and potential of the two most recent appointments to the leadership team, Pierre Woreczek as chief customer officer, and Jean-Paul Constant in sales and retail operations.
    [Mr Woreczek] will work on how we integrate all the customer knowledge that we are developing into all our thinking and how we do things, as well as working on the customer experience, of course, with his colleagues, especially with Steve, on how we implement the digital aspect of things.
    ...
    [Mr Constant] has worked for Decathlon for almost 30 years. And what is special about Decathlon is the fact that they are used to a unified and unique offer. They used to one store format and one platform of communication, as well as being able to generate high level of engagement in their store. And I think that combination is almost unique.
    People at Kingfisher
    Conclusions

    At this stage in its transformation, it is very difficult to draw any concrete conclusions about Kingfisher, either in terms of its progress towards its goals, or whether those goals will repay the investment in time and Capex that will have gone into them. This is particularly the case given the global situation and local market situation in the EU and greater Europe at this time.

    That said, there are certainly some very positive signs emerging from Kingfisher. While Screwfix is only 10% of the entire business (by revenue), its success and growth show that something is working well within the company.

    At the same time, questions do arise as to whether Kingfisher is doing enough to fix its moribund markets in France, and its declining market in Spain. The externalities in both those markets are highly unlikely to improve by much over the next five years or so. That doesn't mean, however, that these markets lack potential. Is there a bit too much of a European acceptance of current conditions, and not enough attention to finding good sources of growth?

    If we were to point to what seemed particularly lacking in this results report, it was a sense of product development. What we are seeing at the moment is a lot of preparatory work, and while that is certainly necessary, there would seem little that would stop a focused approach to product development running in parallel to it.

    Again, all that development activity may be going on beneath the surface of Kingfisher, and we may find out more in another six months of so. But if there is an amber light flashing on the Kingfisher dashboard, it's about whether the company should be quite so complacent in accepting market downturns, and not more concerned with the core business of home improvement retail: discovering what people need for their homes, and finding a way to get it to them at an attractive price.

    Related:
    Kingfisher results 2015-16 first half - HNN
    Kingfisher conjures new transformation - HNN
    Kingfisher results for third quarter 2015-16 - HNN
    Retailers
    Travis-Perkins FY 2015 results
    Wickes online
    Travis-Perkins
    Innovations at Travis Perkins
    Market forecasts
    Click to visit the ITW website for move information
    UK-based building merchants and hardware wholesaler/retailer Travis-Perkins has reported what it sees as a good result for FY 2015 in the difficult conditions created by an "on-again, off-again" market.

    Total revenue for the company was reported as GBP5,942 million, up 6.5% on the previous corresponding period (pcp), which was FY 2014. Earnings before interest, taxation, and amortisation (EBITA), exclusive of property sales, came in at GBP389 million for the year, up 8.7% on the pcp. Overall operating margin remained the same, at 6.9%.

    The company has completed the second year of a five-year transformation plan.
    Bunnings

    Not surprisingly, Travis-Perkins is concerned about the entry of Bunnings into the UK market through its purchase and re-branding of Homebase. In response to an analyst's question during the results presentation about whether the company really should be looking at margin growth given the new competitive environment, the company's CEO, John Carter, responded:
    I think we're in a situation where we'll anticipate Bunnings coming in to the market. Given the backing they have from Wesfarmers, they're going to be a considerable competitor, and they've declared they're going to invest in the business. I think we're investing in our business. We can only do when we address the challenges that we face. We're pretty confident and upbeat. I think we have to be conscious that we're not going to see huge growth in margin until we see exactly what their proposition is. So we may see a little bit of a drift up, but I think I would indicate holding that steady at the moment. We can make investments on price and value and drive the volumes, but, at the moment, I'd really keep it steady in 2016.

    The point was later pushed by another analyst, who asked:
    And then, just a wider one in terms of Simon and the team at Wickes, given what Bunnings are clearly going to come in and do, I understand exactly your point about let's wait and see, but shouldn't you actually -- if I go to most DIY stores in the UK you're pretty underwhelmed with what are shabby, run-down looking facilities pretty much around the place. Don't you want to steal the march and actually snaz up what you've go, because nice green glossy prices to the lowest price, whatever the strap line is. But actually, given what they're going to probably do, don't you need to be on the front foot a bit more in terms of getting there and doing things to snaz up the Wickes offer before they start?

    Mr Carter responded directly to the point about Bunnings:
    Just on Bunnings, we're not sat on our hands, but it is difficult to fight a phony war when you're not really sure. Simon is chasing me; every other word is Capex. And you're not going to be surprised that we've already been to Australia in terms of understanding what we're going to be up against. But we're travelling well, and we're focused very much on our customer. We've got some good momentum, and we're not going to be found wanting.

    This comment was followed on directly by one from the chief financial officer of Travis-Perkins, Tony Buffin.
    And just on the Bunnings point, obviously, I know the Wesfarmers business reasonably well, having worked for them, so I've got to say hello to PJ and John Gillam, who I'm sure will be listening in on the call. So hello, PJ; hello, John Gillam. I did ask John Gillam whether PJ had brought his Milo fishing boat from Hamilton Island in North Queensland, but I don't think he's got as much use for it in Milton Keynes. Anyway, we know the business quite well. We've got a fair handle on what they'll try and do.
    What we shouldn't be diverted from is the plan that we've put in place for our Wickes customers. We've invested in some new real estate, we'll keep doing that. And we'll invest in our format proposition; we'll invest in online. And we've invested, and Simon's done a great job I think, in getting the value proposition right in Wickes. We've got a significant advantage over our competitors. And the ranges are now better, as John and Simon mentioned earlier, with own label range now about 75% of the turnover, 25% is branded. And that clearly resonates with serious DIYers and trade. So all the things we've been doing are the right things, and we're being rewarded for that. And I think we should keep going and we should, if anything, as you say, accelerate our plans. I think we won't be complacent, because they're a good operator. And we know them well. I'm sure PJ will say on the phone that he's thinking about some different things for the UK, but we know them reasonably well. And we'll be aggressive in our plans as well. But I think we're in good shape.

    (Mr Buffin was chief financial officer for Coles, the Wesfamers-owned supermarket business, from July 2009 until early in 2013, when he joined Travis-Perkins.)
    Divisions

    The company reported some growth in the first half of the year, followed by slowing markets in the second half. The company pointed in particular to weakness in the repair, maintenance and improvement (RMI, same as US MRI) market during the second half. According to the company's report:
    The link between the RMI market and the level of secondary housing transactions shows a strong correlation. The impact of the Mortgage Market Review on the availability of mortgages, and therefore the number of secondary housing transactions, along with uncertainty at the time of the election, had a negative impact on the RMI market in the second half of 2015. Whilst the summer months, especially August, were particularly weak, the significant recovery in RMI spend in October was not sustained consistently through November and December.

    This led to, in particular, a weaker fourth quarter for FY 2015 in the company's construction, professional businesses, but did not affect its consumer-based businesses (in particular Wickes), which continued to grow.
    General merchanting

    Revenue for this division was reported as GBP1,972 million, up by 5.3% on the pcp. Operating profit also grew, coming in at GBP182 million (excluding non-recurring elements), up by 7.7% on the pcp.

    Like-for-like (LFL) revenue growth was 6.7% in the first half, then fell to 1.4% in the second half, giving overall LFL growth of 3.9%. This is down from the 12.9% LFL growth recorded for FY 2014. Volume contributed 2.8%, and price and mix contributed 1.1% to the LFL growth.
    Revenue results for general merchanting

    The two drivers of growth were heavyside materials (construction materials such as sand, ballast, timber, boards and glass) and tool hire. The company commented that these two had proved complementary, as supply-chain arrangements meant that both heavyside materials and tool hire assets could be dispatched from a central location to branches on a next-day basis. This arrangement means that tool hire can be offered even at smaller branches, which could otherwise not hold sufficient hire stock. The arrangement also allows for more efficient use of hire stock, with fewer units required to service a larger market.

    In response to an analyst's question, the company indicated that it had seen costs increase during the first half of the year, but had worked hard to curb those costs in the second half.

    Travis-Perkins developed 12 new and re-sited branches during the year. Branches are also being steadily refurbished. The company reports that 20 branches are now using a new format, and that early results indicate they are net positive in terms of performance.

    Travis-Perkins also reports good results for its wholesale kitchens and joinery business Benchmarx. The company said it expanded to 38 additional sites during FY 2015, consisting of 26 standalone sites, and 12 sites opened in existing Travis-Perkins operations. The year also saw a product line refresh at Benchmarx.
    Plumbing and heating

    Revenue for plumbing and heating grew by 1.3% over the pcp to come in at GBP1,371 million. Adjusted EBITA also fell, down to GBP46 million, a decline of over 29%.

    LFL growth declined, losing 1.4%, with the losses occurring largely in the first and fourth quarters of the year, down 6.1% and 1.9% respectively. Loss of volume contributed 0.1% to the decline, with price and mix making up the other 1.3%.
    Revenue for plumbing

    The company put the declines in LFL down to two factors. The first was the anniversaring of the government-backed ECO scheme from 2014, which had artificially boosted sales of boilers, an event not repeated in 2015. The second was the accelerated rollout of a re-segmentation plan, which saw the company convert former PTS outlets to City Plumbing branches. This program was almost entirely completed in FY 2015, six months ahead of schedule.

    Its rapid completion led to substantial disruptions to the business. Some 114 outlets were converted, with 30 closed and further three relocated. City Plumbing is now operating with 344 branches. The company reports a strong, positive response by customers to this move. The plumbing business has also expanded through the acquisition of the Primaflow and Underfloor Heating Store businesses.

    Travis-Perkins stated that the plumbing business continues to be highly competitive, especially in larger volume deals for contractors. The company also saw margin declines through sharp decreases in commodity prices, particularly copper, as well as decline in the price of plastic piping, as pressure on petroleum prices eased.
    Contracts

    The contracts division returned a strong results, with FY 2015 revenue of GBP1,214. This is an increase of 13.2% over the pcp. LFL growth was 8.2%, still down from the FY 2014 figure of 11.8%. Volume contributed 7.4% to this growth, and price and mix contributed 1.1%. Adjusted EBITA was GBP83 million, up by 15.3% on the pcp.
    Revenue for contracting

    Much of the growth occurred in the Keyline and CCF business lines, which are focused on construction supplies. Keyline has become increasingly focused on the delivery of civil, drainage and heavyside materials to large, commercial customers. CCF has expanded by opening a further eight branches. Some 13 Keyline branches will be converted to Travis-Perkins stores during 2016.

    In contrast, the BSS plumbing business experienced some difficulties in a highly competitive market.
    Consumer

    The consumer division saw revenue increase by 8.0% over the pcp, lifting to GBP1,386 million. Adjusted EBITA was GBP95 million, up by 23.4% on the pcp. LFL growth was 5.3%, down from 11.8% in the pcp. This was entirely due to volume, which grew the business by 8.5%, while price and mix were negative, bringing it back down by 3.2%. LFL growth was fairly consistent throughout the year, with only the third quarter dropping below 6%.
    Revenue for consumer

    The company emphasised the continued development of Wickes, which has better rationalised its product lines, and took something of a hit through clearance sales to help achieve this. A new format store for Wickes is being rolled out, and there are currently eight stores operating in that format. Online has continued to improve for Wickes, with it now accounting for 8% of all sales.

    Toolstation underwent a significant expansion, opening 40 new stores during FY 2015. Asked by an analyst whether the strong results from Kingfisher's Screwfix business didn't make Travis-Perkins a little cautious, Mr Buffing responded:
    We've got about 400, just over, of these outlets in the UK at the moment. There are 5,000 builders' merchants. So are we worried about overcapacity and space? At the moment, I don't think so. Screwfix, I think, have said they'd like to open about 600 outlets. We've, of course, have got our plans in place. We opened 40 in the year. We've guided to more than 30 in 2016, and I think we've got some capacity to keep going. And like-for-like sales growth are very good. Underlying like-for-like sales growth were not impacted by cannibalisation or new store openings. It's very strong. So it's resonating, so we should keep going. And these are small boxes, very low capital intensity; we can put them down on short-lease terms and make good returns. So we should keep going.
    Conclusions

    Travis Perkins is continuing its repositioning to adjust to changes in the UK and overall European markets. The core tensions in these markets consists of increased and steadily increasing demand for housing, meeting up with increased costs and unfavourable changes to the credit position of future potential home-owners.

    The fragility to Travis Perkins' position is that much of the way in which markets develop over the next three years will be outside of their influence. It will depend on both how governments and housing providers choose to respond to these tensions. Underlying those responses is uncertainty on how best to stimulate and sustain some difficult economies.

    Related:
    Travis Perkins results for 2015/16 H1 - HNN
    Homebase acquired by Wesfarmers - HNN
    UK may be shifting towards DIFM - HNN
    Retailers
    Indie store update
    Stewart's Hardware Nowra is open for business
    HNN Sources
    Home Timber & Hardware wins on customer satisfaction again
    Porters closes its Northern Beaches outlet
    Click to visit the ITW website for move information
    Stewart's Hardware offers something different in Nowra (NSW); Home Timber & Hardware is Hardware Store of the Year according to the recent Roy Morgan 2015 Customer Satisfaction Awards; and Porters to close its Northern Beaches store in Mackay.
    Alternative to big boxes

    Nowra local James Stewart has opened his new store, Stewart's Hardware Nowra, in the wake of Masters collapse earlier this year. He told the South Coast Register: "The way we fit in we're like a convenience hardware store, not the big box Bunnings and I like it that way.

    "We're a small business and I've found the town generally likes to support the smaller people. At the end of the day I'm also buying myself a job and creating employment for a few of the guys I used to work with."

    With 21 years experience and many strong connections from his former role at Walsh's Hardware, Stewart hopes the business will continue to receive local support. He said: "I know a lot of people around here and I've even applied my name to this business so I'm hoping it grows. The staff are all likeable people and I know it's going to take a bit of time to build but we'll get there."

    The store caters to both weekend DIYers and tradespeople.
    Customer satisfaction awards

    Home Timber & Hardware (HTH) has been crowned Hardware Store of the Year for a third time in four years at the Roy Morgan 2015 Customer Satisfaction Awards. Satisfaction ratings are collected from Roy Morgan's Single Source survey of approximately 50,000 Australians annually, the largest survey of its kind.

    Customers were asked to rate their shopping experiences with individual brands across a range of sectors and, based on 12 months of data. HTH's customer satisfaction consistently rated ahead of other hardware retailers such as Bunnings or Mitre 10.

    James Aylen, HTH general manager said credit for winning the number one customer ranking belongs to passionate staff working in the independently-owned and operated Home stores, and company-owned sites. He said: "Our advice, expertise and customer service is what attracts so many tradies and DIY customers...This win is testament to the hard work and dedication everyone continues to put into delivering exceptional service to our customers.

    "Customers know when they walk into one of our stores they'll receive the right service, the right advice and we'll deliver in full every time. To be recognised yet again as one of Australia's top retail brands is an honour for HTH and very significant in our highly-competitive sector."
    Mackay's Porters closes a store

    Porters has announced it is closing one of its stores after a drop in the region's construction demand. The company will stop operations at its Northern Beaches stores but its Mackay city store will remain open. In a statement, chairman Barry Porter said the business was no longer sustainable after housing approvals dropped from 102 in December 2011 to 10 in January this year.

    In late 2015, the Mackay-based family business said it it would be cutting a number of jobs, due to tough market conditions.

    Related:
    Indie store update: Porters in Mackay to cut jobs - HNN
    Careers
    Seeking opportunities
    Home Timber & Hardware Group is looking for a buyer for its greenlife portfolio
    HNN Sources
    An operations manager is required at DuluxGroup
    AEG Power Tools needs a product manager
    Visit the Mecca Website
    Home Timber & Hardware Group is searching for a buyer for its greenlife portfolio; an operations manager is required for DuluxGroup brands Selleys and Parchem; and AEG Power Tools has an opening for a product manager.
    Buying for greenlife

    The greenlife buyer role at Home Timber & Hardware Group involves developing customer led ranges to increase sales and profitability; managing the range review process and planograms to timeframe; planning for category and pricing frameworks; and financial management of the category.
    Home Timber & Hardware Group requires a buyer
    Managing operations at DuluxGroup

    The role of operations manager will be tasked with coordinating all of the supply chain activities for DuluxGroup's Selleys and Parchem businesses. With multi-geographical responsibility, the successful candidate will cultivate a culture of continuous improvement that supports all business activities to improve output, quality and overall safety performance.
    Operations wanted for DuluxGroup businesses
    Product strategy for AEG

    Techtronic Industries is seeking a qualified product manager to join its consumer team in Melbourne. Reporting to the business manager for AEG Power Tools, this role is pivotal in the development, alignment and execution of the sales and marketing plans so that the company achieves its revenue and profit objectives.
    Product manager role at AEG
    Editorial
    Home automation shows potential
    Belkin Insight switch
    HNN Sources
    Tati's film "Playtime" lampoons automation
    The development of cordless
    Give to Amnesty International
    Home automation is often seen as being a single product set. It's a product set that draws on the tradition of the "smart home" that has actually been with us, in one form or another, since the late 1950s and early 1960s. "The home of the future" has been promoted through endless exhibitions since that time -- and frequently parodied as well, in movies such as the classic 1967 Jacques Tati films "Mon Oncle" and "Playtime".
    Tati's film "Playtime" lampoons automation

    Where mechanical-based efforts to automate homes in the way that many industrial and retail situations had been automated were laughable, by the 1990s electronic technology had evolved to the point where "serious" home automation could make progress. This consisted largely of centralised control panels that could, through a system of corded cables, solenoids, rheostats and transistors dim lights, open curtains and open doors.

    The rise of the personal computer soon provided a new area for home automators to consider. In early 2005 the then-chairman of Microsoft Corporation, Bill Gates, introduced what was dubbed "E-Home Technology" in a "Home of Today" exhibition in Munich, Germany.

    This featured a home-wide, wired communications bus that was hooked into a central computer, and could control home functions in much the same way they were controlled in modern high-rise office buildings. Four control panels located around the house could control its functions.
    Microsoft's Home of Today

    As recently as 2010, Microsoft released its idea for a HomeOS, which would be an operating system for the home. Like a PC, this would have a central controller, and devices in the home would be attached to the HomeOS system as peripherals.
    Microsoft's HomeOS system

    This became connected to Microsoft's "Lab of Things" infrastructure, which is somewhat like the Internet of Things, except that every thing in it ends up involving Microsoft in one form or another. As Gigaom commented in 2013:
    But in digging into HomeOS and the Lab of Things news today, I'm struck by how odd Microsoft's vision seems to be with regard to the connected home. For example, Microsoft's HomeOS vision centers around a home PC (it can be a netbook or a laptop) that the devices talk to -- something that seems more at home in 2003 than in 2013.
    Microsoft pushes HomeOS further with Lab of Things - GigaOm
    The new automation

    As the GigaOm article points out, what none of these visions of the future take into account is the rise of the smartphone as a key tool. One way of looking at the difficulties we currently face with home automation is to see it as the struggle to tie together 40 years of development with technologies that have only been around (for most people) over the past seven years or so.

    At one time, for example, being able to pipe music of your choice into a room seemed like a wonderful thing to do. One solution to this was the Sonos system, which made this vision easily possible in homes by interlinking a number of speakers.

    More recently, this kind of function has been taken over by devices such as the highly popular Amazon Echo (voice-controlled through Amazon's Alexa cloud-based system), which can, on command, stream music from a range of sources -- without requiring any centralised controller.

    The Echo doesn't make the vision of the same music everywhere possible, but that vision has itself dimmed somewhat. You might want a good speaker in the kitchen while you are cooking or dining, but sitting on the couch, you might be just as happy with your smartphone and some earbuds.

    Similarly, devices such as the Nest Thermostat from the Alphabet-owned Nest Labs relies on recording past behaviours, then using these to predict future heating and cooling needs, without the need to network to any other devices.
    Home automation and home improvement

    From a strictly market-driven perspective, HNN believes that home automation will become increasingly important to home improvement retailers over the next two to three years.

    One driver behind this is that home improvement retail is still in something of the "honeymoon" period when it comes to Li-ion cordless tools, but, from a DIY market perspective, this will begin fading in coming years. People are still replacing Ni-Cad cordless with Li-ion, or simply discovering that they can now afford powerful, long-lasting cordless tools that make many DIY jobs easier to do.

    Today, as brushless motors slowly filter down to the DIY market there is an additional wave or replacement happening. However, strictly in the DIY market, HNN does not really see any further technology coming along that will continue to push growth.

    DIYers will find their price-point in the market, brushed or brushless, 2.0 amp-hour battery or 4.0 amp-hour battery, 10.8 volt or 18 volt, and some will eventually be tempted to upgrade through a combination of better features and price deflation. However, the market will likely begin to contract, partly because these consumer tools are also, almost universally, very well made these days.

    The situation at the professional, "tradie", builder, construction end of the market will be different. Both Techtronic Industries (TTI) and Stanley Black & Decker have indicated how they plan to add advanced Internet of Things technologies to their tools. We will likely see additional advances, particularly from companies like Hitachi, and while Makita has been quiet on this front, it is a power tool manufacturer that should never be underestimated.

    It is quite likely these advances will change not only the tools themselves, but also how they are sold. For example, using these modern networking technologies, introducing a Hilti-like leasing system would be much simpler, and much more effective. We could see the rise of the power-tool as a service at the top end of the market.

    If things work right, however, just as the DIY market for power tools sees a decline, the market for home automation products will begin to increase. It is HNN's belief that it is partly this vision that has influenced the TTI brand Ryobi to get into the garage door opener business, with what is, for that market, a very advanced product.
    The situation today

    One of the major problems in the home automation market today comes down very simply to price. To look at a single device that can be very useful, Belkin sells the WeMo Insight switch. This plugs into a powerpoint, and then devices are plugged into it. Aside from offering the usual features of such a switch, enabling the user to turn it on and off remotely, either from within the house or from just about anywhere in the world via an internet connection, it also monitors the current that passes through it, providing a reading on how much energy is being used.
    Belkin Insight switch

    This means that energy hungry devices, such as air-conditioners and heaters, can be monitored overtime, providing feedback on when they are being used efficiently.

    That's impressive, but the Insight Switch can also provide alerts when the amount of current changes -- in other words when the attached device switches on or off. That could be an alert that signals a battery has finished charging, that the washing machine has finished a load, or even that the coffee is (finally) ready.

    Installation is simple and reliable. Connection methods include hooking it up to the home wi-fi network, or directly connecting to it over Bluetooth through a custom smartphone app.

    All that is great, but each unit costs $100. A technology fan might buy one as part of a project, or just out of curiosity, but very few people and going to buy eight or nine for the home. Even the simpler WeMo switch, without the current monitoring built-in, costs $70.

    In market technical terms, home automation is currently stuck at a bad place in the price/volume curve. Adoption isn't widespread enough to make volume purchases and subsequent price reductions worthwhile, and adoption is being held up by the high price of individual units.

    Time will, most likely, take care of this issue. Adoption will continue to spread, and manufacturers will see their development costs amortised over the first two to three years of a product's lifespan, meaning that they can reduce margins on older items.

    Forecasting adoption cycles is always difficult, and we do not take that task lightly at HNN. Reviewing the products on offer, and looking at adoption cycles we've seen in similar areas, it is our belief that during 2016 we will see a significant expansion in the number and complexity of the products that are being developed.

    We don't think that the adoption cycle will begin to tip over into real growth until the end of 2017 at the earliest, and we don't believe strong growth will occur in the general market until late in 2018.
    The development of cordless

    However, we do think that we will see the emergence of some quite profitable vertical categories before that. Security is one of the easier ones to spot at the moment, though the price-points in this area still seem to be set surprisingly high.

    Another potential driver could be anything that can help people who have decided to age in place in their own homes. Home improvement retailers seem to be concerned about directly marketing these products, leaving many elderly Australians with the task of cobbling together their own systems. This could include everything from video doorbells that mean an older person doesn't have to get up from bed to answer the door or let someone into the house, to assisted lighting systems that automatically turn on lights even during the day in dark corners to help prevent trip-and-fall injuries.

    Related:
    The two-speed retail economy and home automation - HNN
    Home automation report: ready for retail? - HNN

    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
    Products
    Ryobi's garage technology hub
    The Ryobi garage door opener without modules
    Ryobi
    The Ryobi garage door opener with modules
    The laser park assist module
    Click to visit the HBT website for more information
    Over the past four years home automation has been viewed as a product category that extends existing product ranges. Home automation products are often "souped-up" versions of familiar devices, with additional home automation features added-on, at a similarly "souped-up" price. For example, $50 lightbulbs, or $100 powerpoints, that measure energy use.

    The market seems set to change over the next three years. Home automation products will take on a more aggressive role, competing with standard products in the mid- and low-range by offering better features at similar prices.

    Something of an "index case" for these changes has already appeared. It's telling that it has shown up in a product right in the centre of the home improvement sector. Somewhat less unexpectedly, the product has been developed by the Techtronic Industries (TTI) Ryobi brand, which has invested heavily in technology for the DIY power tool sector.

    Ryobi's Ultra-Quiet Garage Door Opener retails for USD248 at US-based big box retailer The Home Depot. This product represents the first real advance in garage door openers (GDOs) for the past 20 years.

    Its importance isn't only about the advances it has made in this previously very stable category. It's also about the way TTI innovated, in both meeting customers' needs, and leveraging its own capabilities for marketing and design.
    Opener history

    GDOs were originally invented in the USA in the mid 1920s. They became popular in the late 1940s, when entry via an external wired keypad was first introduced. In the mid-1950s entry via a wireless button keypad was added, using technology developed during World War II to remotely detonate bombs. Modernised through the use of transistors, the remote controls were small and convenient to operate.
    1930s use of a radio garage door opener

    Security concerns about the remote transmitters persisted until around 1996, when there was widespread adoption of the same "rolling code" systems used by remote car unlocking systems. These encrypted the communications between the transmitter and the opener, making it almost impossible for a burglar to open a garage door by duplicating the entry code.
    Ad for radio-controlled garage door opener

    Various accessories were added to GDOs over the years. A light that switched on when the opener was activated became common, and by the early 2000s, the light was also motion activated. Battery backup was introduced as an option, and now comes standard on some systems.

    Around 2010 or so the first systems that could interconnect GDOs with the internet (and thus smartphones) appeared. Even today, many of these systems rely on sub-routers that need to be connected directly to an internet-connected wireless router via an Ethernet cable. Others have evolved to use only wireless connections, though most still rely on a separate control panel to set them up.
    US-brand Craftsman garage door opener internet gateway
    Function and design

    The mechanical design of the GDO has hardly changed since its invention. In the common installation for sectional garage doors, the device is mounted to the ceiling of the garage. A "trolley track" along the ceiling of the garage houses a metal-reinforced rubber belt. This is attached to the trolley itself, and the trolley is attached, via a metal "arm", to the door.

    To open the door, the electric motor in the GDO rotates to drive the rubber belt, moving the trolley towards the back of the garage, thus opening the door. To close the door, the motor operates in the reverse direction. Sectional and single-panel garage doors are counter-balanced, which means the force needed to open and close them is not large.
    The Ryobi innovation

    There are two parts to this transformation has made of the humble GDO. the standard features the GDO come with, and a set of six (for now), optional modules that can be purchased separately to add to its functions.
    The basic Ryobi GDO
  • The Ryobi GDO (RGDO) provides wi-fi/internet/smartphone connectivity out of the box. Linking directly to a smartphone for initial setup, it connects to a local wi-fi network in much the same way a standard wi-fi printer would.
  • The smartphone link provides access to most of the settings on the device.
  • The smartphone link provides access to the usual status/log activities, such as whether door is open or closed, and open/close activity in the recent past.
  • Homelink. This is a US communications protocol specifically for GDOs and gate openers. For example, the Tesla S is equipped with Homelink, and it can be programmed to show a Homelink button "door open" button on its integrated touchscreen when the GPS the vehicle is approaching the garage.
  • What Ryobi describes as an electric motor that is "20% quieter" than competing products.
  • A motor Ryobi rates as having 1400 Nm/s of power, as contrasted with the maximum of 1000 Nm/s common to most GDOs.
  • LED light with motion sensor. As has become standard on GDOs, the unit provides lighting via a motion sensor, with adjustable activation settings.
  • The Ryobi garage door opener without modules

    In addition to the above, the RGDO also comes equipped with a battery backup system, which can operate the door opener up to 100 times from a fully-charged battery.

    It's here, with the battery backup, that we begin to see the real marketing intelligence behind this device. The battery it uses is a standard Ryobi One+ Li-ion, battery, the same type used in Ryobi power tools and outdoor power equipment.

    The device doesn't come with a battery -- which makes sense -- but the RGDO doesn't just house the battery, of course, it also acts as a fully configured Ryobi One+ battery charger.

    While other GDOs can be configured with a backup battery, those batteries are entirely passive investments -- all the battery does is sit there, attached to the GDO, perhaps getting used for 10 opens for one or two days every two years. The Ryobi alternative integrates this system with they Ryobi cordless tool range, and makes getting value from the battery a real possibility.

    People who already own a few Ryobi cordless tools, of course, don't really need to buy a battery: when there is a power failure, they can just get a ladder and plug one of their power tool batteries into the RGDO.

    For people who don't own a Ryobi cordless tool, a 1.5 amp-hour battery costs as little as USD40. Or they could just decided to get better value by buying one of the Ryobi tool kits, such as the ONE+ 18-Volt Lithium-ion string trimmer/edger, blower/sweeper, battery and charger kit for USD99, or the ONE+ Lithium-ion hammer drill, impact driver, battery and charger kit for USD129.

    In other words, it works just like a Ryobi cordless tool purchase in encouraging a customer to benefit from the wide range of tools.
    The RGDO modules

    The backup battery only hints at what is further developed by the set of five modules currently available for the device. Each of these enables the buyer to customise the device. The current modules include:
  • Retractable extension cord. This provides almost nine metres of extension cord, and three outlet sockets.
  • Laser park assist. This is a pair of lasers (for two cars). They are adjusted by the user so that they shine on a particular part of the car (eg., a windshield spray nozzle) when the car is correctly positioned in the garage. This helps to guide parking.
  • Bluetooth speaker.
  • Three-speed fan, controlled by the RGDO remote.
  • Carbon monoxide sensor.
  • The Ryobi garage door opener with modules

    The first two of these, the extension cord and the laser parking assist, fall into the category of "why not?" accessories. They relate as much to the position of the RGDO, overhead in the garage, as anything else.

    The Bluetooth speaker and the fan will be familiar to anyone who knows the Ryobi range: these are repurposed tools. TTI is making use of pre-existing manufactured lines, likely with some simple adapters added.

    The most interesting of all the modules, because it is the one that points to the future development of the RGDO, is the CO sensor. To begin with, this is simply a great idea. Anyone who has done any work at all on cars in garages will be aware that the level of CO can be a concern. While it is easy to detect high levels to CO, longer-term exposure to low levels of CO can also lead to fatal poisoning. A side benefit is that CO detectors can also provide an early alert to some types of fires.

    What is really interesting about this module is that it interconnects with the RGDO smartphone app, so that when excess CO is detected, it sends an alert to the smartphone. This capability could see the type and functions of future modules radically extended.

    For example, adding a simple webcam module could enable a scenario where a delivery person rings the internet-connected doorbell, is asked to leave the delivered package in the garage, which is remotely opened and then closed through the Ryobi app. The webcam could be used to make sure that nothing untoward happens during the delivery.

    Outside of that, there are further possibilities for Ryobi to integrate their tools into the RGDO as well. The charge level of the battery in the RGDO can also be checked via the smartphone app. What if some Ryobi battery chargers can link to the app via the RGDO in the garage, and notify the user when a charge cycle is complete? Or tool "cradles" could report back if tools had been returned to them at day's end, and properly stored. Which introduces the possibility of custom storage worktables made by Ryobi.

    So, on one level, the RGDO is just a convenient grouping of features you'd like to have in a garage. On another level it is a highly functional hub for home automation features.
    The competition

    To really understand the potential impact of the RGDO, you need to think about its competition in markets such as Australia. Based on projected currency exchange rates, if Ryobi did choose to market this device in Australia, pricing would likely be around $400 to $440 for the base unit.

    Take, for example, the B&D Controll-A-Door Prodigy (CADP), which is marketed by B&D, part of DuluxGroup's troubled garage door/opener business (which saw EBIT decline by 6% in 2015). The base unit, which is less powerful than the RGDO, is sold by National Garage for $540. Adding smartphone connectivity costs over $240 more from the same source (though you can buy kits through eBay for around $99). Meanwhile, the other major player in Australian GDOs, Giderol, doesn't seem to even offer any kind of smartphone option.
    The B&D Prodigy

    These features and price points go directly to current competition, but they aren't the real point. The real point is that DuluxGroup, which is a paint manufacturer that has diversified into a medium-industrial, import business, simply has no real chance of competing with TTI in this area. The same could be said not only of other companies that have diversified in this way, but several pure-play opener companies as well.

    The advent of home automation, the introduction of technology to what has been for 20 years a sleepy byway of home improvement accessories, will both revitalise this market, and lock out many of the current participants. The real future competition is likely to come from companies like Stanley Black & Decker and Positec. Other participants will either consolidate to form real competition, or else be relegated to the lower, purely functional end of the market.
    Companies
    The big three in home automation
    Even the Apple Watch gets into the drift
    HNN Sources
    The Amazon Echo speaker layout
    Google's OnHub device
    Subscribe to HNN weekly e-newsletter
    There seems to be something about home automation that makes normally well-managed, forward-looking companies lose most of their hard-won skills, and begin to almost "slash" away at whatever problems they are trying to solve.

    Cases in point: the two behemoths of mobile, Apple and Google, have both seen their automation efforts fall on tough times. Meanwhile, unexpectedly, it's the online retailer Amazon that has come up with the most popular solution, devices that access its voice-driven artificial intelligence (AI) cloud system, Alexa, to help home-owners activate home automation with spoken commands.

    What exactly is happening here? The main problem seems to be that the customers' primary needs are not being considered. None of these participants in the home automation market has approached the problem by asking themselves what the best possible experience for the customer would be. Instead, they have each sought to use home automation as a means of furthering their central business model.

    Apple, for example, is today mainly in the business of selling smartphones, with a secondary interest in associated services, and a tertiary interest in computer hardware. Google (now Alphabet) is in the business of using personal information revealed through the use of its services to provide highly targeted advertising to users. Amazon wants to be the on-demand supplier of everything from ebooks, music and video services, to clothing, and household goods such as razorblades and paper-towels.

    Thus Apple's HomeKit is controlled by its iOS devices, smartphones and tablets. Google is relying on products like the Nest thermostat, which observes the user's behaviour patterns and programs its settings based on those. Amazon has developed a voice-activated system that will play music from its streaming service, or order-up that dishwashing liquid you've just realised you will need soon.
    Apple HomeKit

    HomeKit is one of those Apple projects that instead of getting better and more refined as it went through development, grew steadily worse. Between its announcement in 2014 and its release in 2015, it went from a system that had a degree of openness, to one that was as completely closed as Apple could make it without building all the connected devices itself.

    Today, in order for a device to be officially certified by Apple, and to be admitted to the gated community that is HomeKit, it has to select key hardware components from a narrow range certified by Apple, and also use firmware supplied by Apple on those components.

    Perhaps the most generous way to view this is to see that what Apple is doing is trying to bring some of what made its App Store (and thus its iOS devices) so successful into the home automation area. All iOS apps have to be made with Apple software tools, and they all (without exception) have to pass tests to be listed in the App Store, the only source of apps. That has worked very well for Apple, providing a safe, mostly tasteful supply of relatively inexpensive apps.

    However, the world of hardware is a very different one from the world of software. Using a particular software tool to build an app and then tweaking the result to match up with Apple's expectations is not a difficult thing to do. Using specific hardware components that may not be ideal to a certain situation, and whose supply may be difficult to guarantee is a much more difficult and riskier task.

    By and large, for companies that already have some home automation products out there, the Apple requirements leave them with two options. Apple has built into the HomeKit software a special provision for a "bridge" device. This is one unit of a system that communicates with HomeKit. Commands for elements of the system, such as dimming one particular light, are passed to the bridge in a "package", which is then "unwrapped", and the correct command sent to the correct device. Both Lutron with its home lighting kit, and Phillips with its Hue system, have followed this approach.

    The other option is, like Belkin with its WeMo line of smart plugs and switches, to opt out of doing anything with HomeKit in the foreseeable future. The reason for this is that the bridge ends up costing the customer something around $90. Trying to sell a power-point switch for $70 that needs a $90 accessory to make it work with HomeKit is hardly a winning proposition.

    The end result is that there are very few devices that actually do work with HomeKit, and many of these (especially in the Australian market) carry very high prices. Take, for example, the Schlage Smart Sense door lock, which works both with HomeKit and via a keypad on the lock. This is currently retailing for $399 at the Apple store. (You can, however, buy the US version for $250, including shipping, on eBay. Some sellers on Amazon offer the device for USD165.)

    Apple's reasons for having such a closed system have largely to do with security. With their reputation at stake in other areas, such as mobile phone security, and the security of their cloud-based services, they don't feel inclined to take any risks with home automation. You can hardly blame them. If some hacker works out how to remotely dim the lights in George Clooney's living room or adjust the thermostat in the bedroom of Angelina Jolie's maid by hacking HomeKit, it's going to be headline news for a month.
    The network

    Aside from the closed nature of HomeKit, the other big problem it presents is that it relies on Bluetooth for its inter-device communications. For some homes and apartments, this isn't a bad thing. The main advantage of Bluetooth is that it can be made to consume very little energy, so that a small battery will power a device for an entire year, or even two years.

    The bad thing about Bluetooth is that it has very limited range. With a clear line-of-sight, it might reach as far as 30 metres. Inside a house with walls and other obstacles, it's not going to reach further than (maybe) an adjacent room.

    Also, using Bluetooth, there is no direct way to connect to the internet, and thus provide remote access to home automation devices. Apple's solution to this is to enable HomeKit to connect to the Apple TV device, which connects to the local wi-fi network, and then to the internet.

    One of the problems with that, of course, is that the devices connect to the Apple TV device via Bluetooth. Which means that in a larger house you would need several Apple TVs to ensure coverage.
    Siri

    The other point of failure for HomeKit, however, is that it is designed to be operated primarily via voice, by making use of Apple's AI-powered "personal assistant", Siri. The problem with this is that just about the only way to connect to Siri and HomeKit is through an iOS device such as an iPhone or an iPad. So to turn down the lights in the living room, you have to be carrying your phone with you around the house at all times -- something that is not a common habit for most people.
    Solutions?

    If Apple is going to give its HomeKit anything like a chance in the market, it is going to have to change its current strategy. It will need to build a small device of its own that essentially works as the bridge between Bluetooth communications with home automation devices and the local wi-fi network of a house.

    For starters, this bridge could be built-in as standard to its networking devices, such as its Airport wi-fi routers. It would also need to be a small, relatively inexpensive device that could be plugged into an electrical socket in a room. The device would then not only enable control of home automation devices throughout the house, but would also be able to identify people by their phones (or Apple Watches) as they moved through the house.

    In case this seems a little far-fetched, this kind of connectivity is exactly what is being offered by Google's OnHub router, released in 2015, which includes Bluetooth as a means of connecting devices directly. Google has yet to do much with OnHub, but the capability exists.

    The chances of Apple changing its approach are, of course, very slim. What is far more likely is that we'll see another year or so of HomeKit, as Apple rolls it out with iOS 10, and then a dramatic fall in interest with iOS 11 in 2017.
    Alphabet (Google) and Nest Labs

    Meanwhile, back at Google, things are not going quite as well as had been hoped either.

    Google's progress into home automation really began with its acquisition of Nest Labs in 2014. Nest was created primarily by Tony Fadell, who is credited with the early development of Apple's first iPod, which arguably was the key element that has built that company's current success.

    Mr Fadell developed the Nest thermostat, which was launched in 2011. The Nest is a circular device that relied on some of the hardware originally developed for use in smartphones. One of its main features was the ability to "learn" from users, and thus anticipate their heating and cooling needs, helping to reduce energy consumption in the process.

    The Nest thermostat was joined by the Nest Protect in 2013, a smoke and carbon monoxide detector. After its acquisition by Google, Nest also acquired the Dropcam company, which produced a well-regarded security webcam.
    Google developments

    In addition to these devices, Nest has also been involved in developing some fundamental infrastructure that could well become the way of the future for home automation devices. News about these products was released in mid-2015.

    A networking protocol known as "Thread" solves one of the main problems for home automation providing a secure, wi-fi based system that is securely encrypted and consumes very little energy. It is also a "mesh" network, which means that if just one device in a group of devices has access to the house's wi-fi network (for example) all the other devices can reach that network through it.

    Nest has been somewhat less involved in two other technologies developed at Google. Weave is a communication layer that is all about internet of things (IoT) devices being able to talk to each other. Brillo is something like a scaled down version of the Android operating system that can work on the small devices that make up the IoT.

    So putting the three things together, a camera running Brillo can access a cloud service through Thread to run face recognition, then communicate using Weave over a Thread connection with a lock also running Brillo to unlock a door.
    Products

    While all this sounds pretty good, Nest and Google have been very slow at releasing new products. The two products that Nest has failed to deliver so far are a system that monitors door/window openings and closing and, most importantly, some kind of central hub that would provide a point of control for diverse home automation devices.

    The technology news and analysis site The Information recently published an article entitled "Inside Tony Fadell's Struggle to Build Nest" which outlines some of the problems Nest has encountered in developing products. Mr Fadell is seen as something of a divisive character, placing a high level of demand on the people who work for him, and not always responding well to both suggestions and criticisms that relate to products. He is also held to be responsible for many of the product delays due to excessive micro-management of the development teams at Nest.

    One way around this may be the products that will eventually emerge from Nest's Works With Nest and Nest Weave projects. The idea seems to be to add products to the Nest system in much the same way Apple adds products to HomeKit, but with far fewer restrictions.

    The Works with Nest website (workswith.next.com) lists over 70 products, which puts Apple's HomeKit to shame. That said, a large number of these listings involve software that is aimed at providing different ways to access and control the Nest thermostat. However there is also a range of truly interesting products, such as the August smart lock, PetNet, which is an remote controlled pet feeder with a camera to show the pet eating, and the revolutionary Heatworks hot water heater.

    The Weave protocol along with Brillo was at least present in some devices previewed at the 2016 Consumer Electronics Show (CES) in Las Vegas. The Korean appliance manufacturer LG indicated Weave was being made use of inside an air conditioner, a washer and dryer, a refrigerator, a security camera, and some wireless speakers. However, these were released in a very quiet way, and there seemed to be little attempt by Google to help promote the product.

    In Google as a whole, there is also the OnHub router, which was launched in 2015. Somewhat like the Nexus mobile phones Google has sponsored, the OnHub is made by two external companies, but its specifications were worked out with Google.

    As the OnHub speaks Weave, it could act as a bridge between the internet world of wi-fi and the device world of Bluetooth. However, in terms of supplying a room-by-room connection for IoT devices, it's just too expensive at around USD200 each.
    The future

    Whatever the causes, the fact is that Nest Labs has not delivered much in the way of home automation products. That said, Nest recently announced it would be ending support for a product it acquired in 2014, the Revolv home automation hub. There is also a slightly cryptic note in the article from The Information on Nest which states:
    Separately, Nest asked to be included in a secret Google project to create a competitor to Amazon's Echo, a voice-controlled personal assistant device.

    Putting those two things together, it seems possible that there could be significant home automation announcements at Google's annual developer conference, Google I/O, scheduled to take place on 18 May 2016.
    And the winner is -- Amazon

    After a series of failures with devices in the mobile/connected area, Amazon has proved itself a surprising winner in home automation. Perhaps this just proves that in a contest that pits selling more mobile devices against selling ads based on personal profiling versus just selling whatever you can to your customers, the last of the three will always end up winning.

    At the centre of the Amazon home automation system is its Echo voice command/speaker system. Development of the Echo began in 2011, and it was launched in November 2014, but made available only to members of Amazon's Prime customer rewards program, and a few special invitees. The Echo became widely available in June 2015.

    Since it became widely available, the Echo has steadily gained in popularity to reach the status of a "must have" for people with an interest in technology. While Amazon does not share exact sales data, the Echo currently sits at number three in its list of bestsellers, ahead even of the Kindle Paperwhite eBook reader.
    How the Echo works

    Echo provides a voice interface that interacts with Amazon's Alexa artificial intelligence driven voice recognition technology. The Echo is always on and always listening. Interaction is triggered by users saying a "wake" word, which defaults to "Alexa", but can also be "Echo" or "Amazon". It uses an array of seven microphones to provide "far field" voice recognition, which means it can detect the wake word at a distance and despite the clutter of background noise.

    Once the user has the Echo's attention, the device can provide a wide range of services. It is also equipped with a good speaker, and so can be asked to play a specific music track (Amazon offers streaming music services), or read a spoken-word book (it interfaces directly with Amazon's Audible recorded book service).

    As you would expect, the Echo also makes it very easy to order products from Amazon. A suggested voice command, such as "Alexa, re-order paper towels" will have the Echo help you verify your purchase, then make the transaction. That said, the Echo only enables you to repeat a past purchase, not create a new one.

    Alongside entertainment, home automation and product ordering, the Echo makes available a wide range of information services. The user can ask for a "briefing" from a range of sources, and receive a concise summary of events. Weather and general knowledge questions can be answered, and it now provides an interface to Google Calendar. There are also simple conveniences available, such as setting a quick timer for cooking.

    Amazon has made it easy to interface the Echo with a very wide range of home automation products. This includes, for example, Belkin's WeMo switches -- the same ones that are not going to be connected to Apple's HomeKit. You can tell the Echo to turn on lights, switch appliances off and on -- and so forth. Domino's Pizza has an interface that makes ordering a home delivered pizza a simple instruction, and Uber will send you a car as well when requested.

    One slightly curious incapability of the Echo is that it will not interact with anything like a door lock, or open/close windows. That's because Amazon is afraid it could be used by thieves to break into houses. As the commands are not encoded in any way, a thief could just shout "Alexa, open the door", and gain entry.

    The Echo also serves some more ordinary functions. Much of the 235mm tall device consists of an array of speakers for audio playback. It can be used by other devices, such as a smartphone, as a simple Bluetooth speaker.
    Product details

    The Echo is sold by Amazon for USD180, down from the original price of USD199, largely because it no longer comes with a remote control. While that is pretty pricey, especially as a homeowner may want more than one device in a house, Amazon has worked on that as well. It now offers two additional devices that offer the same functionality as the Echo, but in a more affordable and convenient form.

    The Amazon Tap is basically a smaller version of the Echo, that operates as a cordless device, while the Echo connects to the mains current. To conserve power, it is not always on, but requires a swift "tap" to wake the device. It also doesn't feature the same long-distance microphone array as the Echo, so users typically speak into the Tap from quite close range. Like the Echo, it can function as a normal Bluetooth enable speaker, and it offers up to nine hours of playback on a single charge. The Tap sells for USD130.

    The Amazon Dot is pretty much like the Echo, but without the speaker array. Like the Echo, it needs to be plugged in to the mains, but it is much smaller, at just 160mm tall and 80mm in diameter. It possesses only a rudimentary speaker, but does make it easy to plug in higher-quality speakers. At just USD90 -- half the price of the Echo -- it also makes it a good way to affordably integrate the Amazon Alexa service throughout a home.
    Conclusions

    The one issue HNN has not covered in detail in the above descriptions is the availability of these systems in Australia. The limiting factor is, in most cases, the different voltages between the US and Australia (and Europe). Thus, for example, you can now buy a Nest Thermostat, and you can also buy a Nest Protect -- as long as the latter is the battery-powered model. You cannot, however, buy the OnGo router, as this relies on mains power.

    With the Amazon Echo ecosystem, you are pretty much out of luck. The Echo, the Tap and the Dot are all unavailable, though this has more to do with both the supporting cloud-based system behind them, and the unavailability of convenient Amazon store access than it does different voltages.

    With Apple's HomeKit, the story is quite mixed. It's available, but the range of products that do work with HomeKit is even more limited than it is in the US. There is also the curious problem of the extra-expensive currency conversion. For example, the Schlage Sense Smart Deadbolt sells in the US Apple store for USD230, which would be around $305, yet it retails in the Australian Apple store for $400.

    Overall, however, this doesn't really indicate any kind of anti-Australian -- or, more accurately, non-US -- bias but rather just the surprisingly disordered state of the home automation market. It is possible that home automation may be one of those markets that are contested by Apple and Google not so much because they see them as representing a great opportunity, but rather because they fear that leaving an open field to their competitor could have serious consequences.

    We've seen exactly this behaviour with self-driving, autonomous vehicles, where Apple is now striving to catch up to Google's lead, and with "wearable" technology, where after Google's misfire with Glass, Apple has surged ahead with its Apple Watch -- albeit with apparently lacklustre sales.

    As for Amazon, it seems very unlikely that Australia will see much benefit from its systems over the next three to four years, at the least. Australia's best hope for a decent home automation system probably does rest with Apple's HomeKit more than the others.

    HNN doesn't expect very much to happen with HomeKit during 2016, so it will depend on whether Apple decides to reboot HomeKit in 2017, or to exit this market at that time.

    Related:
    CES 2015: Wishful thing-ing - HNN
    Nest reveals HD security camera - HNN
    Bigbox
    Big box update
    An artist's impression of the new Bunnings Bonnyrigg store
    HNN Sources
    A Masters store at Parafield Airport remains empty
    Wesfarmers is expected rebrand up to nine British Homebase stores as Bunnings
    Click to visit the ITW website for move information
    A "supersize" Bunnings store will be constructed at Bonnyrigg (NSW); Bunnings lodges plan for a store in Glynde (SA); Masters' property portfolio attracts additional attention; the future of Masters Mt Gravatt site under a cloud; Masters store at Parafield Airport (SA) remains empty; prospective buyers for the Masters business have been given until May 2 to lodge their bids; former Woolworths CEO Grant O'Brien resigns as Masters director; Bunnings' move into shopping centres is part of its continuous rollout of smaller format stores; Wesfarmers is expected rebrand up to nine British Homebase stores as Bunnings; and suppliers and competitors prepare for Bunnings' British "invasion".
    Bunnings building at Bonnyrigg

    Bunnings has announced the development of a new 15,000sqm store at 1-19 Bonnyrigg Avenue, Bonnyrigg (NSW). The retailer is investing more than $45 million into the construction, which was approved by Fairfield City Council.

    All current staff will transition to the new store, which will be built next to the existing store. The new warehouse is expected to open in mid-2017, with the current store remaining open throughout construction.
    Bunnings planning SA store

    Bunnings has lodged an application with Norwood, Payneham & St Peters Council to build a $26 million store on a 14,000sqm site in Glynde (SA). Its application followed the closure of a Home Timber & Hardware store on the corner of Magill and Glynburn Roads in July 2015.

    General manager - property Andrew Marks said it was too early to comment on when the company hoped to begin construction or when the store would open. He told Adelaide Now: "If approved, the new Bunnings Warehouse development would represent an investment of over $48 million for the land, construction, fitout and stock."

    Bunnings' proposal comes almost two years after Woolworths scrapped its plan to build a Masters store in the suburb on the corner of Glynburn and Davis Roads.

    The nearest Bunnings store is about 5km away from Glynde at Rundle St, Kent Town. There is also a Mitre 10 store on the corner of Glynburn and Montacute Roads.

    Related:
    Big box update: Masters no longer at Glynde - HNN
    More interest for Masters properties

    Dexus Property Group as emerged as the latest property group looking over Masters' portfolio, reports The Australian.

    According to Information Memorandum (IM) documents for the sale obtained by the newspaper, a sale of the actual Masters hardware business is seen as unlikely, given it was $324.6 million cash flow negative at the end of the first half.

    Some in the industry were shocked to learn of the extent of the losses but they believe once the business is divested, it would create a higher than expected earnings lift for the overall Woolworths business.

    While a large number of prospective suitors of the portfolio have taken IM documents recently, many are betting Charter Hall and Blackstone would probably be the frontrunners to secure the assets.

    Related:
    Big box update: Property play from Masters sale - HNN
    Masters Mt Gravatt in limbo

    The sale of Masters' assets leaves the future of the Central Fair Shopping Centre in Mt Gravatt East (QLD) in question.

    The 1.8ha shopping centre site has been empty for about two years since the last shop closed its doors. But after a 20-month process, Brisbane City Council has recently approved a development application for a Masters store to be built. But with Woolworths moving forward with selling off the hardware chain, the site's future remains uncertain.

    Local business owners are also demanding something be done about a derelict retail site which has become a hot spot for squatters and vandals.

    Councillor Krista Adams (Holland Park) said the application took 20 months to be approved because Brisbane City Council wanted Masters to adhere to the City Plan 2014. She told the Courier Mail: "I didn't want a blue (hardware store) box dropped on the site and so they amended the proposal to do things like put the cafe at the front of the store and extend awnings to weatherproof pathways.

    A Brisbane City Council spokesman said it received an application for a Masters Home Improvement store at 48 Creek Road, Mt Gravatt East, on June 26, 2014. He said: The original proposal did not have an adequate plan for traffic impacts and council had several concerns. Council forced Masters to make significant changes and the application was approved by council on April 1, 2016."

    A Masters spokeswoman told the Southern Star newspaper the company was concerned about reports of squatters at the Mt Gravatt East site. She said: "In recent months we enhanced our security on-site, with 24-hour teams now on patrol. We are committed to addressing these concerns and will work with our security teams to ensure the safety of local community members and business owners."

    The spokeswoman also confirmed the sale process for Masters and Home Timber and Hardware had commenced and was expected to continue over coming months.

    It is understood the site at 48 Creek Road will be sold during this process. It is not yet known when the sale of the site will begin.
    Masters Parafield Airport store unused

    The 13,500sqm Masters store located on Main North Road, Parafield (SA) was due to open within the next month. However it remains unoccupied since Woolworths announced it abandoned plans to open Masters stores around Australia including new stores under construction at Parafield and Noarlunga (SA).

    Developers had already laid the concrete foundation at the Parafield store, erected the walls and painted the building since construction began in June 2015.

    Salisbury councillors have previously suggested a gardening retailer, supermarket, department store or storage warehouse would be among the best options to replace the home improvement retailer. Mayor Gillian Aldridge was hopeful a new tenant would snap up the site in the coming months. She told Adelaide Now: "I would imagine that it would take no time at all for someone to move in there because it is in such a prime position with easy access in and out of the area. And I suspect that there would be more development happening right around that area, which would of course encourage more people to come in."
    Deadline for Masters sale

    Suitors for Masters, along with Home Timber & Hardware (HTH), have been given until May 2, 2016 to lodge their bids.

    As first reported by the DataRoom column in The Australian, Woolworths adviser Citi distributed an information memorandum recently to a number of potential investors including trade buyers, private equity firms, and a large number of listed and unlisted real estate players.

    The sales documents, seen by The Australian, underscore Masters was cashflow negative at the end of the first half, to the tune of $324.6 million, while its net assets are worth $2.5 billion.

    The dire straits of the big box retailer's balance sheet has deterred many prospective bidders and prompted predictions the chain will be flogged off as a property play. New York-based Blackstone, Charter Hall Group and Abacus Property Group were all widely touted as contenders for the portfolio.

    Trade buyers are also pursuing a handful of sites. The Australian reported that US giant Costco has at least four outlets in its sights and it is understood Melbourne-based Spotlight will attempt to prise off some stores, as will Bunnings.

    Yet while the Masters business looks doomed, HTH has lured in a string of enthusiastic suitors. Mitre 10, which is advised by Luminis Partners, is a well-known contender, although a number of private equity firms are also in the mix.

    Related:
    Big box update: The start of Masters' sell-off - HNN
    Masters loses director

    Ex-Woolworths CEO, Grant O'Brien, has stepped down as a director of Masters. Mr O'Brien, who officially departed Woolworths as chief executive in late February, has resigned as a director of the joint venture that houses the Masters hardware chain. It severs the final ties between the executive and the business he helped create.

    Three years before he was appointed the head of Woolworths in 2011, Mr O'Brien played a leading role in the development of the company's hardware strategy. He spearheaded the creation and design of Masters, later championing the loss-making venture when he replaced Michael Luscombe as Woolworths chief and arguing it would eventually emerge profitable.

    Mr O'Brien's departure comes as Woolworths and its joint venture partner in Masters, US hardware and home improvement giant Lowe's, have yet to agree on a valuation for Lowe's one-third stake in the Masters chain. Woolworths is seeking to gain 100% control of Masters so it can then sell or shut down the loss-making retailer completely.

    Under the terms of an agreement released earlier this year, the supermarket group and Lowe's are seeking to appoint a third independent expert to determine a valuation for the Lowe's stake. A Woolworths spokeswoman told The Australian: "We have not agreed on a valuation at this point and we are discussing the process for the third valuation."

    Related:
    Masters after O'Brien - HNN
    Big box update: Masters boss quits Woolworths - HNN
    Bunnings' foray into shopping centres

    Bunnings will open a store in a shopping centre on Brisbane's northside at Vicinity Toombul Shopping Centre in the middle of this year.

    About $8 million will be spent on the development, fitout and stock for the new smaller-format store, which spans about 3000sqm in a former Coles site. Bunnings general manager - property Andrew Marks said the new store would employ 50 staff. He told the Courier Mail: "It's an exciting opportunity as it's located within an existing subregional shopping centre and will allow Bunnings to breathe new life into the former supermarket and service the inner northern suburbs of Brisbane.

    :Bunnings smaller format stores, part two

    Several media outlets have picked up on the story that Bunnings is developing a growing number of smaller format stores, following its announcement that it will open a 3000sqm store at the Toombul Shopping Centre in Brisbane (QLD).

    The conversion of a former supermarket in a small shopping centre at Indoorooopilly in mid-2014 was a first for Queensland and received a positive response so Bunnings is now expanding even more.

    There are currently 69 smaller format Bunnings stores across Australia and New Zealand. The smaller stores are part of its DNA, according to Bunnings.

    CEO of Hardware Australia, Scott Wiseman, told the New Daily website that Bunnings is expanding into smaller format stores, mostly in more regional areas. He said: "It's quite an interesting model. They're sort of shifting focus or shifting tactic to try and capture what the independent hardware retailers have got, in terms of that personal service, that expertise or knowledge."

    He said while many independent retailers remain, it is difficult for them to compete with the huge marketing budgets of retailers like Bunnings. However, he believed more of the smaller players are changing tack and offering price matching to try to compete. He said: "The reality is there's not much of a price difference between the big boys and the little guys."

    Business futurist Morris Miselowski said many retailers around the globe are mixing it up when it comes to size. He said: "Many large box retailers across the planet are experimenting or moving to a small box size. It's not instead of -- it's generally as well as."

    Miselowski cited the example of Woolworths' "Metro" format stores. Under the "small box" model, a retailer would generally take 20 to 25% of its top-selling products, and place them in a convenient, smaller-sized store, he said.

    Related:
    Big box update: Small format Bunnings stores - HNN
    Bunnings opening smaller stores, part three

    Industry consultants have come on the side of Bunnings and believe its move into smaller format stores is "good" and a way of competing with other big box stores that could emerge in the future.

    Geoff Dart thinks the small retail business plan could mean Bunnings is tapping into a market of impulsive shoppers who are after convenience. He said McEwans, a hardware chain Bunnings took over in 1993, used to have stores in shopping centres. He told News Corp.: "The good thing about that smaller range is people just impulsively buy things they might need at home, like hooks to hang your pictures or tape for fixing things. It used to work really well for McEwans.

    "Someone needs to fill this need, supermarkets have a fairly pathetic hardware range and Kmart and Big W have little tool kits but they couldn't service somebody who wanted to fix their tap or wanted a new type of paint."

    Apartment dwellers and the larger number of people now living in cities could also help with the potential success of these small stores. Dart said: "There are a number of apartments being built and there are no hardware stores around them. People don't want to drive 20 or 30 minutes for a large warehouse and they don't need a lot of things for apartments, they just need paint and some power tools."

    Melbourne University business and economics expert Dr David Byrne said there was a similar move when petrol stations started to relocate closer to supermarkets. He said: "That's been a good move for companies, taking one line of their business and putting it near another business.

    "There's some rationale behind Bunnings' decision to open smaller scale stores. Time will tell if it's successful but you can see the economic rationale for doing it."

    Dr Byrne said people associated Bunnings with large, big box stores and he believed smaller shops would appeal to a new market. He said: "Depending on how they roll out these smaller scale stores, it may allow them to enter and profit from smaller markets around Australia."

    Dr Byrne does not believe the smaller retail shops will eventually take over big box stores. He thinks instead it will just expand Bunnings' customers. He said: "Opening smaller shops near other retail outlets and supermarkets is probably a way of picking up customers who are just out buying bread but also need paint.

    "They are going to try and get supermarket customers into their stores as well and I suspect we won't see them selling timber in these smaller retail stores but instead small scale things like super glue, insect repellent and other things you can get while at the shops.

    "I think with the construction industry we're always going to have a physical need for large warehouse stores but the question is whether there is an appetite for big box stores in smaller markets."
    Mini-Bunnings, "disastrous" for indies

    Bunnings' move to implement smaller format stores will be a win for shopper choice and convenience, but a disaster for smaller independent suburban hardware chains, according to Queensland University of Technology (QUT) retail expert Dr Gary Mortimer.

    After Bunnings announced a small-scale version of its store would open in Toombul (QLD), Dr Mortimer, from QUT's School of Advertising, Marketing and Public Relations, said: "This is a strategic move away from their warehouse style, big box formats which had become a destination shopping experience. It is an exceptionally smart move by the hardware retailer to capture a new customer base, once serviced by the discount department stores."

    Dr Mortimer said both Big W and Kmart once had large automotive and hardware departments, including paint and decorating items. However to reduce costs, both have moved away from offering this full service experience, he said.

    "A mini-Bunnings will attract the shopper looking for convenience and seeking a broader choice than what is currently offered by the discount department stores."
    Bunnings' European summer debut

    Bunnings' green and red logo will hit UK shoppers as a handful of Homebase stores are rebadged in time for the warm summer weather. It is understood Wesfarmers will rebrand up to nine Homebase stores as Bunnings, to capture the increase in demand for homewares, hardware and garden supplies during the northern hemisphere summer.

    The conglomerate would not comment on a launch date for Bunnings in the UK but suppliers suggest Wesfarmers is keen to test the brand in a number of outlets clustered around Homebase's British headquarters in Milton Keynes.

    A source close to Wesfarmers believes what they want to do is maximise the potential sales and increased customers traffic over summer. He told Fairfax Media: "The focus of the guys in the UK is to get the thing operational...They will use this European summer to test the market, they will use a number of stores and see how each of them trades, each with a slightly different model."

    There is also speculation Wesfarmers will alter the product mix at Homebase, with a stronger focus on gardening supplies and accessories, and a reduced range of soft homewares such as bedding and curtains.
    Wesfarmers will shake-up Homebase supply

    Suppliers are speculating there will be big changes to Homebase's buying now it is owned by Wesfarmers, according to UK-based Horticulture Week. One supplier told Horticulture Week: "We're seeing the first stage of what all the industry is expecting - Bunnings coming in and really challenging the market. They're going up against B&Q and Wickes and the wider DIY market.

    "When you check out Bunnings' Australian website, the message you see is 'We want to be cheapest in the market'. It's a bit of a scary message. It's concerning because the current Homebase model won't fit that. They will have to change to a discount-orientated model. As suppliers, we'd have to change our model to supply them.

    "At the moment, we go in over a period of 10 weeks so we have to manage that. With discounters, the start and finish date is set and they take it all at once so the supplier can cost according to that model. The retailer is saying they want to buy at discount price levels, but are not coming up with that model yet."

    Some growers have used that method to supply Aldi. With Homebase changing ownership, more potential suppliers are set to ask for business. Packing bedding and pot plants are likely to be what the firm concentrates on in the UK.

    Wesfarmers is expected to relaunch about six high performing UK Homebase stores by the end of the year with new Bunnings branding. The company is also believed to want to start expanding store numbers again after previous owner Home Retail Group (HRG) planned to cut store numbers by 80 to 240 by 2018.

    Retail consultant Andy Newman said using the discount model will mean a narrower range being available to the mass market. He said: "The new Homebase will be very seasonal, selling big obvious volume stuff. They will just look at what products have the biggest volume as opposed to niche stuff."
    Brits prepare for Bunnings

    Kingfisher, Britain's largest hardware operator and owner of the B&Q and Screwfix chains, recently unveiled a 20% decline in its full-year profit. CEO Veronique Laury, in her earnings presentation to analysts, conceded that Bunnings would be a tough competitor in the UK market. She said: "It is always good to have strong competition because it forces you to become stronger as well and there is no question Bunnings will be stronger competition than Homebase was in the UK."

    Ms Laury said she had even met Bunnings CEO John Gillam when he was in London earlier this year and in fact knew him very well and respected Bunnings' competitive and retail skills. She said: "I'm very respectful of every kind of competition and I've always been. And I know the CEO of Bunnings very well. I had the opportunity to meet him a few months ago in London and I think he's a really good CEO, so all my respect to Bunnings."

    But there was a sting in the compliment, as Ms Laury reminded analysts, and anyone from Bunnings listening in on the earnings call, that Homebase had many operational problems of its own that needed to be fixed. She said Bunnings would "have work to do because Homebase is today very different from what Bunnings is".

    She added: "The reality is that they will be a stronger competitor than Homebase but it's good and healthy to have competition."

    Bunnings took its first step to revitalise the Homebase business by offering under-25s a "living wage" as a general shift to improving working conditions at its 265 stores across Britain and Ireland. The new living wage, set by the British government at GBP7.20 an hour and rising to StlgGBP by 2020, had not been offered to under-25s at this stage.

    Wesfarmers also made an 11.5 million euro (AUD17 million) injection into Homebase's Irish arm.

    Related:
    Big box update: Kingfisher's "interest "in Bunnings - HNN
    Retailers
    UK DIY retailers listed as "superbrands"
    Screwfix scored higher than B&Q for satisfaction
    DIY Week
    Toolstation rose in the ranks to fourth position for satisfaction
    Wilko holds the top ranking for satisfaction and value
    Click to visit the ITW website for move information
    UK hardware retailers Screwfix, Wilko and Toolstation have been included in the Ikano Insight Retail Alternative Superbrands list. They are being recognised for demonstrating a good understanding of their customers, as well as long-term customer loyalty and engagement.

    People taking part in Ikano Insight's poll were asked to rank brands on a variety of factors including impression; quality; value; satisfaction; purchase intent; purchase consideration; "buzz" (ie. whether they are being talked about); and reputation.

    Now the UK's largest multichannel supplier of trade tools, plumbing, electrical, bathrooms and kitchens, Screwfix rose in the ranks to fifth place for buzz and scored higher than B&Q for satisfaction.

    Screwfix's bricks-and-mortar store growth over recent years, together with its strong online presence and click-and-collect offer, has contributed to its consistently high scores for value and recommend. These scores continue to climb year on year, according to Ikano Insight.

    Offering everything from health and beauty to home and garden, Wilko has felt the pressure of discount stores B&M and Poundland entering the market. But despite the impact on market share, Wilko is still favoured by many consumers and has now reached the number one position for value. Wilko also holds the top ranking for satisfaction, and has seen growth in its recommend and buzz scores too.

    As one of Britain's fastest-growing suppliers of tools, accessories and building supplies, low-cost retailer Toolstation rose in the ranks to fourth position on satisfaction, ahead of both B&Q and Wickes. Toolstation has also seen an increase in its buzz score, again performing ahead of B&Q and Wickes.

    Although Toolstation's score for value is lower than its key competitors, Ikano Insight predicts that in 12 months time, the retailer will be placed amongst the top five.

    Also appearing in the top 10 are Habitat, Home Bargains, Lakeland, George at Asda, Marks and Spencer, Booths Supermarkets and Waterstones. Ikano Insight head of sales and marketing Barry Smith said:
    Some people might be surprised to see so many hardware stores in the list -- but our study shows they are leading the way when it comes to customer satisfaction and value.

    The Alternative Superbrands list aims to profile the achievements of top-performing UK brands, and it has been released to coincide with the annual Consumer Superbrands list. Read more about the list of alternative superbrands here:
    2016 Ikano Insight Retail Alternative Superbrands
    Retailers
    True Value Company shows progress
    True Value Company reported a revenue increase of 1.3% or USD18.6 million for 2015
    True Value Company
    Destination True Value comparable store sales were up 4.7%
    Miami Home Centers converted to True Value in 2015
    Click to visit the ITW website for move information
    US retail co-operative True Value Company has reported revenues of USD1,497.2 million, an increase of 1.3% or USD18.6 million, for the fiscal year ending January 2, 2016, on a comparable 52-week basis.
    True Value Company's year end results

    Total gross billings of USD2,033.2 million up 2% or USD39.3 million compared to the prior year, on a comparable 52-week basis. When comparing the 52-53-week fiscal year, reported revenue increased 0.1% and gross billings were up 0.9%, respectively. President and CEO John Hartmann said:
    Our 2015 results demonstrate that True Value is investing in the future of the co-op for its members as we continue to focus on the strategic pillars of engagement, growth and efficiency.

    Destination True Value (DTV) comparable store sales were up 4.7% for the fiscal year.

    The company also experienced its fifth consecutive year of increased annual sales as retail comparable store sales were up 3.1% with increases across all product categories, led by Farm Ranch Auto & Pet, Lawn & Garden And Hand & Power Tools.

    Wholesale comparable store sales, on a gross billings basis, were up 1.8% for the year.

    The cooperative said it planned for a decrease in net margin in 2015, posting a net margin of USD19 million for the year, driven by investment expense in relation to the implementation of the company's strategic plan. Hartmann explained:
    There has been a compelling amount of progress made in support of the plan as evidenced by our members' success. In 2014 and 2015, our growth averaged 3.5% on a gross billings basis -- well above the historical levels. And for the five years prior to the start of our plan, retail sales averaged less than 1%.
    In 2015, retail sales increased 3.1% and DTV stores increased 4.7%. The work we are doing is making a difference and that is where our focus remains.

    The company has been making long-overdue investments in programs such as customer service training and the rollout of the Roadmap to Retail Excellence, a tool to help diagnose and guide what actions retailers can take to achieve their goals.

    My True Value - A New Customer Experience[tm] is helping members train their staff to create defining moments with customers. To date, over 1,000 store owners and their associates have become "chat" certified. This means they are on their way to providing those defining moments that create loyalty with customers.

    DTV is a proven format that has consistently provided returns for many True Value members. In 2015, the co-op announced a more flexible, affordable DTV making it easier for members to update their stores. During the year, the company added nearly a million square feet of DTV retail space. Store owner CC Gibbs of Gibbs True Value said:
    The momentum we have after implementing DTV has changed our lives and our business. We see young people shopping our store rather than going to the big box stores, and we are now more profitable than we ever thought we could be.

    In addition to expanding relevant formats in its network, a number of multi-store chains converted to True Value in 2015 including Busy Beaver, Miami Home Centers and National Lumber. Dan Hitchcock, owner of Miami Home Centers said:
    Becoming a part of the True Value family and having access to exclusive brands further supports our competitive edge. One of the primary drivers of converting to True Value was being able to offer our customers their private label paint Easy Care.

    Transitioning True Value's fleet to Ryder Integrated Logistics means there are now dedicated fleet services to support deliveries from True Value's regional distribution centres. Changing to Ryder provided big savings to help stabilise delivery costs and the long-term sustainability of high touch delivery. The retailers said new trucks, technology and a larger driver pool should advance its journey to best-in-class service. Hartmann said:
    Momentum is building at True Value, and we are focused on serving our membership rather than allowing the membership to serve the co-op. We are at a pivotal time in our history, and are navigating a transformational path towards greater member growth and profitability. And we're just getting warmed up.

    Related:
    True Value looks to women, millennials - HNN
    Growth and loss for True Value in Q1 - HNN
    Companies
    The smart home moves outside
    The Gro Connected Yard platform allows users to set goals for their garden
    Scotts Miracle-Gro
    The app will track recent weather and rainfall, and local soil types
    Scotts has been working with water sensor and controller manufacturers to integrate their products with Gro's platform
    Subscribe to HNN weekly e-newsletter
    Scotts Miracle-Gro is teaming with a number of technology providers and creating its own app and software platform to bring home automation to the outdoor space.

    The company recently introduced its Gro Connected Yard online platform and app at South by Southwest (SXSW), an annual set of film, interactive media, music festivals and conferences that take place in Austin, Texas.

    Gro will track recent weather and rainfall, local soil types, and offer plant recommendations and maintenance instructions based on that information.

    The app will allow users to set goals for their garden, regardless of whether they have a huge yard or a tiny apartment balcony to work with. It will provide step-by-step instructions over days and weeks. The tips are tailored to the user's location, weather reports and data received from an accompanying range of internet-connected sensors, that do things like check the health of plants.

    To optimise the platform, Scotts has been working with other water sensor and controller manufacturers to integrate their products with Gro and provide more data about the garden's conditions.

    The "Works with Gro" program is launching with products from Blossom, Rachio, Green IQ, Lono, PlantLink and Parrot. Their hardware feeds information into Gro software, making it even more aware of the condition of the yard, starting at first by focusing on water usage.

    These technologies enable the careful monitoring and control of watering levels, adjusting for the soil's moisture content and the weather forecast.

    Scotts also plans interactive installations in retail outlets that will sync with the Gro app and help users buy exactly the right gear. The app will guide them to the specific shelf in the store.

    The company hopes that the Connected Yard will help get more millennials into gardening by offering a 21st century approach to a pastime that can seem overly complicated to beginners. Chief digital and marketing services officer, Patti Ziegler said:
    Gro welcomes everyone into the garden...Our Gro application will suggest interesting and fun project ideas. We will give people advice on what to do, and how to do it, based on their exact location and the time of year. We will increase the ability of all gardeners, but particularly new gardeners, to succeed in having healthy lawns, gorgeous flowers and shrubs, and tasty home-grown vegetables.
    Previously complex tasks will be presented as bite-sized, highly visual, personalised instructions. We will offer the same type of advice a friendly, expert gardener would suggest, if they lived next door. We will give people the confidence to try new things.

    The Connected Yard is an open platform, and Scotts Miracle-Gro is eager to align with companies and particularly start-ups in the smart water and gardening space who want to connect their hardware solutions to Gro.
    Products
    Garden tools for US spring
    Ames Companies has introduced a new line of garden tools
    Green Industry Pros
    The Stand-Up Weeder has a patented design that easily removes weeds at the root
    The Garden Tiller has a patented head design and features six innovative tines
    Click to visit the HBT website for more information
    The Ames Companies has introduced a new line of garden tools under its Ames brand in time for the spring season in the US. They can provide a sneak peak of what is to come for the Australian market.

    The Spike Aerator is the "secret weapon" to improving lawn health. Its all-steel, multi-spike design should provide optimal soil penetration. This allows water, air and fertiliser to achieve faster root access. It is a suitable tool for hard soils and comes equipped with a footstep and a strong, U-shaped steel handle for added leverage.
    The Spike Aerator

    The Stand-Up Weeder has a patented design that quickly and easily removes weeds at the root with no physical bending or divots of damage to turf. This tool also aerates the soil for a healthy lawn and features an ejection slide action for easy release of weeds. Made of durable steel and lightweight poly, this tool is ideal for eliminating weeds without chemicals.

    The Garden Tiller has a patented head design with six innovative tines for optimal soil aeration and turnover. This tool allows air, water and fertiliser to mix and penetrate the ground which can result in a healthy garden. Its large, non-slip footsteps offer added leverage when breaking up hard, compacted soil or mulch. The tool also has a wide, T-handle, which provides a comfortable grip.

    The Landscape Border Edger is useful for creating clean borders around beds and walkways. The arched, serrated steel blade cuts through grass and turf in one step and is able to create straight or curved trenches for custom-shaped beds. A footplate provides consistent cutting depth. This tool works well to create clean, finished edges along driveways, flower beds and sidewalks.
    The Landscape Border Edger

    The Garden Cultivator features a cast metal head for increased strength and durability. There are six rotating, detachable tines that can effortlessly penetrate soil to accommodate tilling around and in between rows with ease. Its ergonomic steel handle design can also minimise fatigue, and its cushioned grip provides a comfortable and sturdy hold.

    The Planting Auger makes planting bulbs and annuals fast and easy from an upright position. It attaches to a power drill, which does the digging, and its all-steel design ensures strength and durability.

    Related:
    Garden and Tools trading as Cyclone Tools - HNN
    Products
    Easy control blinds
    Luxaflex PowerView represents the future of window covering automation
    St Mary Star
    PowerView motorisation will launched in Australia in May
    PowerView is compatible with most home automation systems available today
    Click to visit the HBT website for more information
    Luxaflex Window Fashions are welcoming the next generation of wireless technology with its new PowerView motorisation, which allows homeowners to control their blinds with the press of a button.

    The latest product can be controlled via smart devices. It lets homeowners schedule personalised settings that will activate automatically.

    National marketing manager, Jenny Brown, said PowerView is compatible with most home automation systems available today. She said:
    The house of the future is here right now. PowerView fits into most home automation systems and its purpose is to simplify your life. It is now possible to raise the garage door, position the blinds to maximise privacy at night and have your favourite music playing, all at the touch of a button.

    Homeowners can create "scenes" to balance different lighting and privacy needs and adjust window coverings for temperature and security. This can be done from across the room or across the world, using the PowerView app. Brown said:
    By pre-programming different scenes for various times of the day -- such as 'winter breakfast' which can raise your blinds to invite in the winter sun, or 'hot afternoon' to lower shades and minimise heat transfer, it is taking very sophisticated technology and making it extremely easy to use.
    As the blinds are cord-free, they look modern and are safe for pets and children. It's never been easier to find the perfect combination of light, privacy and warmth to keep your home perfectly in sync no matter the time of day or the season.

    Luxaflex PowerView will be launched in May.
    Bigbox
    Testing virtual home renovations
    Lowe's is testing Microsoft's HoloLens virtual reality technology to help consumers with kitchen renovations
    Digital Trends
    The in-store trial provides a peek of what home renovations will look like in the future
    The HoloLens augmented reality visor will be available in a select number of Lowe's stores
    Click to visit the ITW website for move information
    Lowe's is partnering with Microsoft to provide customers with holographic representations of redecorating and renovation projects, starting with the kitchen. The home improvement retailer will first use Microsoft's HoloLens augmented reality visor in a few pilot stores in Seattle. After that, it will begin another pilot program in North Carolina, where Lowe's headquarters is based. Scott Erickson, general manager of HoloLens at Microsoft, said in a blog post:
    From within the nearly empty square frame of a showroom kitchen, customers can completely change the look and feel of that space...

    Using HoloLens' holograms, Lowe's customers will be able to select faucets, the size of their kitchen islands, and different design options for their remodels -- without having to actually assemble them. They can experience a holographic representation of a completely new kitchen.

    That way, if they don't like the look of a new black fridge, they can swap it out for stainless steel or something else. It takes the pain out of buying something they don't like and having to take it back to the store to return it.

    It's an interesting, introductory use case for augmented reality devices like the HoloLens that may resonate with the average customer and not just tech geeks.

    With HoloLens technology, shoppers can also check out kitchen cabinetry, countertops, appliances and features like backsplashes, in a visually rich and interactive way, according to Microsoft.

    They can view kitchen furnishings in size and scale with high-definition options and detailed finishes. Microsoft said the holographic details are rich enough to let users see the differences between shiny chrome appliances versus matte brushed aluminium options.

    The shopper uses a hand-held Surface tablet to manipulate the scene and share it with in-store designers, family or friends.

    According to Retail Dive, home improvement could be a natural application for virtual reality because remaking a room tends to be a big, expensive task consumers want to get right the first time. And beyond its practicality, there could be a "buzz" to virtual kitchen design that should get Lowe's shoppers talking.

    The HoloLens tool brings Lowe's efficiencies, too. Stores can install a single HoloLens station to save on floorspace and still offer a full range of design services, even in smaller, urban locations. Microsoft sees the technology eventually allowing consumers to map entire renovations without ever visiting a store -- but a retail partner would still need to supply the physical goods.
    Lowe's, Microsoft team up on virtual home renovation tool - Retail Dive

    Related:
    Lowe's 3D room makes renovation a (virtual) reality - HNN
    Companies
    Online strategies for home improvement
    The Home Improvement eRetailer Summit is focused on strategies to increase online sales
    eRetailer Summit
    It will be held at the Hilton Fort Lauderdale Beach Resort, October 26 to 28, 2016
    The event will bring manufacturers, distributors, and pre-qualified online retailers together
    Subscribe to HNN weekly e-newsletter
    A symposium has been created specifically for the retail home improvement industry to put together strategies that can maximise revenue in an increasingly online environment.

    The eRetailer Summit is a top-level conference for retailers doing business online. The event will provide a forum for them to collaborate with progressive vendors and distributors to create new partnerships. It will be held at the Hilton Fort Lauderdale Beach Resort from October 26 to 28, 2016 in Fort Lauderdale, Florida USA.

    Over a day and a half, a select group of e-retail executives and buyers will develop their business ambitions and game plans with suppliers. The event will combine one-on-one meetings; knowledge shared directly from online retailers; leading keynote speakers; seminars that will clarifying confusing topics; and genuine networking in an intimate setting.

    The goal? To raise the bar in home improvement sales online. Michael Hargrave, divisional merchandise manager for online tools at Sears.com and Kmart.com said:
    The eRetailer Summit will provide a great opportunity for internet retailers and hardware/home improvement manufacturers to gain beneficial knowledge of the dynamic workings of e- commerce.

    Sonya Ruff Jarvis, manager, Jarvis Consultants, is mounting the event in partnership with Canadian-based Hardlines Inc. She said:
    In this industry, e-retailers are moving together to make home improvement online a more powerful presence. By bringing together a focused group of high-calibre retailers,...we're creating an environment for these retail leaders to share their goals for growing online sales with select supplier partners.

    The Home Improvement eRetailer Summit is an invitation-only event. To find out more, go to:
    Home Improvement eRetailer Summit, October 2016
    Companies
    Hitachi-Koki kickstarts 2016
    The high-torque drill from Hitachi
    Hitachi-Koki
    Chart of regional results for Hitachi-Koki Q3 FY 2015/16
    Corded impact wrenches from Hitachi
    Subscribe to HNN weekly e-newsletter
    Japanese-based power tool and life-sciences equipment company Hitachi-Koki has started out 2016 with some prominent product news. The company won the prestigious IF Design award for three of its power tool products. It has also launched a new, high-torque cordless Li-ion drill, which comes with a new 6.0 amp-hour Li-ion battery.

    While this is all positive news, Hitachi-Koki has also released its results for the third quarter of its FY 2015/16, which indicates some slowdown in sales for the company during this quarter. Consequently, the company has also revised its sales forecast for Q4 2015/16 down as well.
    Q3 FY 2015/16 results

    While the overall results for Hitachi-Koki in the first nine months of its FY 2015/16 showed an improvement over the first nine months of 2014/15, the underlying numbers for the third quarter itself showed some sharp declines.

    Sales for the third quarter of FY 2015/16 were YEN32,914 million, an increase of 2.11% over the previous corresponding period (pcp), which was third quarter 2014/15. However, the company's operating income for the quarter was YEN527 million, down by over 62% over the pcp. Net income for the quarter was YEN509 million, down by over 33% on the pcp.

    The numbers indicate that the company had a very robust first half for FY 2015/16, but has suffered some setbacks in the third quarter. Sales have increased but profit measures have not performed as well. This could indicate that it has undertaken some discounting activity in some markets to continue to expand its overall market share.
    Power tool division performance

    The power tool division returned revenue of YEN32,402 million for the third quarter. The life-sciences division contributed revenue of YEN1117 million for the same period.
    Regional performance nine months to date

    Outlining its regional performance for the nine months of the first three quarters of FY 2015/16, Hitachi-Koki states that it maintained sales levels in its home Japanese market, despite a drag created by local economic factors.

    It states that it saw sales increase throughout much of Europe, but suffered a major slump in sales in the Russian market, in part due to a steep depreciation in the Russian currency, the rouble. The result was an overall decline of 9% in sales for Europe. Despite this, Hitachi states that sales in local currency for Russia actually increased by 5% over the nine months of the first three quarters.

    North American results showed positive trends. Sales increased by 31% for the nine months. Hitachi-Koki attributes this to both positive moves in currency exchange rates, and its developing relationship with the US big-box home improvement chain Lowe's. Much of its sales growth at Lowe's has originated with pneumatic tools marketed to the building trades.

    Outside Japan in Asia, India returned solid results, but overall results fell by 6% over the nine months. This was the result of reduced sales in Australia, China and Thailand.

    Additionally, the company incurred expenses for its merger and acquisition activity related to the European power tool company Metabo.
    Regional performance for quarter

    Hitachi-Koki does not provide comment specific to its quarters, but does provide financial information for each quarter. Looking at the financial results for the third quarter of FY 2015/16 alone, sales in Japan were essentially flat at YEN10,371 million. Sales for Asia (outside Japan) declined by 19% over the pcp to YEN2665 million. Sales for Europe declined by 8% over the pcp to reach YEN9349 million. Sales in North America grew by 34% to reach YEN9481 million.

    Hitachi-Koki reports ongoing positive results for its operations in North America, buoyed both by increases in sales, and the appreciation of the USD in relation to the YEN. In the remaining geographies, Hitachi-Koki reported a fall of 25% in revenues, down to YEN1460 million.
    Chart of regional results for Hitachi-Koki Q3 FY 2015/16
    Forecast

    In response to the difficulties the company faces in some markets, Hitachi-Koki has revised its forecast for Q4 FY 2015/16 downwards. It is now projecting revenue for all of FY 2015/16 to come in at YEN141,500 million, 2.4% down on its prior forecast. Operating income is now forecast to be YEN2000 million, down by over 70% on the prior forecast.
    Hitachi-Koki IF Awards

    Hitachi-Koki was privileged to receive FI Design awards for three of its power tool products in February 2016. The products that received the awards were: the DH40, DH45 and DH52 series rotary hammers, the WR22 and WR25 impact wrenches, and the UR18DSDL worksite cordless radio.
    Rotary hammers

    These rotary hammers are quite unique to the market. While they are corded products, they feature an AC brushless motor, which provides a high-power rating and also reduces maintenance needs (brushes do not need to be replaced).

    The motors also provide smooth performance, even when operating in a low-power situation created by the use of inefficient extension cords. They also feature a vibration absorber, which reduces operator fatigue on lengthy demolition projects.
    Hitachi DH40MEY Rotary Hammer
    Impact wrenches

    The 22mm WR22SE and 25mm WR25SE impact wrenches also make use of brushless motors in corded tools. Hitachi claims that these wrenches and the smallest and lightest in their class, in part due to their use of an aluminium housing for the tool. The WR22SE weighs 4.6kg and is 280mm long. The larger WR25SE weighs 7.7kg (1.3kg than the tool it replaces) and is 340mm in length.
    Corded impact wrenches from Hitachi
    Worksite cordless radio

    Hitachi's UR18DSDL cordless radio features a unique triangular design that looks like it makes the radio virtually tumble-proof. It can operate on both 18v and 14.4v batteries, and provides access to DAB/DAB+ and FM radio. It also functions as a Bluetooth speaker which can link to smartphones and other devices.

    The radio has two seven-Watt speakers, and is designed to withstand five minutes exposure to rain, making it waterproof against most worksite splashes.
    Cordless radio from Hitachi
    The new big drill

    In addition to its six amp-hour battery, released first in Japan at the end of 2015, Hitachi is now also distributing a new, powerful brushless hammer drill in the UK market. The Hitachi 18V Brushless Hammer Drill DV18DBXL/JX features a very powerful 136 N*m of torque, putting in the same ranks as the top Milwaukee FUEL tools. The drill is 204mm and weighs in at 2.5kg.

    It is currently being sold in a kit with the 6.0 amp-hour battery, which has a claimed fast charge time of just 38 minutes. It comes with 22-stage torque settings, a built-in worklight, and what Hitachi is calling "Reactive Force Control", which helps protect the user from kickback.

    Power Tool World is the UK is selling the drill kit, complete with two 6.0 amp-hour batteries and a fan-cooled rapid charger for GBP289.
    Hitachi DV18DBXL/JX hammer drill
    Metabo acquisition complete

    On 1 March 2016 Hitachi Koki completed its acquisition of Metabo, a power tool company based in Nurtingen, Germany. The president of Hitachi Koki, Osami Maehara, was clear in a press statement that Metabo was to retain its own identity, despite the acquisition:
    We have the greatest respect for the outstanding results the Metabo team has achieved in recent years. We will therefore not only retain Metabo as a distinct brand, but also run the business as a company within the company and allow it the necessary independence to continue this success in the future.

    The CEO of Metabo, Horst Garbrecht, pointed to the synergies and shared competence of the two companies:
    Given that battery technology is plainly the big topic for the future in our market, being able to utilise synergies in the development of cutting-edge drive and battery systems, and pooling in procurement are key factors that will boost our competitiveness.
    CEO Metabo, Horst Garbrecht (l), president Hitachi Koki, Osami Maehara (r)
    Conclusion

    In addition to the above news, Hitachi has also recently announced the closing of Hitachi Koki Europe Ltd, a manufacturing plant in Ireland. According to a company press release:
    Since it relied upon assembly of imported components from Southeast Asia and China, its operation has gradually been affected by the financial crisis after the bankruptcy of Lehman Brothers, depreciation of Euro under the European credit crisis, and recent economic downturn in Russia. These series of events have affected total order volumes as well as overall productivity of the company. Under such circumstances, we finally determined to close Ireland plant, as a part of structural reform. The production of this plant will be transferred to plants in Malaysia and Fujian, China, to increase the cost competitiveness of the products.

    While Hitachi-Koki is taking steps to ensure its supply chain remains as efficient as possible, the company is also, through the Metabo acquisition, anchoring itself to a four-year strategy based on the European market recovering substantially. This is an emerging theme in the home improvement and construction industries, with Wesfarmers' purchase of the UK home improvement retailer Homebase, for example, indicating a similar strategy.

    In Australia, the brand is likely to suffer some setbacks from the exit of Woolworths from the home improvement industry, as it makes moves to sell-off its Masters Home Improvement retail operation. While it has widespread distribution through other outlets, it will be left with somewhat limited exposure to the consumer market. This is in sharp contrast to its market exposure in the US, where items such as its compound mitre saw (for example) compete in the higher-end of the DIY market with tools from SKIL and Kobalt.
    Lowe's online mitre saws
    Products
    Cordless high-torque fastening tools
    Makita's 18v 3/4" square drive impact wrench is ideal for iron and steel workers
    LBM Journal
    The 18v 1/2" square drive impact wrench is useful for automotive mechanics
    Makita's 18v 7/16" Hex Impact Drill can deliver for electricians
    Click to visit the HBT website for more information
    Makita's latest 18v LXT(r) brushless cordless impact tools are designed to meet and exceed corded demands, according to the company. The new products added to this range include the 3/4" Square Drive Impact Wrench (XWT07M/Z), 1/2" Square Drive Impact Wrench (XWT08M/Z), and 7/16" Hex Chuck Impact Drill (XWT09T/Z). Makita said all three models deliver the highest fastening torque in their categories. Adam Livingston, senior product manager - cordless products, Makita USA said:
    With these new high-torque cordless impact wrenches, a contractor can put down their much heavier corded impact wrench and go cordless for the most demanding fastening applications.

    The newly released 18v LXT brushless high torque impact wrenches are part of Makita's expanding 18v Lithium-ion series that will exceed 125 tools in 2016. Makita said it is the world's largest cordless tool line-up powered by 18v Lithium-ion slide-style batteries. The company also said its 18v Lithium-ion batteries have the fastest charge times in their categories so they spend more time working and less time sitting on the charger.
    3/4" Square Drive Impact Wrench (XWT07M/Z)

    The 18v LXT Lithium-ion Brushless High Torque 3/4" Square Drive Impact Wrench includes a 3/4" anvil with friction ring and thru hole retention system for maximum productivity. The XWT07M/Z delivers 780ft.lbs. (1057.54 N*m) fastening torque and 1,250ft.lbs. (1694.77 N*m) breakaway torque. The electronic 3-speed power selection gives users precise fastening control for a range of applications. The Makita brushless motor is engineered for longer run time, increased power and speed, and longer tool life. Additional features include all-metal gear housing with rubber overmold, rubberised soft grip, built-in dual LED lights, and less weight (only 8.1lbs. or 3.67kgs with battery). It is ideal for a range of users such as iron and steel workers to pipe fitters, railroad and automotive mechanics and forming contractors.
    1/2" Square Drive Impact Wrench (XWT08M/Z)

    The 18v LXT Lithium-ion Brushless High Torque 1/2" Square Drive Impact Wrench includes a 1/2" anvil with friction ring. The XWT08M/Z delivers 740ft.lbs. (1003.31 N*m) fastening torque and 1,180ft.lbs. (1,599 N*m) breakaway torque. Similar to the previous model, there is an electronic 3-speed power selection. Other features include all-metal gear housing with rubber overmold, rubberised soft grip, built-in dual LED lights and weighs just 7.9lbs. or 3.58kgs with battery. It is useful for iron and steel workers, pipe fitters, railroad and automotive mechanics and forming contractors.
    7/16" Hex Chuck Impact Drill (XWT09T/Z)

    The 18v LXT Lithium-Ion Brushless High Torque 7/16" Hex Impact Drill delivers 590ft.lbs. (799.93 N*m) drilling torque. The electronic 3-speed power selection is the same as the other models. The tool hook and hanging ring provides added convenience. Similar to the previous models, it has all-metal gear housing with rubber overmold, rubberised soft grip, built-in dual LED lights, and weighs 8.1lbs. or 3.67kgs with battery. It is ideal for linemen and electricians installing and maintaining power lines as well as wood boring.
    Star Protection

    For improved tool performance and extended battery life, the 18v LXT brushless high torque impact wrenches have Star Protection Computer Controls[tm]. Star Protection is a communication technology that allows the Star Protection-equipped tool and battery to exchange data in real time and monitor conditions during use to protect against overloading, over-discharging and overheating. They can be powered by Makita 18v LXT and compact Lithium-ion batteries with the star symbol on the battery that indicates Star Protection inside. They include 18v Lithium-ion 2.0Ah, 3.0Ah, 4.0Ah, and 5.0Ah batteries.
    Companies
    App for "easy" tradie payments
    Payments to tradies can be made in a "seamless" way through the hipages app
    IT Wire
    Hipages partnered with PromisePay to develop the payments feature
    PromisePay creates fast, safe and simple online and mobile payments
    Subscribe to HNN weekly e-newsletter
    Online home improvement services marketplace, hipages, has launched an app that will allow payments to tradies in a "seamless" way because it utilises WhatsApp-style messaging and Uber-like payments.

    According to hipages, the new app will offer payment choice and a better user experience. Customers will have the option to pay tradies using credit cards with a single tap on the app. David Vitek, co-founder and CEO of hipages, said:
    ...You can pay for the service directly through the app, chat with tradies instead of playing endless phone tag, and have a frictionless process from start to finish.
    It's faster and safer to book any job around the house now. There are already 100,000 messages each month between users and tradies in the app, making quoting and scheduling much quicker for anyone. Tradies can even quote based on descriptions and photos without a site visit, making the process more efficient through smart technology.

    Vitek also said that nearly two in three (60%) tradies do not currently accept credit cards, because the technology to do so is cumbersome and expensive. Australians want an easier way to pay a tradie that gives them more choice. This ensures trust, security, and fast confirmation with every payment. He added:
    There are already over 1.5 million Australians using hipages, with a job posted every 29 seconds. People are no longer relying on that old fridge magnet to find a tradie, or worse yet, the giant pile of yellow coloured pages. Instead, they are benefiting from verified reviews, on-demand connection with tradies, and speed of communication to find the right tradespeople.
    Partnership

    Hipages partnered with Australian startup PromisePay to develop the payments feature. Vitek said:
    Integrating payments with the PromisePay platform is a great way to make it faster, simpler, and more secure. Hipages will also automatically issue a receipt of the transaction for peace of mind.
    Our mission at hipages is to make any home improvement job as easy as catching a ride with Uber, and payments are a crucial element of delivering this experience.
    ...
    This is just the beginning. We see a world where you can easily pay deposits in escrow, schedule monthly payments to the gardener, apply for loans, and more, all with just the tap of a finger.

    Hipages said Australians pay for around $130 billion in home improvement services annually. It claims to be the number one website for finding and hiring tradespeople, with over 70,000 registered and verified tradies on the platform, and over 80,000 jobs posted per month.

    The updated app is free and available on the Apple iTunes store and the Google Play store.
    About PromisePay

    PromisePay creates fast, safe and simple online and mobile payments. Simon Lee, co-founder and CEO of PromisePay, told Startup Daily:
    With PromisePay's instant onboarding, tradies can sign up and start transacting within minutes - no more fumbling over cash or chasing invoices.

    Since its launch in 2013, PromisePay is now active across the US, Australia, and New Zealand. The company reports growing its revenue 25% month on month in 2015, and doubling the number of direct sign ups every quarter.

    The Melbourne-based startup offers a smooth transactional experience by removing the need for people to pay cash. While a cashless model seems like an easier alternative, establishing user trust and validating people are who they say they are remains a major issue.

    PromisePay has devised a system that conducts background checks to enable identification and authentification of each customer and business owner. Lee said:
    Simply accepting online and mobile payments is only the tip of the iceberg. There are a plethora of complex problems hidden behind payments that have seen platforms build large payments teams and implement expensive tools to manage them.
    Products
    A zero turn mower with backbone
    Gravely's ZT-X Zero Turn Mower is constructed from welded, tubular steel
    HNN Sources
    A view of ZT-X mower in parts
    The Gravely ZT-X combines industrial grade strength and comfort
    Click to visit the HBT website for more information
    Gravely's ZT-X Zero Turn Mower is built on a highly durable single piece frame, constructed from welded, tubular steel. Welded steel is considerably stronger than bolted steel, and can drastically increasing the mower's life span. This trademark Gravely toughness is backed by a 5-year warranty.

    Durability can often rule out practicality and comfort but the ZT-X sets out to prove that theory wrong. A high-back, plush seat with padded armrests offers full support, reducing lower back pain. Changing the height of the ZT-X's cutting deck has also become very easy, with a dial and pedal based mechanism taking the strain and awkwardness out of this function.

    The ZT-X is easy to start, and powered by a rugged Kohler 7000 Series Engine with Smart-Choke[tm] technology and a Pro Filtration package. With Smart Choke, all users need to do is simply turn the key before heading off.

    Mowing the lawn does not have to feel like a chore anymore. The Gravely ZT-X is a zero turn mower that combines industrial grade strength, with comfortable extras to create a mower users can enjoy spending time on.
    News
    HI News Vol. 2 No. 5
    Download the latest HI News, issue number five
    HI News Vol. 2 No. 5
    Techtronic Industries (TTI) continues to deliver growth
    Sherwin-Williams acquires Valspar, from the Australian perspective
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/hinews-2-5.pdf

    The latest issue centres on the latest results from TTI Industries and how the company with its major brands Milwaukee Tools, Ryobi and AEG will explore a digital future. It discusses other categories such as hand tools, lighting and floor care that the company is involved in. There is also a transcript of the presentation delivered by CEO Joseph (Joe) Galli.

    In the "Paintorama" section, we take a look at the most recent results from paint companies Valspar, Sherwin-Williams, PPG Industries and AzkoNobel. The story on Sherwin-Williams' acquisition of Valspar is taken from the perspective of the Australian market and what it means for local hardware retailers.

    Other stories include a list of the award winners from Home Timber & Hardware Group's conference and there is another extensive roundup on big box retail activities.

    The tiny house trend is featured along with BIS Shrapnel's report on the apartment boom that seems destined to go bust. Australian company PlantMiner is disrupting the construction industry and Brickworks announces its first half results.

    The regular update on job opportunities highlights roles at AEG Power Tools, PPG and Yates.
    Companies
    Valspar Q1 2015/16 results slide
    Valspar results for 2016 Q1
    HNN Sources
    Four quarter comparison of Valspar sales
    Projected margin growth the Valspar's Australian operations
    Subscribe to HNN weekly e-newsletter
    US-based paints and coatings company Valspar has reported reduced earnings for the first quarter of its FY 2015/16. While broadly inline with guidance and expectations, sales and earnings were tipped lower by a combination of circumstances.

    Overall company sales came in at USD885.8 million, a decline of 12.7% over the previous corresponding period (pcp), which was the first quarter of FY 2014/15. The company reports results separately for two segments: paints and coatings. Sales for paints were USD291.1 million, down 19.7% over the pcp. Earnings before interest and taxation (EBIT) for paints was USD4.5 million for the quarter, a fall of 28.2%.

    Valspar reports that product line performance showed percentage decline in volume and sales (without the effects of foreign exchange fluctuations) in the double digits for North America and Asia, while in Australia percentage volume declined at double digits, but percentage sales declined at only a mid-single digit rate. In his remarks during the analyst presentation, the company's chief financial officer, Jim Muehlbauer, indicated that overall paints volumes declined by 20% and sales declined by 15%, excluding fluctuations in exchange rates.

    Sales for the coatings part of the business were USD 543.6 million, down 9.9% on the pcp. EBIT for coatings was USD96.8 million, an increase of 6.4%.
    Valspar results for 2016 Q1

    In his opening remarks at the presentation of the results to analysts, the company's chief financial officer, Jim Muehlbauer outlined several basic causes behind the poor numbers Valspar produced for the quarter.

    The first set of causes were ones that were outlined by Mr Muehlbauer in his remarks on the previous quarter (fourth quarter of FY 2014/15). A Valspar-provided transcript of that event shows him as stating the following:
    The first quarter will be our most challenging period during the year from a comparison perspective. This is driven by several factors. First, the US dollar strengthened as we move through fiscal 2015. Therefore, we currently expect the biggest FX headwinds to occur in Q1.
    Second, as you know, we have one more quarter until we fully annualise the impact of the change at Lowe's. Third, we are facing difficult comparisons in the coatings segment when volumes were up 10% in the first quarter of fiscal 2015. And finally, interest expense in Q1 will be up year-over-year, driven purely by the timing of our bond issuances in 2015.

    "The change at Lowe's" refers to US-based big-box home improvement retailer Lowe's de-ranging Valspar's premium paints in favour of those of Sherwin-Williams, a change that took place as of March 2015. Annual sales losses for Valspar at the time were calculated as being around USD170 million.

    Added to these predicted negative factors is what Valspar has described as an incremental downwards adjustment in the inventory of its paints held by retailers in North America. Mr Muehlbauer also stated that the double-digit percentage growth of volumes in Asia and Australia for the pcp also helped to make the current performance seem poor by comparison.

    On a more positive note, sales were boosted by the company's acquisition of Quest Specialty Chemicals, Inc. in mid-2015. Valspar also reported that its new channel in Europe, with sales through Kingfisher's B&Q, were going well. Valspar's CEO, Gary Hendrickson, also expressed some optimism for the development of sales through the cooperative Ace Hardware chain in the US:
    Ace is on track. The key dimension of the Ace program that we talked about last year that we needed to improve was the penetration of the Valspar brand into the overall mix of paint that's sold in Ace stores. That's improving. That's been on a good trend and we're about 500 basis points higher in that penetration today than we were at this time last year.

    The company also reported that sales volume had increased in its channels outside of Lowe's.

    The company sought to minimise the impact of factors such as the inventory decline on the overall performance of the company. In responding to an analyst's question, Mr Muehlbauer said:
    I mean, it's Q1 we're outside of paint season. It's not unusual for us or others to have small changes at inventory between the quarters. Key thing for us is that our sell-through plans for the quarter came in line with expectations. Outlook for the balance of the year hasn't changed. So, we know that, as time goes on, inventories will match sell-through to keep product availability where it needs to be with our retail partners. So, you're going to have these timing adjustments once in a while. And we look forward to those inventories returning back to more normalised levels.
    Masters and Valspar

    Asked by an analyst what the impact of the sale of Masters by Woolworths would be on Valspar, Mr Hendrickson replied:
    On a total company basis, Bob, it's de minimis. For the Australia consumer business, it was about $20 million of sales last year. So -- also, the de minimis impact, given what we can do in terms of restructuring to deal with the smallish loss. So no impact in Australia that's of significance. Absolutely no impact to the corporation.
    And let's see what happens. I mean, it's not -- I don't believe that a decision has been made to shutter the doors on Masters. We're still supporting them. We're still selling them paint. And we're in a wait -and-see mode like everyone else is.

    It is worth looking back to Valspar's unusual 2014 Investor Day presentation to see what high hopes the company did have at one time for its relationship with Masters. This is a slide from that presentation:
    Projected margin growth the Valspar's Australian operations
    B&Q

    Asked about how the relationship with B&Q was progressing, Mr Henrickson replied:
    Both we and B&Q are extremely pleased with the progress that we've made. And we thus far believe that this is a replicable program through other parts of the Kingfisher organisation. And I'll just say that I think if we continue to execute well, we'll be given the opportunity.
    Analysis

    While much of what Valspar has to say about its market conditions, and the unfortunate concurrence of a range of events which have decreased its earnings for this quarter, the overall picture shows a company that is not yet performing brilliantly. Looking back over the previous four quarters (which are the quarters affected by the loss of some business to Lowe's), and comparing that to the four quarters before that, we get the following chart:
    Four quarter comparison of Valspar sales

    Sales for the previous four quarters (year-to-date) come in at USD4263.6, and for the four quarters prior to that at USD4661.2, meaning there is a USD398 million decline. If we take out the 6% of adverse effect from currency fluctuations, sales would have been USD4519.4 million, down by USD142 million on prior four quarters.

    While in the end projections are not that relevant, as Valspar is in the process of being acquired by Sherwin-Williams, the indications in these results would be that it would have taken more than a couple of years for Valspar to recover from its loss of the Lowe's business.
    Companies
    Sherwin-Williams posts record year
    Sherwin-Williams results FY 2015
    Sherwin-Williams
    Divisional profit comparison for Sherwin-Williams
    Comparative count of stores
    Subscribe to HNN weekly e-newsletter
    US-based paint manufacturer and retailer The Sherwin-Williams Company (Sherwin) has reported a record year for its FY 2015. Sales increased to USD11,339.3 million, up by 1.89% over sales for the previous corresponding period (pcp), which was FY 2014.

    Gross profit rose by 7.64% over the pcp to hit USD5559.2 million, and earnings before interest and taxation (EBIT) rose by 23.11% to reach USD1549 million. These results were achieved despite what the company claims as a 3.3% drag on profits brought about by unfavourable currency exchange rates.
    Sherwin-Williams results FY 2015

    The result for FY 2015 saw gross margin come in at 49.0%, up from 46.4% in the pcp. Sherwin stated the increase was driven by increased productivity gains through higher volume, as well as a reduction in raw material costs.
    Division results

    Much of the increase in sales and underlying EBIT was brought about by the good performances of the company's Paint Stores Group (PSG) and its Consumer Group (CG). PSG sales revenue was USD7209 million, up by 5.22% over the pcp, while profit increased by 19.32% to reach USD1433.5 million.

    Sales were boosted by the strong performance of architectural paints. Like-for-like sales were up by 4.2% for the year over the pcp. Profit was primarily driven by increased volume. Profit margin was 19.9% for the year, up from 17.5% in the pcp. A total of 83 new stores were opened during 2015, bringing the total number of stores worldwide to 4086.
    Comparative count of stores

    For CG, sales rose by 11.06% over the pcp to reach USD1578 million. Profit for CG came in at USD308.8, up by 22.14% over the pcp. A strong driver of growth for the year was the introduction of Sherwin's HGTV HOME line of paint through US-based big box home improvement retailer Lowe's.

    The fourth quarter of 2015 was particularly strong for profits at CG. In the quarter sales rose by 13.63% over Q4 2014 to reach USD314.6 million, while profit for CG in the quarter came in at USD50.9, up by 67.86% over Q4 2014. Profit margin was 19.6% for the year, up from 17.8% in the pcp. Sherwin stated that much of the boost to profit came from operating efficiencies.

    The Global Finishes Group saw its sales decline by 7.9% over the pcp to USD1916 million for FY 2015. Sherwin states that, correcting for unfavourable exchange rates, the sales declined by 0.4%. Profit for this division rose by 0.37% over the pcp to reach USD201.9 million. Unfavourable currency exchange rates were offset by decreases in the costs of raw materials.

    The company's Latin America Coatings Group was negatively affected by both currency exchange and lower volumes of paint sales, but boosted by increases in prices. For FY 2015 sales declined by 18.2% over the pcp to reach USD631 million. Profit fell steeply, by 54.3% to reach USD18.5 million. Profit was affected by increases in raw material costs.
    Divisional profit comparison for Sherwin-Williams
    Material costs

    In his introductory remarks, newly appointed Sherwin CEO John Morikis predicted that input costs for the company would decrease in 2016, but by less than 9%. In response to a question from an analyst, Bob Wells, senior vice president corporate communications, went into more detail on the costs of raw materials:
    We think that there could be some benefit in the petrochemical side of the basket maybe as much as we saw in 2015. We think that, we saw a pretty big move in TiO2 in 2015 and we're unlikely to see that figure move in 2016.

    Mr Wells expanded further on this comment in replay to another analyst:
    We do expect to continue to see benefit from raw materials and we've commented that on the oil side it does take longer for a drop in propylene and ethylene to work its way through the acrylic chain and actually get to market. So there's probably more tailwind on that side of the basket in the year to come than there is on the TiO2 side. TiO2 took a pretty sharp drop in the back half of last year. We'll see that obviously the benefit of that in the first half of this year but TiO2 is approaching kind of its historic starting place of USD100 a pound on the spot market. So we don't necessarily see a lot of further runway for TiO2 to decline.

    In further questioning, Mr Morikis went into more detail:
    We often comment that these pricing cycles in Ti02 typically begin with pricing below USD1 a pound. Oftentimes peak above USD2 a pound and then settle back on the back end of the cycle below USD1 a point again. We're hovering just above USD1 a pound. And we realize that there's been price increase announcements in the market. Ultimately, the balance of supply and demand in the market will determine whether those increases our successful and we'll see, but it feels like we are approaching the bottom on the downside of this cycle.

    Sean Hennessy, senior vice president-finance and chief financial officer, responded to an analyst question as to whether there wasn't more scope for price reductions, given the steep fall in commodities other than titanium dixoxide (TiO2):
    The other thing I would caution you want is assuming that resin and latex pricing is tracking in line with propylene or with crude oil a lot of times because these are specialty formulas they are often times owned and controlled by our supplier. That gives them some measure of pricing power in the short-term. The resin that you use in a particular paint formula has a very significant impact on the performance of the end product and they're not interchangeable parts. If the supplier wants to hold on to some of the benefit of lower cost propylene for a period of time in the long run we believe we'll get the benefit but the benefit tends to come to market slower than in the commodity category like TiO2.
    Retailers
    HTH Group 2016 conference
    The Sutton Tools crew with conference MC Tania Zaetta
    Home Timber & Hardware Group
    Bretts Timber & Hardware won HTH National Store of the Year award (over 1,000m2)
    Wycheproof Hardware won Thrifty Link's National Store of the Year award
    Click to visit the ITW website for move information
    In the official press release sent out to media following the event, Home Timber & Hardware Group's (HTHG) said its recent National Conference brought together the largest gathering of industry leaders and key influencers. It said it delivered a record sales event that helped to confirm the group's position as a significant player in the Australian hardware market.

    Over three days and nights, HTHG's independent members, company-owned stores and suppliers lived up to its theme "Dare To Do More". According to the release, it achieved the following outcomes:
  • Over 3,000 trade show specials offered
  • A record $5.6m in sales written at the trade show, up 10% on last year's result
  • Over 300 stores in attendance
  • 176 suppliers in attendance
  • 35 award winners (see below)
  • More new product and innovation than ever before
  • Keynote presentations from Samantha Taranto and Mark Matthews
  • Open Q&A plenary session with James Aylen
  • A dinner on the grounds of Metricon Stadium, sponsored by Valspar
  • And a memorable gala dinner topped off with entertainment from the "fab four": Ross Wilson, Joe Camilleri, Richard Clapton and Leo Sayer

  • HTHG general manager James Aylen, said the outstanding results were testament to the passion and dedication of the group's independent retailers and to the suppliers who have shown continued loyalty and commitment to HTHG. He said:
    There has been a great deal of change for HTHG recently but these results just go to show the strength and unity of our group. It's all about delivering reward for our members and for our suppliers, and over $5million in sales in what is a tough market, not to mention a significant degree of uncertainty in our business, is just a sensational result and more gratifying than anything else we achieved at the event.

    The conference also provided a platform for Mr Aylen to lead an open discussion at the plenary session on the final day, to answer questions directly from the floor and reaffirm the group's commitment to support its members and suppliers.

    The best performing stores and suppliers were also recognised with a total of 35 awards presented. Mr Aylen said:
    A significant proportion of our stores continue to raise the bar in retail excellence however these particular businesses have gone that extra mile. We're exceptionally proud to have the winners as part of our group and proud of the dedication they've shown to HTHG.
    These store owners have worked incredibly hard to provide a superior offer for local customers and we look forward to seeing the business continue to prosper with HTHG in the years ahead.

    Recognising the value of its supplier base, the contribution of key vendors was also recognised with a range of award categories presented.

    The event was used as a platform to announce Home Timber & Hardware had been crowned the Hardware Store of the Year for a third time in four years at the recent Roy Morgan 2015 Customer Satisfaction Awards.
    Laura Town won HTHG's Best Young Retailer award
    Award winners
    Home Timber & Hardware Group
  • Best Young Retailer -- Laura Town, T M & H Timber & Hardware
  • Home Timber & Hardware
  • National Store of the Year (over 1,000m2) -- Bretts Timber & Hardware
  • National Store of the Year (under 1,000m2) -- Ocean Grove Home Timber & Hardware
  • VIC/TAS Store of the Year (over 1,000m2) -- WB Hunter Yarrawonga
  • VIC/TAS Store of the Year (under 1,000m2) -- Ocean Grove Home Timber & Hardware
  • NSW/ACT Store of the Year (over 1,000m2) -- Gubbins Home Timber & Hardware
  • NSW/ACT Store of the Year (under 1,000m2) -- Narooma Building Supplies
  • QLD Store of the Year (over 1,000m2) -- Bretts Timber & Hardware
  • QLD Store of the Year (under 1,000m2) -- Kawana Hardware & Garden Centre
  • SA/NT Store of the Year (over 1,000m2) -- Globe Home Timber & Hardware
  • SA/NT Store of the Year (under 1,000m2) -- Loxton Home Timber & Hardware
  • WA Store of the Year (over 1,000m2) -- Donnybrook Hardware & Garden
  • WA Store of the Year (under 1,000m2) -- Exmouth Hardware & Building Supplies
  • Thrifty-Link Hardware
  • National Store of the Year -- Wycheproof Hardware
  • VIC/TAS Store of the Year -- Wycheproof Hardware
  • NSW/ACT Store of the Year -- Dunedoo Rural Hardware
  • QLD Store of the Year -- Bernborough Hardware & Produce
  • SA/NT Store of the Year -- Port Broughton Hardware
  • WA Store of the Year -- Karratha Timber & Building Supplies
  • Supplier awards
  • National Supplier of the Year -- Bremick
  • Supplier of the Year: Home Timber & Hardware -- Bremick
  • Supplier of the Year: Thrifty-Link Hardware -- Hitachi Power Tools Australia
  • Innovation of the Year -- USG Boral
  • Exhibitor of the Year -- Pope (Toro)
  • Logistics Supplier of the Year -- Yates Australia
  • Supplier of the Year: House & Garden -- Amgrow
  • Supplier of the Year: Timber & Building Supplies -- Fletcher Insulation
  • Supplier of the Year: Trade Tools & Consumables -- Bremick
  • Companies
    PPG's FY 2015 suffers headwinds
    PPG results 2015
    PPG
    PPG coatings volume trend
    PPG divisional sales
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    PPG Industries, Inc. (PPG) has reported a slight decrease in sales for FY 2015 compared to the previous corresponding period (pcp), which was FY 2014. Sales for the year were USD15,330 million, down from USD15,360 million.

    PPG reported there were positive gains of 0.2% attributed to price, 0.9% attributed to volume, and 6.1% attributed to acquisitions. These were offset by a 7.4% loss attributed to unfavourable currency exchange fluctuations.
    PPG divisional sales

    Some 46% of sales came from North America, 28% from Europe, 16% from Asia, and 10% from Latin America. According to statistics provided by PPG, since 2008 growth in its coatings business has been largely static in North America, while in Europe growth declined sharply in 2009, and has continued to drift downwards. Growth in emerging regions, however, has remained robust since 2010, and the market is now up 25% over levels in 2008.
    PPG coatings volume trend

    By close of 2015, PPG operated 920 company-owned stores in North America, 40 company-owned stores in Australia and 100 company-owned stores in Central America.
    PPG results 2015
    Raw materials

    During the results presentation for Q4 2015 and FY 2015 an analyst asked for an update on the production of titanium dioxide (TiO2) from the Henan Billions plant in China. The operation is a partnership PPG has entered into, and it began shipping product in December 2015.

    The CEO of PPG, Michael McGarry replied:
    We qualified the material, let's call it in October. We had shipments on the water. We started commercially using the material in early December. More product is on the water going to other locations outside the US. So, it's going to get qualified in Mexico; it's getting qualified in Europe. The bottom line is they are making good products, their consistency is getting better. And we are pleased with what we are seeing. We have most favoured nations with them, so that's the positive for us as well. As far as licensing, no one else has approached us.
    Architectural coatings markets

    Asked for his views on how world markets would develop for architectural coatings, Mr McGarry replied:
    The Eastern European countries are -- they have had a lot of promotional challenges, but I would say overall it should come back around when you look at the US, we've obviously had some good growth in the US except for the dealer market, the dealer market continues to be challenged. Canada I think is probably going to stabilize, so I don't expect a lot in there. Mexico we've had tremendous growth there we're going to continue to expect to grow two times GDP, the one negative in Mexico is the fact that government spending has started to slowdown with the price of oil dropping. I think Brazil's going to be a challenge, I think China's going to be a challenge, Australia should be good at least mid, I think low to mid single-digits in Australia. So that's a good market for us, so all-in-all I would say we should be at or above GDP for the Performance Coatings segment.
    Companies
    Sherwin-Williams acquires Valspar
    Matching up the geography of company channels to growing markets
    Sherwin-Williams
    Paint companies in the market
    Geographical distribution of Valspar sales
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    US-based paint manufacturer and retailer Sherwin-Williams (Sherwin) has announced it intends to acquire its main rival, US-based paint manufacturer Valspar, in a friendly buyout. The announcement was made on 20 March 2016, and is should be completed before the end of January 2017.

    The acquisition is expected to cost Sherwin-Williams USD9.3 billion. It will take the form of an offer to buy Valspar shares for USD113. This price represents a 35% premium on Valspar's share price on 20 March 2015, and a 41% premium on its 30-day average. With debt included, Sherwin-Williams values the deal at over USD11 billion.

    If the two companies sales remain the same or more than sales for FY 2015, their combined revenues would make them the largest paint company in the world. The combined revenues would equal USD15.6 billion. The paint operations of PPG brought in revenue of USD14.2 billion in 2015, and those of AkzoNobel were around USD11.1 billion (though denominated in Euro).

    The reconfigured market is illustrated in the slide below, taken from the Sherwin presentation to analysts of the acquisition on the morning of 22 March 2016:
    Paint companies in the market

    In his opening remarks to analysts at the presentation event, the CEO of Sherwin, John Morikis, outlined the reasons behind the acquisition move:
    This combination will create a premier global paints and coatings company with a comprehensive product portfolio and broad global reach. This is a highly complementary transaction that brings new capabilities and greater geographic reach to Sherwin-Williams and accelerates our growth strategies and enables us to deliver a broad range of products to more customers. Valspar will expand Sherwin-Williams' capabilities into the highly attractive packaging and coil segments, and we will also gain a global platform to broaden and grow our business throughout Asia Pacific and EMEA (Europe, Middle East and Africa).

    After the CEO of Valspar, Gary Hendrickson, was given a chance to speak about the deal, Mr Morikis continued in much the same vein:
    First, the combination expands our brand portfolio and customer relationships, significantly expands our global finishes businesses, and extends our capabilities into new geographies and applications, including a scale platform to grow in Asia Pacific. We have long admired Valspar's position across Asia Pacific and EMEA where we have a limited presence. This transaction provides us with an opportunity to realise immediate scale and allows us to provide customers with a greater set of products, accelerating our growth in these key markets.
    Behind the deal

    As the above quote indicates, the Asia-Pacific, and Australian in particular, featured as a major part of the reason Sherwin found the acquisition of Valspar attractive. In fact, the first point on the first slide listing the details behind the deal read:
    Significantly expands position in Asia-Pacific and EMEA

    Continuing to describe the deal, Mr Morikis revealed how geography, as it applies to future growth markets, influenced the thinking at Sherwin:
    Slide seven shows a geographic revenue breakdown of Sherwin-Williams before and after the transaction. This transaction will also better align Sherwin-Williams with the global paints and coatings industry, increasing our international revenues from 16% to 24% of our business. This is especially important, given the chart on the right, 81% of the $120 billion global paints and coatings business lies outside North America. Through Valspar's impressive platforms in Asia Pacific and EMEA and their talented professionals, we will have a greater ability to accelerate our strategy.

    This is slide 7:
    Matching up the geography of company channels to growing markets

    A little of the possible strategy Sherwin might pursue was also revealed when an analyst asked:
    And then looking at Asia-Pacific, you have mentioned several times that you have a low utilisation level. So, am I to translate this that you are obviously going to consolidate manufacturing facilities and then combine the capacity in all the production into one or two of the newest plants; is that how you're going to do it?

    Mr Morikis replied:
    Yes. I think it's a little early to commit to any one plan. But, I would say that go back to our performance, as it related to the Comex integration. I think we've demonstrated an ability to really dial in, understand the best move for our company, our customers and figure out the best way to drive value. And at the times it does take the course that you described, and if that's the best course, then that's the one we'll take.

    If the presentations made by Sherwin are not enough to convince, there was also a slide offered by PPG at its recent presentation to the Goldman Sachs "Chemical Intensity Day":
    World region construction growth rates

    In these projections by IHS, it's clear that China and Australia/New Zealand have the highest combined rates of residential and non-residential construction.
    DuluxGroup

    If Sherwin does have plans to expand in Australia, it's clear that it will have one main target in its sights: DuluxGroup (along with PPG's Taubman's brand, secondly)

    Just about every year the CEO of DuluxGroup, Patrick Houlihan, gets asked about pressure being exerted by an overseas competitor. At the presentation of full-year results for FY 2014/15 in November 2015, this is how Mr Houlihan responded to a question about the entry of Sherwin in the Australian market:
    On your Sherwin-Williams question -- for those that have been involved with this a long time it's really the latest chapter in a long story. Decorative paint all around the world has been proven to be well characterised as a regional business. Consumers not just here in Australia, all around the world, infrequently purchase, once every five to seven years; do it once, do it right; trust a brand; whether you do it yourself of have it done for you. So they're the consumer dynamics at play. That's why brand is so important. That's why our brand strength as the most trusted paint brand and in fact the second most trusted brand of all consumer brands in Australia is just so important.
    But the recent history for those that might not have been involved with it was in 2007 PPG, the global number one in paint, bought Taubmans, the number 3 here. In 2008 Nippon Paints, number one in Asia, came, lost AUD50 million, left two years later. In 2010 Valspar acquired the Wattyl company. We've then had Resene from New Zealand try and push into Australia unsuccessfully. We've had Benjamin Moore which Warren Buffet, through Berkshire Hathaway owned, come in from the North East to the US and to New Zealand and bits of Australia, and leave.
    So again you can never get complacent about it but I suppose what I tried to share in the presentation about good old prescriptive brands, innovation, customer service and everything that goes into it, that's ultimately what helps us continue to win in that space. In terms of Sherwin they've launched into Masters. They are in Lowe's in the US. Sherwin is primarily in the US. There's no paint company really like us because we play in both retail and trade. If you thought just about trade business largely that's what Sherwin are in the US. They've got 3000 of their own stores. Increasingly they play a little bit now in Lowe's -- in the likes of Lowe's. So presumably there's some link there with the Lowe's and Masters relationship.
    They've launched product in Australia. Their super paint product is retailing at AUD72. Just for the record that's for 3.66 litres. So if you turn it into four litres it's at AUD80 a can. They've got another product that's up in the -- that's even higher priced than that. So the products they've launched just like Nippon did and just like Valspar have done with their products that are priced quite high, and also what PPG have done, are all priced at the premium end of the market because any paint company in the world that makes money if you look at their offshore accounts you will see what we used to see when we were part of ICI. It's all a determinant of your weighted average selling price combined with your scale; but first and foremost your weighted average selling price.
    So that's where -- really I can't tell you anything more about Sherwin. They're here. I suppose ultimately when I think about it, they might be America's most trusted brand but no one here knows them. We've got Australia's most trusted brand. So we've got the best brand. We've got the best product. We've got the best people and we've got the best customers. So let's bring on the next inning so to speak.

    While it is perfectly true that Australia's Dulux has managed to "see off" a number of competitors, and it does have the advantage of a well-established brand, as well as distribution through Bunnings, it will be interesting to see if the focused attention of what will be the world's largest paint company manages to dent DuluxGroup's success.

    It's also worth noting that the "local is good" way of viewing things does have its limitations as well. DuluxGroup's key partner Bunnings has expanded into the European market through its purchase of Homebase, but the company has no European presence at all, and thus cannot supply Bunnings. That leaves PPG as the most likely partner, in what could quickly prove a profitable market.

    One advantage the DuluxGroup does have is that, with the deal only closing a year in the future, and a likely further year to be spent on consolidating the two companies, there is certainly time to plan strategically, and take any necessary action.
    Analysis

    When asked the question of "why now?" by an analyst, Mr Morikis replied:
    I think it just accelerates the path that we were on. It's consistent with our strategy. I would say, Dennis, it brings a scaled platform to Asia Pacific and EMEA; it helps our teams what we have been attempting to do there with a little more scale and more support from the assets that will be coming along, the team that will be coming along.

    One of the reasons behind the "now" is likely that Sherwin's two largest remaining competitors, PPG and AkzoNobel, while continuing to be strong, have encountered some difficulties over the past year and more. Investments in Brazil, Russia and China are not proving profitable. While China is likely to pull out of its current slump in a tempered way during 2016/17, both Russia and Brazil are likely to remain in trouble for at least the next three years.

    By delivering funding, expertise and scale to markets in the Asia-Pacific, especially Australia, the combined forces of Sherwin and Valspar may be able to establish a market lead that will be difficult to blunt in the future.

    The other factor behind the acquisition is simply that Valspar is still struggling to recover from the blow of finding its premium, high-margin paints locked out of the Lowe's home improvement big-box chain, with Sherwin taking its place. While it is likely that Valspar might have found its way to future growth, given its current state, such a deal looks very attractive to both management and shareholders.

    For independent hardware retailers in Australia, of course, the news is likely to be good. There is likely to be a good deal of healthy brand promotion activity in the near future, with the opportunity to further expand paint sales in competition with Bunnings.
    Bigbox
    Big box update
    Bonuses offered to Masters executives
    HNN Sources
    Bunnings Bundamba is expected to open
    The Bunnings Collingwood store caters to apartment dwellers
    Click to visit the ITW website for move information
    Senior staff at Masters are being offered bonuses to stay with the company; the sale of Masters will start despite a dispute between joint owners Woolworths and Lowe's Home Improvement; Bunnings targets apartment dwellers; Bunnings lodges an application for a store in Tura (NSW); the local community in Coolum (QLD) is campaigning against a proposed Bunnings outlet; Bunnings Warehouse at Bundamba (QLD) is close to completion; a plan to battle Bunnings; Bunnings Joondalup sets a record sale yield for a Bunnings Warehouse in WA; an investor snaps up the Bunnings Eltham building; UK's Kingfisher keeps a close eye on Bunnings; Wesfarmers CEO comments on Homebase executive cull; and Woolworths' additional costs over a failed Masters development in regional Victoria.
    Bonus offer for Masters' key staff

    Senior Masters executives are being offered retention bonuses if they remain at the home improvement chain for 12 months. This would help prevent a potential mass exodus as it stares down the barrel of a potential liquidation.

    Sources told The Australian that those being offered the bonuses are executives who would be essential for any wind-down of the business, which is widely thought to be the most likely outcome for the retailer.

    A Woolworths spokeswoman said the company had offered key staff in its support office and stores the opportunity to secure a short-term bonus, subject to performance and retention measures being met.

    Meanwhile, it is understood that Woolworths and Lowe's are struggling to find an independent valuer for Masters and Home Timber & Hardware because most of the larger firms have previously worked for Woolworths or Lowe's and there would be conflict of interest.
    The start of Masters' sell-off

    Woolworths will begin the process on the sale of its hardware chain, Masters, despite an ongoing dispute about its valuation between the company and joint venture partner, Lowe's.

    Investment bank Citi plans to distribute an information memorandum on the home improvement division that includes Masters and Home Timber & Hardware (HTH). But the long-running debate about its value has led to concerns among some bidders that the negotiations could turn into a protracted legal battle.

    Sources close to the process told the Daily Telegraph that a number of prospective suitors remain reluctant to sign a confidentiality agreement, which enables them access to due diligence material, until Woolworths and US retailer Lowe's reach an agreement on the valuation of Masters. These latest negotiations are due to conclude at the end of April.

    Against this background, Woolworths is going ahead with the Masters sale that has been codenamed "Project Miami". It is understood Woolworths favours rolling the Masters operational business into HTH.

    Related:
    Big box update: Home Timber & Hardware sold separately - HNN
    Small format Bunnings stores

    Bunnings has a large pipeline of development projects that include turning vacant office buildings and neglected retail property into its trademark warehouses, as a way of going after the medium-density apartment boom. Andrew Marks, general manager - property told AFR Weekend: "We see dozens of opportunities around Australia and New Zealand where non-standard Bunnings store formats, both small and large, will form part of our strategy in more densely populated and tightly held metropolitan locations.

    "We're able to do stores as small as 1000sqm compared with our purpose-built warehouses which range in size from 5000 to 25000sqm..."

    Last year, Bunnings opened a 1500sqm warehouse in Brunswick (VIC) and undertook its first office conversion with a 7000sqm store opening in a two-story office building in Collingwood (VIC).

    Both Bunnings stores are in gentrifying inner-city Melbourne suburbs, where hundreds of new apartments have sprung up in recent years (and hundreds more still to come). It is part of a large demographic shift driven by downsizing baby boomers and young professionals wanting to live close to the centre of town.

    Despite it being significantly smaller than new super-sized Bunnings warehouses, the Collingwood store holds 96% of "A-range" stock with only the big bulky products not on offer.

    This year will be another big year for store refits in Victoria with a 7600sqm multi-level Bunnings Warehouse to backfill space in Chadstone Home HQ and a 7000sqm store to open in what was a Target store in the Ringwood Square Shopping Centre.

    In Queensland, there is the proposed conversion of a 3000sqm JB Hi-Fi store in Mount Gravatt and the doubling of a 2200sqm Bunnings in Indooroopilly, an inner Brisbane suburb, that was previously a Coles supermarket.

    There will also be opportunities for apartment developers to take on a Bunnings lease with the retailer in the process of securing development approval for a residential project in Doncaster, in Melbourne's eastern suburbs, after resolving a dispute with the local Westfield mall.

    The new project will comprise over 300 apartments above and surrounding a two-level Bunnings, which will have a more understated facade. Marks said: "We're working on a second Bunnings-anchored residential development." But most of the focus will be on re-purposing existing buildings.
    Bunnings plans Tura store

    Bunnings has confirmed that it has lodged a rezoning application with Bega Valley Shire Council to build a store at Tura Beach (NSW).

    Bunnings general manager property - Andrew Marks said in a statement to Merimbula News Weekly: "The proposed new Bunnings Warehouse Merimbula would represent an investment of over $17 million and provide employment for over 70 local residents, as well as approximately 140 jobs during the construction phase..."

    The development proposal is expected to be discussed at a council meeting in April.
    Bunnings opposition in Coolum

    A campaign in Coolum (QLD) has begun to fight a double application to build a Bunnings store with an associated service station and takeaway food outlet.

    Bunnings has made two separate applications, one involving an 8600sqm warehouse and three-lot subdivision and the other involving a 12,150sqm warehouse and five-lot subdivision.

    The applications aim to address serious reservations the council has had about the proposed development based on size, setbacks, visual amenity and economic need and impact on the Coolum community, among other issues.

    Many locals believe the location is wrong and not in keeping with the previous and current town plan for the area. One of the leaders of the campaign, Fiona Skyes, said both plans alluded to developing Coolum West as an attractive entrance to a coastal village. She told the Sunshine Coast Daily: "A Bunnings and a service station and a restaurant is...not part of making a nice little tourist village."

    Bronwyn Jackson, who has lived in Coolum on and off since the 1970s, said the complex would be better situated in the industrial area west of the motorway. "It's not that I don't want Bunnings. We've got a perfectly good industrial area where it could be," she said.

    Related:
    Bunnings tries a second time to build in Coolum - HNN
    May date for Bunnings Bundamba

    Construction of the Bunnings store in Bundamba (QLD) is on track for a May opening with Queensland builder TF Woollam & Son appointed to complete the $44 million project. It will replace the existing Booval Warehouse with all team members moving to the new store.

    Bunnings general manager - property Andrew Marks told the Queensland Times an undercroft car park for over 380 cars has been built underneath the store, allowing the main store to be raised above the designated flood level. In a future flood event, the car park would flood, with minimal impact on the store. Bundamba Creek at the site has also been realigned to improve flows and enhance the local eco-system. The Bundamba warehouse features a store size of 14,000sqm.

    Related:
    Big box update: Construction starts on Bunnings Bundamba - HNN
    Latest plan to take on Bunnings

    Industry consultant Geoff Dart as been quoted extensively in the mainstream business press about his plan to merge Woolworths' Masters and Home Timber & Hardware (HTH) to create a serious competitor to Bunnings. Sources told the Daily Telegraph that Woolworths already favours rolling the Masters operational business into HTH.

    Under Dart's plan, the Masters stores would be gradually rebranded under the Home banner, and the big box format overhauled to support a new range of products and services. He told Fairfax Media: "I would dump the new format Woolworths rolled out in Masters and re-lay the stores to develop a strong brand, differentiated by way of products and services that are all about value-adding."

    This model would start making money within a year, according to Dart, but he knows it will be a challenge to convince investors. He added: "This is a great opportunity but it will come down to whether people believe talk that there's not room for a number two player in hardware or whether they dig deeply and see how it could work."

    It is believed Dart has reached out to a number of investment banks to explore funding options for the acquisition and he has already sounded out key management personnel.

    Related:
    Hardware business numbers falling, but not so fast - HNN
    Bunnings Eltham building sold

    Nick Theodossi has paid $24 million for a major retail investment leased to Bunnings. Theodossi is a well-known prestige car dealer and philanthropist.

    The 1.2-hectare Eltham (VIC) site, with a 7225sqm warehouse, currently returns annual rent of $1.65 million rising with the market. Bunnings has occupied the building since it was developed in 2007 and has options to stay until 2042.

    On current rental numbers, the asset traded on a yield of 6.9%. In the rare case Bunnings decides to break the lease, the block offers reconfiguration potential, with four street frontages and a large, open-plan, 217-bay car park.
    Bunnings Joondalup sold

    Bunnings Warehouse in Joondalup (WA), which opened in 2014, has been sold for $43.5 million. The successful buyer was an unnamed private investor from the eastern states.

    The Bunnings store is in one of Australia's fastest growing municipalities, with the current population of 164,000 forecast to grow to 180,000 by 2036. Justin Dowers of CBRE Victorian retail investments said: "The depth of the buyer interest came as no surprise in light of previous Bunnings Warehouse sales, which have generated consistently strong investor demand. This is a strong result that shows confidence in the property market and in Bunnings assets.

    "We were delighted to receive 14 offers to purchase, with a number of strong offers from interested parties."

    Bunnings will enter into a new 12-year lease paying an initial annual rental of $2,395,000. This translates to a sale yield of 5.5%. The Joondalup property, which was owned by Bunnings, has a lettable area of 17,006sqm and occupies a 2.65ha site with 416 car bays.
    Kingfisher's "interest "in Bunnings

    The CEO of Kingfisher, Britain's largest home improvement operator which owns leading chain B&Q, has admitted sending teams to scout out Bunnings stores in Australia and report back what they had seen, covering all aspects of the business and in particular, pricing and products, according to a report in The Australian.

    Veronique Laury told the newspaper: "We have been looking in a lot of detail at what they've (Bunnings) been announcing, saying, whatever. We sent some people from B&Q in Australia to look at what they were doing precisely product by product, pricing by pricing, everything. And I will say we will prepare them a very warm welcome, as we would have done for any other competition."

    Bunnings agreed to buy Britain's second-biggest operator Homebase for $704 million at the start of this year with plans to invest an additional $1bn to transform the chain into Bunnings UK.

    It has already begun its British offensive at Homebase by offering staff under-25 a "living wage" as a general shift to improving working conditions at its 265 stores across Britain and Ireland.

    Related:
    Bunnings acquires Homebase - HNN
    Homebase management cull "necessary"

    Wesfarmers chief executive Richard Goyder has defended Bunnings culling the entire top level of executives at its newly acquired British hardware business Homebase. He argued the clear-out was necessary to turn the struggling British retailer into a world-class operator.

    Mr Goyder also questioned why some of the axed Homebase senior executives - such as marketing director Chris McDonough who only joined the business in December 2015 - were hired by Homebase parent Home Retail Group when it was in sale discussions with Wesfarmers. He told The Australian: "My expectations are that we will get in there, take control of the business and give the people in the business the best opportunity to grow and prosper in that business. We did it in Coles, Kmart, and that requires people to be moved."

    More than $1billion will be invested in Homebase to transform and revitalise its business, which will be renamed Bunnings. As part of that restructure, Wesfarmers ejected the senior managers of the business, including its recently appointed chief executive Echo Lu as well as Homebase's finance director, commercial director, head of retail operations and marketing director. The clean-out of the executives drew criticism in Britain. Home Retail Group chief executive John Walden said: "You would not expect me to be thrilled about that.''

    But Mr Goyder has argued a new management team at Homebase, led by former Bunnings chief operating officer Peter Davis and fellow Bunnings executive Rodney Boys, was necessary to arrest its lacklustre earnings performance.

    Related:
    Big box update: Bunnings moves quickly in the UK - HNN
    Woolworths incurs more court costs

    Judge Clyde Croft of the Supreme Court has awarded an additional interest bill of $4.297 million to the $10.875 million damages he awarded in January to businessman Brendan Blake, over a planned construction of a Masters store in regional Victoria. Blake is the founder of Maxi Foods and owner of property developer North East Solution.

    At the time Judge Croft found that Woolworths failed to act in good faith with Blake's North East Solution after it dumped its deal with the property developer in 2010 to build and lease a Masters store, walking away from the contract to chase another nearby site.

    It was a big victory for Blake and his lawyers at Tisher Liner FC Law, although Woolworths had decided to appeal that decision. The second leg of the case was a battle over interest charges and costs related to Blake's win in January.

    Blake's counsel was arguing for $4.2 million in interest to cover the four years they had locked horns with the nation's biggest retailer.

    Woolworths was asking the court for the interest component of the damages bill to be divided between past and future losses that in effect push down the interest payment to only $256,441.

    However Justice Croft found in favour of Blake and set the bill at $4.297 million, which also includes costs for lawyers and barristers. In his judgment, Justice Croft held that the lawyers for Woolworths had drawn a "false analogy" between this case and personal injury cases when setting out their arguments and that the Woolworths submissions were "misconceived".

    Related:
    Big box update: Masters' court costs - HNN
    Companies
    AkzoNobel results for FY 2015
    AkzoNobel results 2015
    AkzoNobel
    AkzoNobel 2015 operating income bridge
    Diamond Floor paint
    Subscribe to HNN weekly e-newsletter
    AkzoNobel has reported revenue of EUR14,859 million for FY 2015, an increase of 4% over the previous corresponding period (pcp), which was FY 2014.

    Decorative paints contributed EUR4007 million to revenue, an increase of around 3% over the pcp. While the company saw volume fall by 1%, exchange rates compensated by providing a 4% boost to revenues. Asia performed well, but both Europe and Latin America was negative. Costs, however, moved lower.
    AkzoNobel results 2015

    Performance coatings grew revenue at 6.55% over the pcp, contributing EUR5955 million. Volume fell by 2%, while price mix increased by around 1% and exchange rates contributed close to 8%.

    Specialty chemicals grew the least at 2.15% over the pcp, with revenue of EUR4988 million. Net income grew by over 79% on the pcp to reach EUR979 million. Price mix and acquisitions dragged revenue down by around 3%, but exchange rates contributed close to 5%.
    AkzoNobel 2015 operating income bridge
    Markets overview

    AkzoNobel CEO Ton Buchner summed up the position of the company in response to a query from an analyst:
    You described the situation in what we've tried to depict during this call. On the one side, you have a much stronger company, more agile, better positioned, lower cost base, stronger focus on continued operational excellence and adding organic growth. And on the other side, you have a market that will not help us, which basically makes us come to the realization that we'll have to do it ourselves.
    The latter part is not new. We have had to do it ourselves in the last two-and-a-half, three years as well. So, that should not concern you. It should actually show to you that the underlying strength that we've built in actually should give confidence. And we've tried to depict that confidence as well with a dividend increase. So overall, you've summarized exactly the stronger company that goes into a challenging 2016 and has a set of guidance out there that they are committed to and that strength we're going to continue to build going forward.
    New products

    Among the products that AkzoNobel is bringing to market is its Diamond Floor product from Nordsjo. Water-based and environmentally friendly, this product can be used to seal concrete, laminate and wooden surfaces, providing protection against stains and wear, thus extending the life of painted surfaces.
    Diamond Floor paint
    Companies
    Brickworks' H1 profit comes from housing
    Residential building is now at capacity due to trade shortages, according to Brickworks
    Fairfax Media
    Brickworks products used in the exterior of a house in Preston (VIC)
    Brickworks LINEA product
    Subscribe to HNN weekly e-newsletter
    Australia's largest brick-maker Brickworks has reported its net profit rose 82.2% to $76.9 million in the six months to January 31, compared to the previous corresponding period (pcp).

    Excluding significant items, underlying net profit for the six months ending January 31 rose 19.4% to $75 million, compared to $62.8 million in the pcp.

    It has also reported a 9.8% rise in interim earnings before interest and tax (EBIT) to $98.8 million.

    Revenue increased slightly to 3% to $360 million.
    Residential building

    The company posted its best-ever first half revenue of $358 million in the main building products division.

    EBIT in the building products arm surged 24.9% to $32.6 million from $26.1 million in the pcp, buoyed by increased sales volumes and product prices, along with plant efficiencies.

    Brickworks said the short-term outlook was very positive, helped by residential building activity in Sydney, Melbourne and southeast Queensland.

    Managing director Lindsay Partridge said frenetic activity in the capital cities of Melbourne and Sydney had driven residential building to record levels, and the industry was now at capacity due to trade and product shortages. He told Fairfax Media:
    Every plant we have on the east coast is at capacity even after bringing bricks in from South Australia, Western Australia and Spain. We've got one builder who said he has only got eight spots for construction left this year. That gives you an idea of the pipeline ... the biggest issue for our company is roof tilers. They are very hard to find.

    Mr Partridge said there was an "enormous backlog" of demand, particularly in New South Wales, due to a decade of under-building. He said a shortage of cranes for high rises and two periods of intense wet weather had also held back the pace of construction.
    A lot of the construction got jumbled up with the heavy wet periods we've had. A tiler or roofer would go out to a job and the other trades wouldn't be there.

    He noted an increase in the use of face brick on the back of the group's investment in high fashion and links to the architectural community. He said:
    Our products are becoming increasingly popular in key market segments.

    Despite the momentum, Chairman Robert Millner warned that external constraints such as rising domestic gas prices were limiting further growth.

    Mr Partridge also pointed out soaring gas prices that are set to rise about 30% in 2017-18. He said:
    The [gas] market is dysfunctional. We have an international glut of oil and gas, and prices in Australia are going up 30%.

    Brickworks spends about $35 million a year on gas.

    The company currently carts bricks from South Australia and Western Australia to NSW to meet demand but is finding it's cheaper to import from Spain instead, Mr Millner said. He added the company was considering boosting supplies from overseas.
    Other divisions

    Brickworks' land and development business posted a 17.3% rise in EBIT to $45.4 million for the half, boosted by property revaluations in the property trust. However EBIT from its investments segment fell 11% to $26.8 million, mainly due to lower dividends from the Washington H Soul Pattinson (Soul Patts) subsidiaries New Hope Corporation, CopperChem and Exco Resources.

    Brickworks owns 42.7% of investment group Soul Patts which in turn owns 44.3% of the building products maker. During the half, the value of the Soul Patts portfolio, which includes major stakes in TPG Telecom, Brickworks, New Hope, and API Ltd, fell $92 million to $5.4 billion.

    Soul Patts' half year underlying profit fell $4.6 million (or 5.2%) to $83.6 million due to poor performance from its mining-focused businesses New Hope, CopperChem and Exco which was impacted by lower coal, oil and copper prices.
    Reports
    Apartment boom to go bust: report
    BIS Shrapnel predicts Victoria will be the most oversupplied market in the country
    Financial Review
    All cities, except Sydney, will be in housing oversupply by 2017
    BIS Shrapnel's 2016 Building Industry Prospects report has just been released
    Subscribe to HNN weekly e-newsletter
    Apartment building is reaching its peak and all cities, except Sydney, will be in housing oversupply by 2017, according to BIS Shrapnel's 2016 Building Industry Prospects report.

    The report recently predicted Victoria would be the most oversupplied market in the country, led by high-density apartment development in the inner and middle suburbs. BIS Shrapnel's forecasts the state will have 7592 more dwellings than it needs by the end of the year and 21,881 more homes than it needs by 2017. At the group's Building Forecasting Conference, BIS Shrapnel managing director Robert Mellor said:
    In Melbourne the oversupply will be significant, in Brisbane it will be worse. It is an accident waiting to happen.

    Mr Mellor said the downturn in high rise apartment construction would be significant, with the apartment commencements in the Melbourne and Brisbane dropping up to 60%. And that would impact on all parts of the business from site values, to apartment sales, to finishing trades.

    BIS Shrapnel associate director Kim Hawtrey is also concerned there could be a "very messy end" to the apartment boom.

    Mr Mellor said that dwelling commencements would peak nationally in the March quarter at record 221,000, with the big increase in high-rise apartments, not traditional detached homes.

    By 2016-17, each state except for NSW will be in dwelling oversupply. BIS Shrapnel estimated that West Australia would be over-supplied by 9000 homes and Queensland by 6400.

    In NSW a significant shortage of 41,031 dwellings is expected in 2017, a small improvement on a shortage of 53,386 homes in 2016. Sydney's undersupply is still so extensive that the city faces little chance of overcoming it by 2020 unless construction holds at current record levels, Mr Mellor said.

    At the same time the key drivers of demand are in decline. Net overseas migration has halved from a high 300,000 in 2008-09 to an expected 150,000 this financial and less in 2016-17.

    Also, investor demand has dropped down to 12% in the year to January, as banks have tightened lending in response to Australian Prudential Regulatory Authority guidelines. Investors have responded to the rise in prices and fall in returns.

    Another key driver of demand, from first-time buyers, remains weak, with the numbers in the key age group of 20-34 year-olds actually falling.
    Companies
    PlantMiner disrupts construction industry
    PlantMiner connects searchers with hire companies to source equipment
    Financial Review
    (l-r) Dan Wilson, Mike Davis and Michael Trusler from PlantMiner
    The company is looking to expand overseas
    Subscribe to HNN weekly e-newsletter
    Brisbane-based PlantMiner is an online marketplace for sourcing hire equipment for mining and construction sites. The technology start up created a platform that connects searchers with hire companies through its online portal, similar to accommodation comparison website Wotif.com.

    Like the emergence of hotel, flight and insurance comparison and booking services, PlantMiner has sought to disrupt the Australian industry by providing access to multiple suppliers of things like excavators, industrial drills and even portable toilets in one place.

    Suppliers sign up to an annual subscription, while the site is free for customers to search. More than 10,000 searchers are registered including from large mining and construction companies such as Leighton, Thiess and Hutchinson Builders.
    Investment funding

    The company recently closed a $3.5 million funding round as it considers a potential initial public offering early in 2017.

    It secured the investment from Madad Investments, a venture capital company, which is also based in Brisbane. PlantMiner will use the funds to expand its Australian operations, before an international push and additional investment raising.

    PlantMiner co-founder and co-chief executive Mike Davis told the Financial Review it would use the funds to consolidate and expand its market dominance in Australia and New Zealand, where it had shaken up an industry that previously relied on personal relationships. Davis said:
    When you are trying to disrupt an industry you will always find a bit of adversity to change, especially in such a traditional 'handshake' industry. But there are a lot of forward-thinking companies, which are looking to technology to solve problems of a lack of transparency or control over their spending.

    Since 2014 PlantMiner has expanded to employ 70 staff, with operations in Brisbane, Sydney, Melbourne, Perth and Auckland. Davis said the company would make its business-to-business product the focus of international expansion, having visited the US and Europe and seen a similar lack of online advances in the industries there.

    Funding for this expansion could lead to either an IPO or a larger venture capital funding round. Davis said:
    We did have some significant interest from US VCs, but given the focus for the next 12 months is about staying local, it made sense to have a local investor. Then whether we look to do an IPO in 12 months, which we have had some discussions around, or another larger raise, we would be looking to step it up a gear then.

    PlantMiner has not disclosed its revenue, but Davis said the amount had increased 424% year on year. The company also said it had delivered more than $100 million in jobs to its suppliers.
    An idea is born

    Michael Trusler is the company's other founder and co-CEO. The 26-year-old told the Courier Mail in 2015 he came up with the idea for PlantMiner while on a flight from the mines in Moranbah to Brisbane after becoming frustrated with the clunky process of finding machinery. Trusler was flicking through the Yellow Pages trying to source machinery. He said:
    It was a long an arduous task taking hours out of my day. I scribbled down the idea of a one-stop plant hire shop similar to carsales.com.au but for plant and equipment hire and took it to my business partner Mike Davis to build a case to pitch to gain seed funding.

    A few months later they made their first call to a hire company to get them on board and two months after the site went live they were making steady revenue. Trusler said at the time:
    It is now Australia's largest plant and equipment hire marketplace with over 500,000 items for hire from over 2500 suppliers.

    According to Trusler, the plant equipment hire industry in Australia is worth $4.5 billion and in the US it is worth around $45 billion. "The potential overseas with this platform is very exciting for me," he said.
    Products
    King of lawns
    Rover claims its new Lawn King offers more durability
    HNN Sources
    Kohler's 7000 Series engines
    Rover Australia website
    Click to visit the HBT website for more information
    Rover's Lawn King takes durability one step further, with a new style chassis that is stronger and more resistant to the elements.

    The Lawn King's tighter compact turning circles reduce cut time by lessening the amount of required line trimming. The rider can manoeuvre better through tighter areas, and around common backyard obstacles such as trees, fence posts and flowerbeds.

    The mower is controlled by a foot operated hydrostatic transmission system and powered by a 20hp Kohler 7000 Series V-Twin OHV engine. Coupled with cruise control and a high backseat, the Lawn King easily allows the user to comfortably cover grounds up to 8,000m2.

    With an easier-to-use 107cm (42-inches) side discharge spring-assisted cutting deck, that applies force to the deck, the Lawn King can tackle diverse terrains, whilst taking the weight and strain away so that the rider can adjust height more easily.

    The Rover Lawn King is covered by a three-year (unlimited hour) unit warranty, a five-year chassis and front axle warranty as well as a 90-day commercial unit warranty. It comes with a number of optional extras such as a mulching kit, bumper and catcher.

    The Rover Lawn King Ride-On Mower 20/42 is designed to be efficient, affordable and comfortable.
    Reports
    Tiny house trend
    A tiny home on wheels built by Sprout
    Construction Dive
    The Roving from 84 Lumber has a mini front porch
    The larger Waterhaus model by Sprout Tiny Homes
    Subscribe to HNN weekly e-newsletter
    The tiny house movement has gained more traction in the US than Australia. It has a reputation of being a fad that is only popular among young people who enjoy the novelty of building their own home and living in a small space. Residential industry experts have also questioned the place of tiny houses in the broader housing market.

    However, this hasn't stopped Rod Stambaugh, founder of Sprout Tiny Homes in La Junta, Colorado USA from creating a business that is betting on the lasting popularity of tiny homes. Not only did Stambaugh become a custom tiny house builder, but Sprout is one of the first developers of tiny home communities in the US.

    Another company banking on the tiny home trend is US-based building materials retailer, 84 Lumber that has just launched a package for tiny homes for customers.
    New types of neighbourhoods

    Sprout is preparing to break ground on two tiny house communities in Colorado this year. The 200 plus homes combined make them the largest development of its kind in the US.

    When he started out, Stambaugh only had construction experience building homes while at university. He has spent the 23 years in the mobile electronic payment industry. He told Construction Dive:
    I took a big left-hand turn two and a half years ago. I'd been studying the tiny home industry and thought it would be pretty big. I decided to see if we could dominate it.

    In 2013, Stambaugh set up a manufacturing facility in La Junta and formed a team to build Sprout's first tiny home. He said construction of the first house was a "learning process" and took longer to complete due to Sprout using the traditional stick-built process, which the company has since improved upon. After finishing the first small house, Stambaugh took it to a Denver home show and drew major attention from attendees.

    Soon after that first surge in interest, Sprout started looking for ways to improve its custom homes and the building process. He said:
    Along the way, we really decided to focus on building high-quality, high-end, chemical-free homes.

    Sprout switched to using structural insulated panels (SIPs) -- a composite building material -- to make the building process more efficient, as well as enhance the final product. He said:
    It just makes the home stronger, greener, straighter. We also focused on a really paramount feature being chemical-free interiors.

    The strength of the SIPs panels allows the homes to be driven thousands of miles without experiencing cracks or structural issues. Stambaugh said:
    We tow these things 1,500 miles, and there are absolutely no issues at all. There are no cracks in the drywall. If that was stick-built, it just wouldn't handle it.

    All of the interior features for Sprout's tiny homes are custom-made, Stambaugh said.
    There's no real great furniture, appliances, or anything that's been built in any kind of sustainable way for tiny homes.

    Sprout now offers three tiny house models -- the Aspen, Birch and larger Waterhaus. The company has grown to employ a staff of nine people, but Stambaugh predicts that number will grow to approximately 35 in the coming months as the new communities start to become established.

    He said the company has built 22 tiny homes since Sprout's debut, with some on wheels and others on foundation. The average price of tiny houses sold so far is approximately USD60,000, and build time from start to finish takes only 30 days.

    Despite Sprout's success in the individual custom tiny home market, Stambaugh said his clients kept lamenting concerns about where they would ultimately put their small houses.
    Zoning wasn't very friendly in various towns and counties and cities, so we took a step back and started working with different cities.

    Walsenburg, Colorado is a town of 2,927 residents and the future home of one of Sprout's tiny house communities. It was the second city in the US to change its zoning laws, which now permit buildings smaller than the previous limit of 600 square feet. Stambaugh said:
    Once that happened, we said, huh, maybe we need to become a developer.

    Sprout purchased 4.6 acres in Walsenburg with plans to build a 33-unit development of tiny homes. Soon after, Sprout also bought 19 acres in Salida, Colorado, a town of 5,200 residents, and plans to build 200 tiny homes and 96 storage units. The company will offer tiny homes in the 260-square-foot to 760-square-foot range.

    In the larger Salida community, the tiny houses will be available for lease. Stambaugh said that to build the 200 homes, Sprout would set up a temporary manufacturing facility on the Salida site, build the houses there on foundations, remove the temporary facility, and build a storage facility on that site.

    In Walsenburg, Stambaugh said Sprout is considering a different approach and will likely offer about half of the homes for sale and half for lease.

    He emphasised that these communities will feature more than just houses, as they will also include walking trails, retail space, clubhouses, fitness centres, and restaurants in some cases.

    In the Salida community, Sprout has already seen significant interest from potential residents. Stambaugh said the serious buyers are in the 50 to 60-years age range.

    In his experience, most buyers aren't millennials struggling to purchase traditional-sized homes. Instead, the majority of Sprout's customers are baby boomers looking to downsize after their children left the family home. Stambaugh said:
    [The trend is] taking off because people are making lifestyle decisions and choices to live smaller. We see the market a little bit different than what you see on television. Most of our customers are baby boomers. They're still entrepreneurial, and they're doing it as a lifestyle decision as opposed to for necessity. And honestly, that's the kind of folks that these communities need. They're still good contributors to the local economy, and they're doing it by choice.

    In addition to the two developments in Colorado and similar projects in the works, Sprout has also ventured into the office pod market.

    A scientific research company in Southern California that was growing faster than its headquarters could handle asked Sprout to build office pods for physicists and mathematicians. Sprout built 10-foot-wide by 20-foot-long pods with its own environmental controls that the research company could sit on their property.

    Stambaugh said the market "hasn't even started to see the tip" of the tiny house trend. He also believes that, overall, tiny house developments could be the remedy for some cities' severe lack of affordable housing inventory.
    Tiny houses for the masses

    As a retailer of building materials and services, Pennsylvania-based 84 Lumber has just launched a series of tiny houses, available in flexible packages targeting anyone who might be interested in this lifestyle. The company is trying to make tiny house living as accessible as possible, whether the customer is serious DIYer or someone who just wants a fast, easy turnkey micro home.

    It spent the last six months developing a line of four tiny house models, all of which are under-200 square feet and are now available to order. The estimated turnaround time is about eight to 10 weeks for a fully outfitted home.

    The Roving, the first model with a fully built-out prototype is a 154-square-foot tiny house with cedar lap siding, a lofted full-sized bed, mini front porch, and reclaimed wood details. The other three models range in styles from the cottage-like to the more modern.

    Beyond the design, 84 Lumber's "cater to everyone" approach also extends to the packages and pricing. For those who are ready to roll up their sleeves and build their own tiny house, the company offers a starting USD6,884 (AUD9,062) "DIY package" that includes architectural blueprints, materials list, and a trailer outfitted with a subfloor and ready for walls.

    Next level up is the starting USD19,884 (AUD26,176) "Semi-DIY package" that includes a "shelled in" tiny house on a trailer, along with windows, a door, a shower, blueprints and a material list for finishing the home inside and out.

    And starting from USD49,884 (AUD65,669), the move-in ready option comes fully furnished with a trailer, composting toilet, Energy Star-certified appliances, and LED lighting.

    84 Lumber's tiered packages and national footprint means the tiny houses can be ordered in any of its 200 stores around the US.
    News
    HI News Vol. 2 No. 4
    Download the latest HI News, issue number four
    HI News Vol. 2 No. 4
    Kaboodle editorial is featured in Australian House & Garden
    Home Timber & Hardware launches its Easter campaign
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/hinews-2-4.pdf

    This issue focuses on the "battle" in the media between Bunnings-exclusive, kitchen specialist Kaboodle and flat-pack furniture giant, IKEA. The feature looks at the changing markets for kitchens, the potential impact of Masters' exit on the category and the strategies behind the advertising campaigns of both companies.

    We take a look at the consumer and commercial markets for outdoor power equipment and the latest range from Kobalt that has been launched the US.

    On the home front, an extensive big box update includes the news surrounding the Masters and Home Timber & Hardware (HTH) sell-off and private equity's interest in a merger between Mitre 10 and HTH.

    In terms of the independent retail sector, HTH unveils its Easter campaign and a Mitre 10 store in Sorrento (VIC) achieves a record price at auction.

    Also included in this edition are The Home Depot's annual results that delivered its best-ever revenues and its strong performance in the fourth quarter. Ace Hardware has released its latest advertising campaign with a new agency.

    There is a regular update on the latest job opportunities from Karcher and the Whites Group, and Methven's matte black tapware is also featured.
    Careers
    Seeking opportunities
    Karcher is searching for a key account manager
    HNN Sources
    A CFO is wanted at Whites Group
    A building products manufacturer requires a marketing generalist
    Visit the Mecca Website
    Karcher Australia is seeking a results focused key account manager for its independent retail customers; the Whites Group needs to fill the newly created role of chief financial officer; and a building products manufacturer with a presence in Australia and New Zealand requires a marketing generalist.

    For further information, simply click on the images provided.
  • Selling to independents

  • Reporting to Karcher's retail channels business manager, the key account manager will be responsible for the strategic development and growth of the company's independent hardware retail accounts. The individual must be able to build strong external relationships and maximise opportunities for Karcher's range of products.
    Karcher is seeking a key account manager
    CFO role at Whites

    As part of the executive team, the CFO at Whites Group is responsible for ensuring effective business planning and analysis; pricing policies, treasury, tax and FX are optimised; accurate financial reporting and controlling; cash flow and capital management; and adequate risk assessment in line with legal and company requirements.
    A CFO is wanted at Whites Group
    Senior marketing generalist

    Working in a collaborative team environment, the successful candidate will be responsible for developing and implementing marketing activities in line with customer and product mix strategies. Tasks include managing the marketing and communications plan, market research projects and ensuring product brand development is aligned with the overall company branding and positioning.
    A marketing manager needed for a building producrs manufacturer
    Bigbox
    Big box update
    A formal sales process has begun for Home Timber & Hardware
    HNN Sources
    Some suppliers have voiced concerns about Masters
    Bunnings makes short shrift of top leadership team at Homebase
    Click to visit the ITW website for move information
    Home Timber & Hardware's profitability means it could be sold separately from Masters; Suppliers to Masters remain concerned over its exit; private equity is looking at a hardware merger between Mitre 10 and Home Timber & Hardware; Bunnings takes action in the UK; Masters in legal battle regarding interest charges from a court case; and property deals from Masters sale.
    Home Timber & Hardware sold separately

    A formal sales process has begun for Woolworths' Home Timber & Hardware (HTH) unit, according to a report in The Australian. The supermarket chain looks as though it will set HTH apart from the troubled Masters operation.

    The sales process has been given the code name "Project Miami" and is expected to start within a month even though there is an ongoing dispute over the valuation of Masters.

    Despite failing to reach an agreement on price, Woolworths is continuing with the selldown of Masters. The Australian reports that over two dozen parties are believed to have received sales documents for the assets and an equally large number are expected to sign confidentiality agreements ahead of the auction. Contenders are yet to receive a date to submit confidentiality agreements that enable access to detailed information on both Masters and HTH.

    In its sales flyer for Masters and HTH, seen by The Australian, the business is characterised as the "number two player in a large, growing and fragmented market". The document emphasises there is "room for a successful second major player (in the sector) if executed correctly".

    It also says there is a "potential to remodel sites to alternative uses" and highlights that the combination of Masters and HTH covers all segments of the home improvement market with "minimal commercial overlap".

    Yet few expect Woolworths to clinch a deal for the combined business. The HTH unit is profitable whereas the two entities together are loss-making. The sales documents state that earnings before interest and tax (EBIT) on the combined business lost $225 million.

    If HTH is separated from Masters the financials are far healthier. The division delivered revenue of $937 million. HTH's earnings rose 43% to $12.9 million in the December half-year, underpinned by wholesale and retail sales growth. Analysts believe HTH is worth between $160 million and $200 million, based on earnings of $21 million last fiscal year.

    The sale of Masters looks more complicated. Close to 40% of the chain's store network is leased and exiting these liabilities may be tricky.

    While Metcash's Mitre 10 has shown interest in HTH, it is understood a number of smaller private equity firms are considering entering the race. Sources claimed buyout fund Archer Growth may sign a confidentiality agreement, as will Anchorage Capital, the private equity firm that floated the Dick Smith chain.

    Speculation continues as to whether the DIY chain will be offloaded in a single deal or separated by rival bidders keen to snare a slice of the property. Another possibility is that US giant Blackstone will join forces with a local turnaround specialist like Allegro Funds.
    Woolies to carve up Masters - Business Spectator
    Woolworths tries to keep HTH stores

    Woolworths has offered member stores in its Home Timber & Hardware unit an extra 2% discount on all wholesale purchases to stay in the network, or at least until it is sold.

    HTH remains the only profitable business in Woolworths' $3 billion home improvement division, but its value risked being eroded as stores defected to Mitre 10.

    Woolworths' latest accounts indicate 31 HTH wholesale customers closed or quit the network in the six months ending December, taking the number of departures since 2012 to 97, or 19%. Over the same period, Woolworths has doubled the number of company-owned HTH stores to 43. A source told Fairfax media: "About 70% of what the stores sell is bought through [HTH]. If their turnover is $2.4 million, 2% of that is a nice number for not doing much."

    However, while the discount may prevent an exodus of store owners it will impact negatively on HTH's wholesale margins.
    Woolworths entices Home Timber & Hardware stores to stay - Fairfax Media
    Supplier concerns over Masters

    Payment problems at Masters may have contributed to the collapse of one of its suppliers, family-owned fasteners and fencing company Otter Group.

    A source close to the company told Fairfax Media it had struggled to receive payment for goods supplied to Masters, one of its biggest customers.

    Other suppliers have also voiced concerns about Masters, saying payments are frequently delayed well beyond trading terms and invoices are lost or queried. However, another source played down Masters' contribution to Otter's collapse, saying Masters accounted for only a portion of its sales and it should have been able to manage cashflows.

    Suppliers have also expressed concerns about who will pay their invoices if Masters is sold or wound up. One supplier said: "Woolworths will wash their hands and sell these debts to whoever buys them and we'll have to take it up with the new owners."

    Woolworths defended its treatment of Otter. A spokeswoman said: "Masters continues to support Otter Group during this time. We are maintaining our relationship with the business, including regular payments and stock ordering... Masters is committed to doing the right thing by its suppliers."
    Masters suppliers raise payment concerns - Fairfax Media
    Otter is up for sale

    Otter Group has appointed external managers David McEvoy and Stephen Longley from PPB Advisory after falling into receivership. PPB Advisory is calling for urgent expressions of interest to acquire the company and its assets, with the group continuing to trade through the receivership.

    Otter Group's parent, Otter Holdings, had annual sales of $30.5 million in 2013, according to the most recent accounts lodged with the Australian Securities and Investments Commission.

    The group owns the intellectual property of a number of brands, including showerhead manufacturer Interbath, which it bought in 2007.

    Receivers are also seeking urgent expressions of interest for Otter Fencing, a subsidiary of Otter Group that has been manufacturing, supplying and installing security fencing and gates for close to 50 years.

    PPB Advisory partner told SmartComany in a statement there has been a "strong level of interest" in Otter Group as well as its subsidiaries.
    Nails and fencing business for sale after collapsing into receivership
    A second force in hardware retail?

    Fairfax Media reports that private equity firm, Anchorage Capital Partners has taken a merger proposal to Metcash that will involve combining its Mitre 10 stores network with Woolworths' Home Timber & Hardware business to create a new player that can compete with Bunnings.

    According to Fairfax, Metcash has been talking to Woolworths about HTH from as far back as the middle of last year. It is understood a number of major shareholders support its push to buy the chain and have indicated they would back a capital raising to fund the purchase.

    One retail insider told Fairfax the listed wholesaler would not be able to fund the acquisition without a capital raising and there had been a lot of speculation Metcash would spin its hardware business off into a separate vehicle, splitting it from its grocery wholesale operation.
    2016 will challenge independents - HNN

    The collapse of Dick Smith put Anchorage in the hot seat over its role in the demise of the electronics retailer. Anchorage had bought Dick Smith from Woolworths for $20 million and made $500 million after listing it on the stock exchange nine months later, prompting finger-pointing when the electronics retailer subsequently went into administration.
    Anchorage hatches plan for new force in hardware - Fairfax Media

    Respected industry figure and former Woolworths chairman John Dahlsen from Dahlsens, told Daily Mail Australia that Bunnings needs a major competitor in the market place to drive down prices.

    International business senior lecturer Gary Mortimer, from the Queensland University of Technology, said the possible merger could increase both businesses' buying power and improve price points for customers.

    Parallels can be seen in relation to the supermarket price war over the last five years. He said: "We've seen a price deflation of 3-5%. You would see similar deflation in the hardware price wars.
    Bunnings to face new mega competitor - Daily Mail Australia
    Bunnings moves quickly in the UK

    Shortly after its ownership of UK DIY retailer Homebase was completed, Bunnings has installed its own management team. This has led to a significant number of Homebase directors leaving including managing director Echo Lu, who joined the business last April.

    Finance director Don Davis is set to leave the business, along with commercial director Paul Emslie, retail operations director Ewan McMahon and marketing director Chris McDonough - who only joined Homebase in December - sources told UK publication Retail Week. It is thought those senior roles are to be filled by Wesfarmers personnel.

    When Bunnings' chief operating officer Peter Davis was appointed managing director of its UK and Ireland division, the future of Lu's position at Homebase remained unclear. At that time Rodney Boys, Bunnings' logistics and improvement general manager, was also unveiled as the new finance director.
    Homebase leadership team culled as new owner Wesfarmers swings the axe - Retail Week

    However Bunnings is also facing criticism in the UK following its decision to cull the UK retailer's entire executive board in favour of its own people, barely a week after gaining control. The managing director of influential UK retail research agency Conlumino, Neil Saunders, told UK's Retail Week that Bunnings' decision to clear the decks at Homebase was "not really very sensible" and could alienate Homebase's 15,000 staff.

    Saunders questioned Bunnings' wisdom in sacking the entire executive board before gaining a full understanding of the GPB38 billion ($73 billion) UK home improvement market. He tweeted: "On the surface retail in a foreign country can seem obvious and easy. In reality it never is. There are nuances and hidden traps."

    The speedy management changes reflect Bunnings' desire to turn around the struggling home improvement chain as quickly as possible and remove any doubts among Australian investors that it has bitten off more than it can chew.

    After outlaying an initial $649 million, Bunnings is aiming to reverse a decade-long decline in sales and earnings at Homebase by spending $955 million over the next three to five years refurbishing stores, improving service, overhauling the product range and reducing prices.

    Bunnings sees scope to improve Homebase's sales per square metre, which are among the lowest of any retailer in Britain, by boosting the amount of stock in stores and widening product ranges, focusing on DIY and light-commercial markets, rather than home furnishings and decorator products.

    Analysts say Bunnings' strategy to stock more hardware products and fewer home furnishings means it will compete more directly with UK market leader B&Q and fear its decision to rebrand Homebase could alienate customers.
    Bunnings takes chainsaw to Homebase management - Fairfax Media

    Former B&Q boss Jim Hodkinson also told Retail Week the UK DIY market was ripe for a shake-up, especially as Homebase and B&Q had failed to modernise. He said: "Both Homebase and B&Q have not done themselves any favours, their offer has not moved on. They were quite right to clear out the management. That sort of unclear thinking they don't want around the business." Hodkinson was B&Q's boss between 1995 and 1998.
    Ex-B&Q boss accuses Kingfisher of arrogance - Insight DIY

    James Greenhalgh from Intelligent Investor is generally positive about Bunnings' move into the UK. He believes it paid a relatively low price to purchase Homebase and says there is a precedent to Bunnings recent actions. He writes: "After Wesfarmers look control of Coles in 2007, it sacked the vast majority of senior managers there too. Such a ruthless approach clearly has risks but Bunnings is buying a store network rather than an ongoing business. Homebase is underperforming, so why retain the existing management team? Cultural change matters and the management cleanout sends a signal to junior staff: Fail to perform, and you're out. There are no guarantees of course."
    Will Bunnings be successful in the UK? - Intelligent Investor

    Greg Cullen from Marketing Magazine says Bunnings could learn some lessons regarding big data from UK builders merchant Travis Perkins. He writes: "Travis Perkins is already leveraging Big Data software to help boost online sales, streamline its product data depositories, warehouses and e-commerce functions. The new data solution enables Travis Perkins employees to easily identify and address duplicates in the inventory system, so that staff have the correct view of what is being sold and the company can accurately display its products online."
    Is Bunnings sharp enough for the UK market? - Marketing Magazine
    Masters' court costs

    Lawyers acting for Masters have been arguing in a Melbourne courtroom over a $4.3 million interest bill from a lost battle against a Masters store developer.

    In January, the Supreme Court of Victoria handed property developer Brendan Blake and his lawyers at Tisher Liner FC Law a victory over Woolworths. The court awarded $10.875 million in damages plus interest to Blake.

    For Blake, founder of Maxi Foods, it was a successful end to a four-year legal fight linked to abandoned plans to build one of the first Masters stores in the regional Victorian centre of Bendigo.

    Judge Clyde Croft of the Supreme Court found that Woolworths failed to act in good faith with Blake's North East Solution after it dumped its deal with the property developer in 2010 to build and lease a Masters store, walking away from the contract to chase another nearby site.

    Lawyers have been back in court on to argue over the interest bill that would accompany the $10.875 million damages, with Blake's counsel arguing for $4.2 million in interest to cover the four years he had locked horns with Woolworths.

    Woolworths is asking the court for the interest component of the damages bill to be divided between past and future losses that in effect push down the interest payment to only $256,441. It also wants the opposing QCs costs to be capped at $8094 per day or $810 per hour, down from the typical rate of $9900 per day or $990 per hour charged by Blake's barrister Peter Bick QC.

    It is believed Blake and Woolworths each spent more than $2 million fighting the case between 2012 and 2016. Blake's damages were initially calculated at $14.5 million but were discounted by 25% to reflect the risks of property development.

    Justice Croft has reserved his decision over the quantum of the interest bill owed to Blake. Woolworths will appeal the January ruling that awarded damages and interest to Blake.
    Masters interest bill over failed case - The Australian

    The court case highlighted the lengths that Woolworths management would go to compete with Bunnings. On learning of Bunnings' interest in the CBD site, Woolworths CEO Grant O'Brien told its head of hardware property Richard Champion that the company must beat Bunnings to the alternative site. O'Brien said to Champion by email: "I will provide whatever is needed to make this happen. Even if we expose ourselves to the cost of the unknowns, I don't want us waiting."

    The court also heard the other landowner in the Bendigo CBD being courted by Bunnings, Stephen Iser from Hume & Iser, had corresponded with O'Brien using the secret email name of "Harrywild" after his family dog, who could be a bit wild.
    Woolworths slugged with 11m interest bill - Fairfax Media
    Property play from Masters sale

    The looming sale of the Woolworths hardware chain Masters is increasingly looking as though it will play out as a $1 billion-plus real estate deal.

    During the early stages of rolling out the hardware operation, Woolworths is believed to have paid as much as $25 million per site, of which there were about 100. Around a quarter of them are believed to be leased.

    Apparently a number of companies are keeping close to the situation in addition to property developer and funds manager Charter Hall and real estate fund Abacus. Of particular interest would be sites where buildings have been constructed or are close to completion.
    Masters sale hot property - Business Spectator

    A big box retailer such as Ikea, Costco or a large hardware store would be ideal for the spaces currently occupied by Masters Home Improvements at Richlands and Springfield, according to Queensland business leaders.

    Centenary and Districts Chamber of Commerce president Steve Pollard said news of the closure of the Richlands store was a blow for the community. He said Ikea or Bunnings would be a welcome addition to the area. In fact, another hardware store would also be ideal. He said: "The closest (Bunnings) is (at) Oxley and it is so hard to get in and out of. It can take 10 to 15 minutes getting in to the carpark. We're interested in getting something like that for the area."

    Masters' Springfield store was among the state's first when it opened in 2011. Springfield Land Corporation commercial development director Naren Sinnathamby said something that made "good business sense" and attracted people to the area would work best.
    Ikea, Costco & Bunnings top list to replace Masters sites - Courier Mail
    Bigbox
    The Home Depot sales high for FY 2015-16
    Home Depot FY 2015/16 results infographic
    The Home Depot
    Home Depot results for full-year 2015/16
    The Interline acquisition will take six months to integrate
    Click to visit the ITW website for move information
    For FY 2015/16, US-based big box home improvement retailer The Home Depot reported record sales of USD88.5 billion. This is the highest sales figure ever for the company. This represents an increase of 6.4% over sales for the previous corresponding period (pcp), which was FY 2014/15. The result was achieved despite a USD1.4 billion cost due to unfavourable exchange rates.

    The company said that its net earnings, at over USD7 billion, were also the highest in its history. Earnings before interest and taxation (EBIT) were USD11.021 billion, an increase of 10.5% over the pcp. Diluted earnings per share grew 15.9% to USD5.46 during this period.

    Total same-store (comp) sales increased by 5.6% for FY 2015/16 over the pcp. Same-store sales for US stores increased by 7.1%. Sales per square foot for the year increased 5.2% over the pcp to reach USD370.55.

    Total sales floor space increased slightly for the year, reaching 237 million square feet.
    Home Depot results for full-year 2015/16
    Q4 performance

    Sales in the fourth quarter of FY 2015/16 helped the company reach its record figure, coming in at USD21 billion, up by 9.5% from the quarterly pcp (qpcp), which was the fourth quarter of FY 2014/15. EBIT for the quarter rose by 10.5% to USD2.313 billion compared to the qpcp.

    Diluted earnings per share were USD1.17 in the fourth quarter, an increase of 11.4% from the qpcp.

    Comparable store sales for the quarter were up 7.1% from the qpcp, with US stores showing a strong increase of 8.9%.

    During the quarter, The Home Depot opened one new store in Mexico, bringing its total store count to 2,274 stores.
    Transactions

    The number of transactions reached a record for Home Depot during FY 2015/16, coming in at over 1.5 billion, up by 4.1% over the pcp. For Q4 2015/16, large tickets grew more than small tickets.

    Tickets with a total of over USD900 increased by 11.9% over the qpcp, while tickets under USD50 increased by just 3.8%.

    One of the factors driving the increase in big-ticket sales was growth in items purchased by the "Pro" (tradie) sector. According to Ted Decker, executive vice president - merchandising said:
    ...We saw double digit comps in siding, pneumatics, circuit protection, fencing, fasteners and exterior doors. Our recent assortment update in roofing continues to drive excellent results as we saw double-digit comps in roofing in the fourth quarter.
    And we continue to see strength in core maintenance and repair categories with double-digit comps in pumps, security lighting, water heaters, electrical tools, construction adhesives, ladders and caulks. Cleaning, bath fixtures, door locks and pipe and fittings also had comps above the company average.

    Mr Decker also pointed to some consumer items as contributing to the increase in big-ticket sales:
    The drivers behind the increase in big-ticket purchases were appliances, roofing and special order kitchens.

    However, as Home Depot's chief financial officer, Carol Tome, pointed out later in response to an analyst's question, the increase in sales of consumer items such as appliances did have some negative effect on the gross margin:
    The change in gross margin was driven primarily by the following factors: first, we experienced 15 basis points of gross margin expansion due to productivity within our supply chain and lower fuel costs; second, we had 26 basis points of gross margin contraction due to the impact of Interline Brands; and third, we had 13 basis points of gross margin contraction due to a change in the mix a product sold including a higher penetration of lower margin product categories like appliances.
    Marketing to the Pro

    In response to an analyst's question about the company's Pro business, Ms Tome went into more detail about its marketing efforts directed at Pros.
    So I will speak to the private label card perhaps. We just rolled out our new value prop in January so you really can't attribute the strength in Pro, which by the way grew faster than the consumer in the fourth quarter...to the new private label card.
    But we're really excited about what that new private label card is offering to our Pro customers. As you know 60 days to pay, fuel rewards, 365-day returns...
    Our new accounts are up over our target. Our Pros are enjoying on average USD25 off at the pump when they are using their fuel reward card. So we really like what we're seeing and we think that is going to bode well for 2016. So you can't attribute that but some of the other initiatives that we've introduced are really helping drive the business.

    However, Home Depot was quick to point out that it is no longer particularly privileging the Pro side of its business. When an analyst asked whether the Pro market will be a larger driver of comparable sales in 2016 and 2015, excluding Interline, Home Depot CEO Craig Menear replied:
    I think we're focused on actually growing all of our segments. We're focused on growing the Pro customer, the DIY customer, the do-it-for-me customer as well as our digital customer. So we haven't really thought about it as one being radically outsized versus the other. And we look at transactions and ticket as a balance of growth as well.
    Merchandising

    In the next quarter, Mr Decker and his team will be resetting its door lock range. He said:
    Using our assortment planning tools we were able to more effectively cluster our door lock assortment around styles, finishes and brands. Our reset will include...products such as the Schlage Connect and Kwikset 915 electronic locks.

    For its Pro customer, the retailer is introducing new and exclusive products from Milwaukee, DeWalt, Ryobi and Ridgid.

    As it prepares for the spring selling season in the US, The Home Depot will have exclusive grill offers from Weber, Nextgrill and KitchenAid as well as additional patio accessories. Its online offering will include numerous options from infrared gas grills to smokers.
    Online

    In FY 2015/16, the company's online sales grew by USD1 billion, up 25% over the pcp. For the year, total online sales were USD4.7 billion. This is 5.3% of total sales for Home Depot. Previous, for FY 2014/15, online sales accounted for 4.5% of total sales.

    Kevin Hofmann, senior vice president - online mentioned that mobile usability had become a key part of the online strategy.

    In response to an analyst's question, Mr Menear outlined how customers combined in-store purchases, online purchases, and buy online, pick-up in-store purchases. He said "customers are smart, they have a tendency to gravitate to the best business models."
    There's elements of things like concrete and soils and mulches that make sense and that's where the customer will find the best value to purchase the product [in the physical store]. There are other categories that are enhanced by the digital experience...where our customers actually start their shopping experience online but then finish in store.
    Then there's clearly categories that are...at risk to transfer online because whether it's breadth of assortment or ease of shipping. And candidly in those categories to date for the most part we actually see growth in both channels.
    Interline Brands

    In the third quarter, The Home Depot completed the acquisition of Interline Brands, a national distributor of maintenance, repair and operations (MRO) products. In the second quarter following the acquisition, the company will offer its exclusive paint brands to Interline's multifamily operators.
    Future opportunities

    Ms Tome remains optimistic about the potential for future growth in the housing market, despite an ongoing slowdown in the growth of national gross domestic product (GDP):
    On home prices we anticipate home prices to be up next year 3.5%. That's good. It's down from the growth that we experienced in 2015 of 5.4%, so that's another 30 basis points of growth coming off the top.
    . . .
    A few other housing numbers since you asked. I gave you the home price estimate that we are using but we anticipate housing turnover to be up 4.4% of units, household formation to be up considerably. We are forecasting 1.9 million households formed as a block, this year was about 1.3 million households.
    The other thing is that we're really spending time trying to get a better understanding is the impact of the age of the housing stock. As you know 65% of the homes in the United States are older than 30 years and there's external research that shows that spending on older homes is higher. John Burns would suggest it's something like 7.5% higher.
    Our own internal research suggests it's 8% higher. So this ageing housing stock bodes very well for us.
    And if we could take you back to the last mild recession, and I'm talking a lot here and I apologize, but if you take it back to the last mild recession of 2001 housing stock was a lot younger 15 years ago. So this is a good news story for us.

    The Home Depot expects 2016 comparable growth to be approximately 3.7% to 4.5% as a result of currency headwinds. It also expects corresponding diluted earnings per share of USD6.12 to USD6.18 in 2016.

    Related:
    Home Depot buys Interline Brands - HNN
    Retailers
    Indie store update
    Home Timber & Hardware is encouraging "eggscavation" this Easter
    HNN Sources
    Mitre 10 Sorrento fetched $11.465 million at auction recently
    CSR Gyprock has a new concept store in Preston (VIC)
    Click to visit the ITW website for move information
    Home Timber & Hardware launches its Easter campaign; a bidding war pushes up prices at a Mitre 10 Sorrento auction in Victoria; David O Jones Mitre 10 in Stawell (VIC) reveals its new Beaumont Tiles franchise; and CSR Gyprock opens a concept store in Preston (VIC)
    HTH encourages "eggscavating"

    This Easter season, Home Timber & Hardware wants people to set a "harder" challenge and go on a backyard "eggscavation" for Easter eggs.

    Demonstrated via a short light-hearted video, hosted on Home Timber & Hardware's Facebook page, it features a tough-as-nails dad demonstrating an "eggcellent" way to hide Easter eggs...complete with a freshly-paved concrete slab to finish the job.

    This campaign is the latest in a series of videos from the hardware retailer, adding a touch of Aussie larrikin humour to the traditional way to celebrate key times of the year. Previous campaigns including "Brekky in Shed for Father's Day" and "Hard Wrapping This Christmas" have each received over two million views when released.

    The campaign ties in with HTH's "Crack The Hard Jobs This Easter" campaign featuring all the right tools and hardware to get things done over the holiday season.

    You can watch the video here:


    Related:
    HTH emphasises the "hard" in hardware - HNN
    Strong offers for Mitre 10 store

    Mitre 10 Sorrento has fetched $11.465 million at auction after Chinese investors went head-to-head in a bidding war with a "who's who" of the Melbourne business community. It sold for almost $6 million above its reserve price and was more than double the price expected by selling agency CBRE.

    A local buyer outbid nine others for the 2601sqm block of land with just under 43m of street frontage on Sorrento's main street.

    The property is located on a stretch of housing between the holiday beachside suburbs of Sorrento and Portsea. A CBRE spokeswoman said: "While the property is potentially not earmarked for an overly large scale development, there was a ground swell of buyer interest from parties with property in their blood wanting to deliver a project in their own backyard."

    Any redevelopment will have to wait, however. The current lease for the Mitre 10, which is the only hardware store in the area, runs until at least 2020.
    Beaumont Tiles at Mitre 10

    The official opening of Beaumont Tiles located within the David O Jones Mitre 10 store in Stawell (VIC) was held recently. Shannon and Simon Vos from "The Block" gave local residents design tips at the event.

    Simon Jones, franchisee of the new Beaumont Tiles said homeowners are becoming braver in their designs. He told the Stawell Times: "There's a real trend for homeowners to adopt the looks they are seeing on hit television shows like 'The Block' and in design magazines. Already we're seeing great interest by residents in new trends such as large format tiles and textured and shaped tiles because new technology has made these designs a lot more affordable."

    Jones said the store features Beaumont's touch-screen technology Scan & Play which places any showroom tile into a virtual room. He said: "Customers can experiment with different looks and combinations before they decide on a look that is perfect for their dream space."
    CSR Gyprock opens concept store

    Plasterboard specialist CSR Gyprock has opened a brand new concept store in the Victorian suburb of Preston. It follows the acquisition of local internal linings company Picton Hopkins & Sons.

    The Gyprock Solutions store has an interactive showroom, drive-through warehouse and an expanded product portfolio. The store also stocks related building products such as insulation, power tools, safety gear and access equipment.

    The concept store offers three transaction counters to help move customers through the space quicker; a Customer Lounge, complete with an express phone charging station and coffee machine, offering customers a place to catch up on paperwork, grab a free coffee or plan their next big project; and a Solutions Centre containing a full library of brochures from suppliers, large display boards with descriptions of CSR products, and four custom-built wall displays, showcasing the use of Gyprock in residential and commercial systems.

    It will also offer online shopping along with a selection of pick-up and delivery choices, including a "Grab n Go" option to assist tradies with getting their supplies faster.
    Retailers
    Ace Hardware's "helpful" ads have a new twist
    The jingle's lyrics in Ace's new campaign are customised in humorous ways
    PR Newswire
    This ad demonstrates how Ace helps its customers tackle paint selection
    Ace Hardware's latest campaign features real store staff
    Click to visit the ITW website for move information
    The latest campaign from Ace Hardware leverages the signature "Ace is the place with the helpful hardware folks" jingle, and features actual store owners, staff and customers.

    With the familiar tune as a backdrop, the jingle's lyrics are customised in humorous ways that reflect how the hardware retail co-op and its employees can be of help. John Surane, executive vice president of merchandising, marketing and sales at Ace said that with this campaign, the retailer set out to illustrate its "three greatest differentiators" - people, brand and jingle - in an authentic way by featuring real Ace customers in stores, getting their problems solved by real Ace associates.

    In one spot, a customer enters a store asking for "the stuff for squeaking hinges. I think it's called 10w40." The Ace team member steers him in the right direction as the jingle plays, "Ace is the place with the stuff for squeaking hinges that's called WD40, not 10w40, which is motor oil that we also sell".


    In another spot, an Ace store owner offers a customer paint samples to test on her walls at home. The jingle: "Ace is the place for a taste before you buy the whole meal. That's a metaphor. Don't eat paint".


    In developing its first campaign with Ace, Chicago-based agency O'Keefe Reinhard & Paul (OKRP) surveyed over 100 Ace retailers and employees for real-life instances of customer requests and the ways that staff go the extra mile to help their customers. The team selected a variety of examples to demonstrate how Ace helps its customers tackle lawn and garden projects, paint selection, bug infestations, and more. Tom O'Keefe, CEO of OKRP said:
    We set out to capture the one-of-a-kind authenticity of Ace's helpfulness -- and found it in the relationships and stories of real customers and Ace employees. For us, putting a new twist on the iconic jingle was the perfect way to bring this authenticity to life.

    Launching on television, audio and digital channels across the US, the campaign features more than 30 videos filmed at three Ace stores in Houston, Orlando and Chicago, using a cast of 25 Ace owners and staff, as well as 40 actual customers. The ads were developed to support seasonal offerings and sales across categories such as paint, lighting and lawn and garden. It also showcases Ace's mix of brands including Craftsman, Scotts, Valspar and Weber.

    The campaign will also be extended across multiple consumer touch points including social media, acehardware.com, store signage, circulars, email, direct mail, and local market TV, audio, and display templates.

    To see the campaign commercials, please visit:
    Ace Hardware ad campaign
    Companies
    Tradie marketplace works with real estate group
    hipages is partnering with real estate group Ray White
    Start Up Daily
    Ray White will give buyers and sellers access to hipages' database of tradies
    Ray White Concierge helps customers move house as easy as possible
    Subscribe to HNN weekly e-newsletter
    Online tradie marketplace hipages is joining forces with real estate group Ray White to provide buyers and sellers access to its database of over 70,000 qualified tradespeople across 240 categories.

    It follows News Corp. purchasing a 25% stake in hipages for a reported $40 million.

    The partnership will see hipages housed in Ray White's web-based concierge service, which helps clients with the various aspects of buying and selling a property. This can include helping them to arrange insurance and home loans to tax depreciation schedule reviews. Clients looking for help with home improvement will also be provided with free quotes through hipages.

    David Vitek, co-founder and CEO of hipages, said the partnership opens his business up to a new market of customers who may not have ever looked online for tradies. He told Startup Daily:
    People love having a faster, better way to find the best tradie for any job they need done. But the real competition is that too many Australians still aren't aware that there's a better way to do this.
    hipages is a trusted voice within the home improvement industry. Integrating our helpful content with Ray White has created a home improvement hub, a go-to place for new home buyers to visit and make informed decisions about home improvement.

    Kelly Tatlow, CEO of Ray White Concierge, said the partnership will strengthen the suite of services it offers customers to help make moving house as easy as possible. She said:
    Customers are at the centre of everything we do, that is what Concierge is all about. Partnering with hipages and their database of qualified tradespeople across the country will bolster our offering to customers and ensure that we make their moving transition as easy and seamless as possible.

    Related:
    News Corp buys into hipages - HNN
    Companies
    Cologne 2016 closes on an "excellent" result
    Initiatives such as the DIY Boulevard proved popular at the 2016 Cologne Fair
    Eisenwarenmesse
    The High Speed Disc ALUMASTER won an innovation award
    The fischer DUOPOWER was also the recipient of an innovation award
    Subscribe to HNN weekly e-newsletter
    The International Hardware Fair 2016 in Cologne, Germany attracted around 44,000 trade visitors from 124 countries, down from 50,000 attendees from 136 countries at last year's event.

    There were approximately 2,670 exhibitors from 55 countries, down slightly from 2,783 exhibitors from 53 countries at the 2015 show.

    Nevertheless, Katharina C. Hamma, chief operating officer of event organiser Koelnmesse, is "delighted at the outstanding result". She said:
    The DIY Boulevard was an absolute highlight. The stands were well attended. As a result of [recent] changes and the integration of e-commerce, the quality of the event was further improved...

    Recipients of the EISEN Innovation Award 2016 include PFERD for its High Speed Disc ALUMASTER(r). The judging panel said:
    With the High Speed Disc ALUMASTER, the user doesn't generate any dust when milling aluminium, but produces defined shavings instead. This offers enormous advantages in terms of health and explosion protection. An extraction system is no longer required either.

    Other winners include HAZET for its VDE torque spanner. The judges concluded:
    The fact that the VDE torque spanner can be calibrated is what especially convinced us. Accurate work with accurate tools.

    Fischer also won an EISEN award for its two-component fixing DUO-POWER. The judges said:
    The fischer DUOPOWER offers an innovative solution for everyday fastening problems. The product is made up of both soft and hard components which enables things to be fastened in both cavities and to solid materials. As a result, it covers a wide spectrum of applications.
    Products
    In the (matte) black
    The Methven Gaston culinary sink mixer is a best seller
    Methven
    The slim line Methven Glide collection is a popular choice
    Methven lifts first-half profit by 27%
    Click to visit the HBT website for more information
    Traditional chrome finishes for kitchen and bathroom tapware are increasingly being replaced by modern and sophisticated matte black. While chrome trends will never completely go out of vogue, matte black tapware is growing in popularity.

    Matte black tapware is ideal for customers looking to add a sleek and stylish look to their kitchen or bathroom. Its versatile and timeless characteristics can finish off most designs whether it is a cool monochrome, stone or warm timber.

    In the kitchen, black accents on a culinary sink mixer can make a statement. Whether the design is industrial-style, fitted with timber or concrete benchtops or with stone, the Methven collection is a premium option.
    The Methven Gaston culinary sink mixer is a best seller

    The Methven Gaston is the company's best selling culinary sink mixer. It meets the matte black trend and offers kitchen functionality with its pull out veggie sprayer, as well as a pause option and spring pull down hose.

    In the bathroom, the monochrome pairing of black tapware and white bathware creates a contemporary yet classic look. The minimalist Methven matte black tapware and shower mounted on white tiles instantly becomes a striking centrepiece.
    The slim line Methven Glide collection is a popular choice

    The slim line Methven Glide matte black tapware collection is a popular choice with customers because it balances retro chic with contemporary classic, giving end-users an edgy style option to the traditional chrome.

    Additionally, the matte black finish diminishes the appearance of fingerprints and watermarks, making them less visible than stainless steel or chrome. So the Methven range is easy to maintain.
    Products
    Cordless OPE sector slow to develop
    Echo 58-volt lawnmower
    HNN Sources
    Hitachi battery backpack
    Mean Green Products walk-behind mower
    Click to visit the HBT website for more information
    While cordless electric tools have all but taken over many power tool categories, such as impact drivers, take-up of cordless in the commercial outdoor power equipment (OPE) category has been much slower.

    This is a strong contrast to what has been happening in the consumer market. Cordless grass trimmers were eagerly adopted by consumers when they first appeared. In fact, they were used by Positec's WORX brand as a major way to enter the US market. Denied shelf-space in major retailers, Positec used direct marketing through TV commercials to sell its initial offering, the WORX GT battery-powered line trimmers. By 2010 the company held over 19% market share in those tools, helped along by US retailer Lowe's providing it with shelf space in 2009.

    The second round of cordless OPE is now beginning to sweep through the consumer market, with cordless mowers becoming increasingly popular. However, manufacturers and retailers are struggling to get the price/performance factors right.

    Corded electric mowers rose in popularity with the section of the market that had less than 70 square metres (sqm) of grass to take care of, for which virtually any petrol mower would be too much. Due to price/performance considerations, cordless mowers are less aimed at this market as a replacement for corded mowers, and more aimed at home owners with lawns between 150sqm and 250sqm.

    This is a growing market, as Australian dwelling plot sizes continue to shrink, and construction of medium-density housing continues to increase. According to the Urban Development Institute of Australia, average plot sizes throughout Australia have shrunk from an average of 535sqm in 2009 to 453sqm in 2015, a decrease of 82sqm, or 18%.

    It's likely that, given Australian's ongoing desire for larger houses, most of the lot size shrinkage has come out of yard space. Where houses in 2009 might have had 200sqm of total lawn, today they have less than 120sqm. Besides the shrinking plot, another factor that contributes to smaller lawns is also increased awareness of water conservation in a land with occasional drought conditions. Less grass means less water is needed to keep lawns green.
    The commercial scene

    None of these factors really have much affect on the world of commercial landscaping and grounds maintenance. In terms of mainstream usage, petrol-powered mowers and line-trimmers are likely to continue to dominate for some years to come. The demands professionals place on their OPE are just too high for current cordless technology to match.

    However, while mainstream usage of commercial cordless OPE is not growing, special circumstance usage does show signs of increasing. There are three basic categories of special circumstance: Maintenance/Handyman, Quiet Zone, and Eco-Compliance.
    Maintenance/Handyman

    There are a surprising number of people employed in simply looking after properties where some form of commercial activity takes place. These could be factories, residential aged care, large apartment blocks, outdoor storage facilities, and so forth. A typical job description might look something like this:
  • Maintenance and repair of all physical aspects of buildings and resources for [employer] including grounds and environs and all fixed and mobile equipment and furnishings.
  • The delivery of professionally maintained properties, including all grounds and gardens on the site.
  • Supervision of property staff in their delivery of maintenance and gardening programs.
  • Supervision of contractors in their delivery of contracted works.

  • Time spent in an occupation such as edge trimming grass would be limited but important. As they already likely have a set of cordless tools -- most likely from Makita -- it might make more sense to purchase a cordless line trimmer for their landscape work.
    Quiet Zone

    In the past there tended to be more tolerance for noise produced by grounds maintenance, but today -- perhaps because alternatives do exist -- the need for "quiet zones" has become more common. Landscape work around schools, hospitals, and retirement homes now often needs to be done as quietly as possible.

    Another quiet zone place can be the area immediately around the club buildings of golf courses and tennis clubs. Finding the time to get those areas nicely presented while the members are not using the building can be pretty tough, but quieter cordless electric tools can at least extend the work periods.
    Eco-Compliance

    As more businesses and organisations commit to reaching specific carbon footprint targets, the demand to reduce air pollution at any cost has risen. In response, there are now maintenance services that offer special services that comply with very strict environmental standards.
    The tools

    Given the relatively low-level of demand, it is not too surprising to find that there are relatively few true commercial offerings when it comes to cordless line trimmers and cordless lawn mowers. The test we have applied to determine if a tool is a true commercial offering is whether it offers a commercial warranty. Not only are there few tools in this group, but of those that are, most have quite a restricted warranty of only one year. This seems to hold true, as much as we could determine from our research, even for tools such as Makita, which have offered a two-year warranty on their other tools for commercial use for quite some time.

    A shortlist of the companies that offer a commercial warranty on line trimmers and other cordless OPE would include:
  • Echo
  • Makita
  • Hitachi Koki
  • DeWalt
  • STIHL
  • Mean Green Products
  • Echo

    Echo is one of the most interesting of these companies. It seems to be the only company which offers a full, comprehensive two-year commercial warranty on its cordless OPE (five-year warranty for domestic use). Its lineup also exclusively uses brushless motors, and it relies on a custom 58-volt max replaceable battery system.

    In the US Echo sells its cordless OPE only through the big box retailer Home Depot. Home Depot is, in fact, responsible for Echo expanding its range from petrol-powered tools to cordless electrical tools. To achieve this, Home Depot set up an arrangement between the Japanese firm Echo and the HomeLite division of the Hong Kong-based Techtronic Industries (TTI, makers of Milwaukee and Ryobi brands among others).

    Several commentators have pointed out that the Echo line is very similar to that of all-electric OPE company EGO, only with brushless motors and a commercial warranty. There has been speculation that Home Depot approached EGO with the suggestion it alter its lineup to include these specifications, and when it declined to do so, set about launching an alternative brand.

    The line-up of OPE includes a 21-inch lawnmower, line trimmer, chainsaw, hedge trimmer, and blower. The only battery available is a standard 58-volt max 4 amp-hour model. The mower features on-board storage for a second battery, which can be easily activated by the user when the other battery has run down. The combined batteries are claimed to deliver 80 minutes of total runtime.
    Echo 58-volt mower

    These tools are sold exclusively through Home Depot. In Australia, Echo does distribute one 36-volt cordless line trimmer, which carries a one-year commercial warranty.
    Makita

    As far as we can tell, Makita seems to have adjusted its standard two-year commercial use warranty down to one-year for most of its cordless OPE offerings.

    In order to both make its cordless OPE easily accessible to customers who already have an investment in Makita battery systems, Makita provides tools that use a range of different voltages and battery combinations. It even offers a small hedge trimmer that works with its 10.8-volt battery line.

    In simple 18-volt the company offers a line trimmer, a hedge trimmer, and a grass shear.

    In pure 36-volt and dual 18-volt, Makita offers line trimmers, chainsaws, and leaf blowers.

    The 36-volt line trimmers offer the only brushless motors in the lineup, and can be set to operate on one of two overall speed settings, while the trigger control offers variable speed within the scope of each setting. On the high setting, operating time is estimated at 15 minutes per fully charged battery, and this increases to 25 minutes on the low setting.

    In pure 36-volt only, the company offers a lawnmower and a cultivator. The lawnmower can make use of two 18-volt batteries instead of a single 36-volt battery through the use of a special adapter. The cultivator can connect two 36-volt batteries, with the user able to bring each of these online - using one at a time - with the flick of a switch.
    Makita 36-volt mower

    The estimated runtime of the lawnmower on a fully charged battery is 15 minutes.
    Hitachi Koki

    While Hitachi does offer some 18-volt cordless OPE, the real action for the company is in its 36-volt tools. These include two lawnmowers, line trimmers in standard and telescoping handle models, a hedge-trimmer, a chainsaw, and a leaf blower. These come with a one-year commercial warranty.

    The lawnmowers in the range were revamped in early 2015, and now feature brushless motors. They also have a special "silent mode", which decreases noise by five decibels. The smaller model has a cutting width of 340mm and the larger model cuts at 400mm. Running times in standard mode are 13 minutes and 11 minutes respectively.

    The line trimmers have standard brushed motors and deliver around 35 minutes of use on the standard setting, and 15 minutes on the high setting. Both the hedge trimmer and the chainsaw also feature brushed motors. The leaf blower has a brushless motor and offers around eight minutes of runtime on its highest standard setting.

    Perhaps the most interesting development in the Hitachi lineup, however, is its BL 36200 backpack power supply. This is a really great idea that makes the use of cordless OPE far more feasible. The backpack features wide shoulder straps and an adjustable waist belt. The waist belt includes a battery control panel, which includes a display to indicate power remaining, even while a tool is operating.
    Hitachi battery backpack

    The backpack carries a 6.3kg 36-volt battery that can provide 750 watt-hours of power. That lifts the runtime of the line trimmer, for example, from 35 minutes to well over five hours under normal use conditions.

    The BL 36200 backpack is compatible with all the 36-volt power tools, except for the lawnmowers.
    DeWalt

    The three main tools in the DeWalt cordless OPE line are a line trimmer, a leaf blower and a hedge trimmer. These make use of its 40-volt max battery system, which supplies batteries of both four amp-hours and six amp-hours. The tools definitely have a one-year commercial warranty, and this extends to cover some repairs for as much as three years.
    DeWalt warranty information

    The line trimmer features a brushless motor, as does the blower, while the hedge trimmer makes do with a standard brushed motor.
    STIHL

    STIHL makes a surprisingly advanced range of cordless OPE, and has something of a history in the field, as it introduced its first cordless line trimmers in 2009. All the tools make use of brushless motors. Tools include line trimmers, a lawn mower, hedge trimmer, chainsaw, and a sweeper. Batteries are available in three sizes.
    STIHL cordless range

    The lawnmower is estimated to have a run time of 28 minutes. Warranty on these products for commercial use is one year.

    STIHL also makes available two additional battery accessories. One is a battery belt, which enables users to place the batteries on their body, making the tool easier to handle. Like Hitachi, STIHL also offers a battery backpack, weighing in at 7.1kg. It has a capacity of 891 watt-hours.
    STIHL battery backpack
    Mean Green Products

    While the products listed above have been designed to provide as much performance as possible at set price points, Mean Green Products (MGP) has developed cordless OPE that focuses on performance first. The company began development of zero-turn mowers in 2008, using lead-acid batteries for power until switching over to Lithium-ion in 2012.

    The company released its first line trimmer in 2015. This features a backpack battery as standard. It weighs under 6kg and offers runtime of up to three hours. The battery inside the backpack is swappable. This has a battery warranty of one year, and a system warranty of 90 days.

    What MGP is most well known for, however, is its mowers. Its MGP-20 cordless push mower, for example, features a 500mm cut width, and will run for up to two hours on a single battery. The power delivered to the cutting blades is about three times that of a standard petrol-powered non-commercial mower. The unit costs around USD2500.
    Mean Green Products walk-behind mower

    MGP offers a range of larger commercial mowers as well, including a self-drive 820mm model and zero-turn ride-on electric mowers as well.
    The future

    Looking over the cordless OPE systems currently available, one thing that really stands out is that the needs of larger devices such as lawnmowers are quite different from those of line trimmers and leaf blowers.

    For non-commercial, residential purposes, it seems quite likely that mowers will eventually evolve to feature inbuilt, fixed battery systems that can offer over 40 minutes of runtime on a single charge. As these mowers are typically used once a week for half an hour or so, this would meet the needs of most users.

    The difficulty is that at the moment the current rechargeable systems with swappable batteries have become somewhat commoditised, This means lots of cheap parts and cheap technical design are available for these systems, something that would not be the case with larger, fixed battery units.

    However, we are now seeing the development of new semi-hybrid cars in China and elsewhere.
    Mild Hybrids - Wall Street Journal

    These make use of smaller battery systems than full hybrid cars. They are typically 48-volt, and rather than delivering power directly to the drivetrain, instead power all of the auxiliary systems, such as air-conditioning, accident avoidance, steering and so forth. They can take advantage of external charging, as well as regenerative braking, to provide a good improvement in fuel economy in a cost effective manner.
    About mild hybrids

    As these systems gain in popularity, we will likely seem them become increasingly commoditised. This could open the door for these systems to be included in cordless OPE tools such as lawnmowers in the future.

    A fixed battery system should be, overall, less expensive to produce. If these gained sufficiently in popularity, prices would come down to such an extent that they became an attractive offering for the commercial cordless OPE sector as well.
    Products
    Kobalt launches 24-volt tools
    The battery behind the tools
    HNN Sources
    This is what an outrunner motor looks like
    Pro Tool Reviews on the new Kobalt 24-volt range
    Click to visit the HBT website for more information
    US-based big box retailer Lowe's will soon release a new line of 24-volt power-tools aimed at the trade builder/construction market. Lowe's recently allowed some media in the US to preview the tools, which will be finally released in June 2016.

    The lineup will initially include seven tools, with a further three to be released later in the year. The original group includes an impact driver, impact wrench circular saw and a reciprocating saw. All the tools will make use of brushless motors.

    One of the challenges the designers faced was keeping the size of the battery pack around the size of a standard 18v/20v max battery pack, despite the inclusion of extra battery cells. This was solved in part by removing part of the battery circuitry, and fitting this to the tools instead.

    Kobalt has also chosen the alter the electric motor configuration on some of the tools -- notably the circular saw -- so as to make them more compact. The main means they've employed to do this involves turning the motor inside-out to some extent.

    The two main parts of a brushless electric motor are the rotor and the stator. As you might expect, the rotor is the part of the motor that rotates, and the stator is the part that remains stationary.

    The rotor is fitted with permanent magnets (most of the time). The stator is fitted with electromagnets (coils), which can vary their magnetism as current is applied. Through the magic of a controller, which switches the current off and on in the stator coils, the magnetism produced in the stator affects the permanent magnets in the rotor in such a way that the rotor is forced to turn. Usually, two coils in the stator work on the rotor at any one time, one "pushing" (repelling) the rotor and the other "pulling" (attracting) the rotor.

    (Many of the advances we are seeing in power tools today actually originate in making the controller and its workings increasingly sophisticated. Where in the past the controller was a very simple integrated logic circuit, today it has become a micro-computer, which can be programmed to achieve different effects. As it is tied into a number of sensors, it can also provide lots of feedback about what is actually happening inside the motor at any time, or over a time period.)

    If you think about that design a little, one thing that becomes evident is that you could have the rotor inside the stator, so that the coils work inwards (sometimes called an "inrunner" motor), or you can just as well flip it the other way, and have the rotor surround the stator, with the coils working outwards instead (sometimes called an "outrunner" motor).

    As with just about everything to do with engineering, each arrangement has its advantages and its disadvantages. One of the advantages of the inrunner version (which is the more common) is that it helps with one of the big enemies of the electric motor -- heat. With the rotor at the centre of the motor, the coils of the stator where much of the heat gets generated, are exposed. They can radiate heat more easily, and it's a simpler matter to get a fan to push air over them as well.

    The outrunner setup, however, has the coils on the inside of the solid rotor. That means that the generated heat will be more contained in the motor.

    Looking beyond the heat dissipation, there are two advantages you get from the slightly less usual outrunner setup. One has to do with something called "cogging", which affects how roughly the motor runs as slower speeds, and is a little complex to explain.

    The other, big advantage is that, given two electric motors, one an outrunner and the other an inrunner, of the same specifications and the same diameter, the outrunner motor will be capable of producing more torque. That's because the turning "push" of the motor is generated at a longer distance from the motor's centre, as the rotor is on its outside, and not close to the centre.

    What that means effectively is that if you need a certain amount of torque from a motor, the diameter of the outrunner motor you need to achieve that will be smaller than the diameter of the necessary inrunner motor.

    So, by using outrunner motors in some of its 24-volt tools, Kobalt has added power, but kept the size down. What will be interesting to see is how clever they have been about heat management.
    Testing

    Some of our favourite tool testers, the journalists at the US-based website Pro Tool Reviews, had some hands-on time with the first production test release units from Kobalt. You can read their very interesting review at the link below:
    Kobalt 24volt - Pro Tool Reviews

    Overall they are cautiously excited about these tools. It is partly about the increased power, but it is also evident the tools have been carefully designed as well. The circular saw has been designed to cut to the maximum depth permitted by its 165mm blade.

    The impact driver has a special "finish" mode. When activated, this shuts the tool down one second after enough resistance has been encountered to activate the impact action. This makes it easier to use the impact driver to set screws "just right" into media such as plasterboard. The switch triggers a time-activation -- like the rear window defroster on many cars -- that deactivates itself after ten minutes.
    Strategy

    Lowe's says that the development of these new tools has taken the company two years to complete, and that is certainly believable. It is likely, though, that the strategy behind the development of these tools is three or four years old.

    That strategy has to be seen in terms of how it helps Lowe's to compete with its main rival in the US, the Home Depot. And that means, due to the close association between the two companies, how Lowe's plans to compete with Techtronic Industries (TTI), which supplies Home Depot with Ryobi, Milwaukee and Ridgid power-tools.

    One way of viewing this new strategy by Lowe's is to see it as introducing competition through additional segmentation of the market. While both Home Depot and Lowe's do compete largely in terms of an unsegmented approach (along the lines that Bunnings does in Australia), it is true that competition in the "professional" (tradie) market tends to be a little bit more segmented, due to how specialised professional work can be.

    While TTI has worked hard to build a broad, unsegmented appeal into both its DIY-oriented Ryobi brand and its professional-oriented Milwaukee brand, this move by Lowe's is designed to appeal to a very specific, relatively narrow segment of professionals. These would be builders who are working with structural framing materials, where having some extra power in a tool can make a big difference to the time it takes to complete a job.

    This is of particular importance to Lowe's at the moment, as Home Depot has taken a big step into the professional market by acquiring Interline Brands. This is a company that is well known for providing maintenance, repair and operations (MRO) products. Lowe's has, in the past, been ahead of Home Depot in this area.
    Companies
    Cost cutting delivers profit at BlueScope
    BlueScope's Colorbond product helped it to deliver strong half year results
    Fairfax Media
    North Star is now 100% owned by BlueScope Steel
    BlueScope Steel has outlined further cost cuts
    Subscribe to HNN weekly e-newsletter
    BlueScope Steel has reported a 47% jump in underlying interim profit to AUD119 million, buoyed by the weaker Australian dollar and new home building. But aggressive cost reductions in Australia were the key to the result.

    Chief executive Paul O'Malley said tough decisions, including 500 job cuts at its Port Kembla steelworks, underpinned a dramatic profit turnaround for the steel maker.

    Six months ago, the company was poised to shut down operations at its flagship Port Kembla steelworks in NSW as steel prices slumped amid weaker demand and a supply glut in Asian export markets. O'Malley said that the 500 Port Kembla workers who lost their jobs, and the remaining workers who agreed to wage freezes, deserved to be thanked. He told Fairfax Media:
    It was a tough six months but it is fantastic that plan A [to keep the Port Kembla blast furnace running] is successful ... economically it is the right thing for us to do.

    The steel maker also received a $60 million payroll tax holiday from the NSW government to keep the fires at Port Kembla burning.
    Residential and reno sales

    Stronger sales to the Australian residential housing market, buoyed by new home construction and an increase in home alterations and additions, also improved earnings in the Australian steel business.

    BlueScope dispatched 372,000 tonnes of steel to the domestic dwelling segment during the half -- the highest level in five years.

    Local residential demand is a key driver of higher margin coated and painted product sales such as Colorbond. O'Malley said the lower Australian dollar is also making local product more competitive against imports.
    Sales revenue

    The company's sales were up 2% to AUD4.43 billion for the six months ended December 31, up from $4.33 billion in the year-earlier period because of stronger sales into China.

    Statutory net profit jumped 116% to AUD200.1 million from AUD92.7 million a year ago. The AUD35 million of proceeds from the McDonald's Lime sale and the AUD703 million integration of the North Star steel business were positive one-off boosts to statutory profit.

    North Star is a BlueScope subsidiary in the US and is now 100% consolidated into BlueScope's accounts, pushing both its sales and net profit figure higher. O'Malley said:
    We have moved to full ownership of North Star, recognised as the best steelmaking business in the US. It has a clear pathway of incremental growth ahead of it. Equally, our focus on costs and lifting the performance of steelmaking operations in Australia and New Zealand is paying off.

    The statutory result was negatively impacted by AUD567.5 million of impairments against BlueScope's New Zealand and Pacific Steel and Australian Steel businesses.

    O'Malley said further cost reductions are planned for its Australian and New Zealand operations. He said:
    Our relentless focus on cost reductions in Australia must continue and we are now targeting AUD270 million in financial year 2017.
    We also continue to target at least NZD50 million (AUD45.3 million) of cost reductions in New Zealand in financial year 2017 and we have commenced a sale process of the Taharoa export iron sands business.

    Its Taharoa iron sands export business is struggling with the low iron ore price. BlueScope's New Zealand business lost AUD47.1 million of EBIT in the half.

    BlueScope cost savings target to AUD270 million by 2016-17 is up from AUD200 million.
    Steel market

    Excluding one-off charges, underlying earnings before interest (EBIT) and tax jumped to AUD230.1 million, up AUD59.1 million.

    The boost in EBIT comes despite further weakening of already depressed steel prices during the past year. As Chinese demand for steel has plummeted, the country has been ramping up its steel exports, driving down steel prices.

    O'Malley said that China exported 120 million tonnes of steel last year, but he believes the country is finally curtailing production. He said:
    A year ago a lot of the Chinese steel companies were making money. Today almost none of them are making money and the losses are in the multi-billions.
    Companies
    Dynamic Paint range in Australia
    Dynamic is known for its environmentally friendly products
    HNN Sources
    Tenaru Timber & Finishes is also the distributor of timber care brand Sikkens
    Dynamic Paint Products is a family owned Canadian business
    Subscribe to HNN weekly e-newsletter
    Tenaru Timber & Finishes has become the distributor for Canadian paint tools and accessories manufacturer, Dynamic Paint Products. The company is building on its strong coatings experience as the distributor of timber care brand Sikkens and metal care paint range Hammerite.

    The Dynamic range adds to its portfolio and expertise in paint and related products.

    Recognised globally for products that deliver on both innovation and value, Dynamic has been supplying paint accessories for over four decades. Products available in Australia include high quality brushes and rollers for DIYers and professional painters, trays, extendable poles, caulking guns, blades, scrapers and wall fillers, as well as protective wear and drop cloths.

    The Dynamic line of products also meets the needs of those seeking environmentally friendly products with a selection of paint rollers and trays made from recycled materials. This includes the world's first roller made from 100% post-consumer PET (Polyethylene terephthalate) plastic. Brian Hamilton, managing director of Tenaru Timber & Finishes said:
    We are delighted to be working with Dynamic. The partnership is a natural fit, and positions Tenaru as a one-stop shop for all Australian painting needs.

    Related:
    Maintaining decks is easy now - HNN
    Companies
    Write-down won't stop Victa
    Victa has a specialist range of equipment that will help maintain its marketshare
    HNN sources
    Briggs & Stratton supplies a different range of Victa models to Bunnings
    Victa makes up around two thirds of the Australian business of Briggs & Stratton
    Subscribe to HNN weekly e-newsletter
    The Australian arm of Briggs & Stratton, owner of Victa lawnmower brand, made a loss of almost $11 million in its latest financial year because of a big one-off write-down. However managing director Tom Rugg said this year's profits will be strong and the exit of the Masters hardware chain will bolster its position.

    Rugg, who runs Briggs & Stratton Australia, made a deliberate decision for Victa not to be stocked in the loss-making Masters stores. Instead he focused on supplying a different range of models to Bunnings, Mitre 10 stores, and about 500 specialist lawnmower outlets.

    Briggs & Stratton Australia, the local arm of the United States firm which bought Victa in 2008, generated a 11.3% rise in revenues to AUD93.7 million in 2014-15, but the write-down of AUD13 million pushed it to a bottomline loss of AUD10.91 million, compared with a net profit after tax of $576,194 the year earlier.

    Rugg said Victa's market share sits at around 45% in Australia and sales have gained momentum through the introduction of new models with push-start batteries and mowers that are about 40% quieter than traditional mowers.

    He said the first seven months of trading of 2015-16 have been strong. He told Fairfax Media:
    We're having a very good year in sales. Our operating profit is good. It will be a strong year.

    He did not to go into specifics about the large AUD13 million impairment that hit the financial results for the 12 months ended June 28, 2015 and which have been lodged with the corporate regulator. He said, "It's a non-cash charge."

    Briggs & Stratton sells more different models through Bunnings, than it does in Mitre 10 and in the specialist mower outlets. Rugg believes the exit of Masters will just strengthen the company's offer.

    Victa makes up around two thirds of the Australian business of Briggs & Stratton, which acquired the lawnmower brand in 2008 from ASX-listed GUD Holdings, for AUD23 million. Briggs & Stratton also sells a range of engines, pumps, brush cutters and generators.

    Rugg says the overall lawnmower market is growing at around the same rate as Australia's GDP but it is a very competitive industry. Along with the growth of cheaper Chinese imports, the lawnmower market has also been affected in the past few years by the steady growth in householders hiring gardening service businesses such as Jim's Mowing to mow lawns and trim edges. This means the end of a lawnmower as a necessity for many of them.

    Sharp growth in the number of people living in apartments and multi-story dwellings in Australia's cities and a trend toward some householders planting native plants and steering away from lawns is also a factor.

    But Rugg said Victa has a specialist range of equipment for professional gardeners that will be able to tap into the market. He said:
    We're getting our fair share there.

    A report from IBISWorld in December, 2015 outlined that the gardening services industry in Australia was worth AUD2.9 billion annually, and it forecast growth of 2.6% in 2015-16 where "much of the industry's demand comes from time-poor, high-income households that can afford to pay a high price for services they do not have the time, or inclination, to undertake themselves".
    Products
    Insect repellent apparel
    The Insect Shield Repellent range is designed to provide long-lasting and effective personal insect protection
    PR Web
    The bandanas were first introduced in 2015
    Insect Shield blankets have built-in, EPA registered protection
    Click to visit the HBT website for more information
    There has been renewed interest for Insect Shield from the lawn, garden and hardware industry in the US as retailers seek to provide additional methods of insect protection for their customers in the wake of recent concerns about the Zika virus and other dangerous insect-borne illnesses.

    In 2015, Insect Shield introduced the hardware industry to an assortment of apparel and gear accessories including outdoor blankets and bandanas with built-in, Environmental Protection Agency (EPA) registered protection. They are designed to provide long-lasting, effective and convenient personal insect protection.

    The product was adopted as a warehouse item by both Do it Best and Ace Hardware. In response to strong demand, Insect Shield has expanded its offering to include hats and socks.

    Most recently, Insect Shield has been added as drop-ship items for its newest co-op partner, True Value Hardware. The new collection generated a lot of interest at the 2016 True Value Spring Reunion in Houston, Texas. It will also be shown at the Ace Hardware event in Las Vegas and Do it Best Market in Indianapolis. Mark Klonowski, automotive/sporting goods merchant at Ace Hardware said:
    Insect Shield blankets and bandanas, now stocked in the Ace Retail Support Centers, help protect against the insects that can carry dangerous diseases such as Lyme disease and the Zika virus.

    Insect Shield products have also earned the coveted Members' Choice Award from a national panel of Do It Best member-owners at its event in October 2015. Trisha Hinen, manager of divisional promotions for Do it Best Corp said:
    Our markets are important in bringing exciting new products to our independent retailers that can help them expand their merchandise mix and increase their sales. The New Idea Exhibit is a valuable source for identifying the next breakout product stars for our retailers. And Members' Choice Award winners like Insect Shield can certainly help them compete and win in their marketplace.
    Products
    Meeting mechanical needs
    The quarter inch drive, compact Multi-Function Ratchet from GearWrench
    GearWrench
    The professional end-user can turn loose fasteners with speed and accuracy
    The Multi-Function Ratchet also comes as a part of a kit
    Click to visit the HBT website for more information
    GearWrench has introduced the quarter inch drive, compact Multi-Function Ratchet (MFR).

    The MFR dual-flex-head is designed to get users into those awkward spots that ordinary ratchet wrenches can't. This is because MFR can be locked into seven different positions and unlocked for angled access. With a slim-line quarter inch drive on one end and a quarter inch hex bit-driver and holder on the other, the MFR can save time.

    The GearWrench thumb-wheel allows the user to start and turn loose fasteners with speed and accuracy. The MFR has also exceeded torque requirement standards, set by the American Society of Mechanical Engineers.

    Alongside the flex-head and the thumb-wheel are other features including a 72-tooth count, quick release drive tool retention, and a full polish chrome finish.

    For a faster, stronger and more efficient ratchet, users need look no further than the quarter inch drive, compact Multi-Function Ratchet. It is available now in two different sizes and as a part of a kit.
    News
    HI News Vol. 2 No. 3
    Download the latest HI News, issue number three
    HI News Vol. 2 No. 3
    Bunnings' store map, first half 2015-16
    Ace Hardware delivers another year of growth
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/hinews-2-3.pdf

    In this issue, we take a closer look at what it means to be an independent hardware retailer today. This feature includes revisiting the recent histories of Mitre 10, Home Timber & Hardware Group as well as Bunnings. Is there an alternative to private ventue capital ownership of vital independent hardware retail assets?

    Successful US retail co-op Ace Hardware delivers annual growth again and proves that independents can be successful competing against big box retailers. Lowe's robots actually serve people in the store and there is a last minute bid for the UK's Home Retail Group.

    Local e-tailer Milan Direct enters the renovation market and we include the latest statistics on renovations from the Housing Industry Association.

    Other stories include Harvey Norman's first half results boosted by the property market and a profit plunge for Hills.

    There is a regular update on big box retailers and job opportunities from Dulux, Blackwoods and Selleys. Sony's multifunctional light for smart homes is also featured.
    Editorial
    2016 will challenge independents
    Forces affecting independents in 2016
    HNN Sources
    ABS statistics on entries and exits
    Mitre 10 results
    Give to Amnesty International
    What, exactly, does it mean to be an "independent"?

    2016 is shaping up to be a year when, more than at any time for the past 12 years, the hardware/home improvement retail industry is set to change. The changes will bring up new questions and new challenges. The entire nature of what it means to be an independent could be, today, on the verge of being significantly redefined.

    There are two main triggers to this. The exit of Woolworths from home improvement means that the Home Timber and Hardware Group (HTHG) is set to be divested. Also, Metcash's need for further funds to invest in its transformation plan (aimed at securing marketshare of IGA supermarkets) means it would willingly divest Mitre 10 if a good opportunity arose.

    These looming changes bring up a number of issues. If these hardware retail brands do shift from corporate to private capital ownership (perhaps in a combined company, as some predict), how do they resolve the basic conflict of interest that arises between the needs of financial investors and the needs of the industry itself?
    Forces affecting independents in 2016

    Financial investors want to receive the highest profit in the shortest possible time for the least possible risk. Yet what the independent part of the Australian home improvement retail industry needs is steady, sustained investment and development over the next four to five years. It needs marketing, branding, better-managed product development and supply-chain, education in merchandising, and close attention to pricing.

    This tension between what investors want and retailers need has been highlighted by the recent implosion of retailer Dick Smith Holdings (DSH). Anchorage Capital Partners bought DSH from Woolworths in September 2012 for $20 million. The company was floated on the Australian Stock Exchange at a value of $520 million 15 months later. A year after the float, Anchorage had sold its holdings in the company, for the most part above its $2.20 float price. In February 2016 DSH went into liquidation.

    It's easy to see how something like this could happen to home improvement retail if HTHG and/or Mitre 10 ended up being acquired by financial investors. The problem is it wouldn't just be individual private investors who were hurt in the end, as was the case with DSE. It would be independent store owners who would really suffer if such an enterprise collapsed.
    Independent industry overview

    Just what does the independent home improvement industry look like, and how is it doing currently?

    According to the most recent figures from the Australian Bureau of Statistics (ABS), during FY 2014/15 in the non-employing (family, sole proprietor) hardware retail sector, 227 entered, and 350 left, leaving 1788 in business at the end of the financial year. For those employing between 1 and 20 employees, there were 230 entries and 221 exits during FY 2014/15, leaving a total of 3507 businesses. For those employing between 20 and 199 employees, there were nine exits and no entries, leaving 211.

    Some consolidation did occur during FY 2014/15, in other words, and this took place in the small, non-employing sector of hardware retail.
    ABS statistics on entries and exits

    Of the major buying groups in Australia, we know from numbers released by Metcash that Mitre 10 during the first half of 2015/16 lost 19 Mitre 10 stores, and gained six, to give it a total of 314. The company also has 69 True Value stores, for a grand total of 383. The company claims around 400 additional stores depend on it for supply.

    In rough numbers, HTHG has 275 Home-branded members, and 150 Thrifty-Link members, for a total of 425. HBT has around 585 members in its two groupings of hardware and industrial & tools. That means that these three groups have a total of around 1800 businesses affiliated with them.

    Estimates vary widely as to how much of the independent home improvement market the affiliated retailers control, but an accepted conservative figure would suggest something more than 50%.
    The situation

    To come to terms with the shifts that will happen over the next two years, it is vital to work out what is going on at the present time. To do that, we need to look at two areas:
  • How did this happen? Bunnings took considerable time to develop and implement its successful business model. In the beginning, the consumer market wasn't so much Bunnings' to win, as it was Mitre 10's to give away.
  • What happens next? With the demise of Masters, and both HTHG and Mitre 10 possibly up for acquisition, how does the brand-affiliated independent home improvement retail industry move forward? What are the possibilities?
  • How did we get here?

    The most outstanding feature of brand-affiliated independent home improvement retailers in Australia is their focus on trade sales rather than DIY retail sales.

    To any outside observer, this seems a curious choice. Retail DIY is a large and growing sector of the market. Above all, the sector has a vast retail margin advantage over trade sales. Also trade sales fluctuate in response to housing activity and dwelling prices. Retail DIY sales are also affected, but not by nearly as much.

    Added to this is that there is considerable international experience that not only can brand-affiliated independents survive in retail DIY, they will actually flourish. Cooperatives such as Ace Hardware in the US have proved the viability of the retail market.

    The most common explanation offered for pursuing trade rather than retail sales is that Bunnings has become a dominant competitor in the retail DIY area. In the face of this, smaller retailers have had to retreat to trade sales in order to survive.

    Independent retailers see themselves as "hardware experts", able to provide super-service, which currently only tradies and "serious" DIYers really appreciate. Independents see retail DIY consumers as being unreasonably dazzled by the low prices offered by Bunnings.

    In the case of HTHG, this trade focus is understandable. The Danks group on which HTHG is built had a long-standing focus on trade. Additionally, as part of the Woolworths/Lowe's hardware operation, it needed to stay away from standard retail DIY, as that was where Masters Home Improvement was expanding.

    The case for Mitre 10 is quite different. Mitre 10 did make a big push into retail DIY sales, from 2002 through to 2007. The program was developed and implemented by Mitre 10's then-CEO Frank Whitford. When he left in 2005 it was carried on by his replacement, Bernie Bicknell.

    It did not work out. The borrowing needed to implement the plan led to the near-collapse of Mitre 10 by 2009, and its eventual acquisition by independent grocery wholesaler Metcash.

    This is not something that Mitre 10 executives ever mention. Instead, when pushing for independents to join the brand, they tend to portray Bunnings as a ruthless -- and even slightly unfair -- competitor which cannot be resisted unless independents join together.

    While these attitudes are understandable, they may not be the best basis on which to build future strategies in the changing world of home improvement retail today.
    The Bunnings myths

    The two main myths that persist about Bunnings and its market dominance are that its achievements are based on a kind of "big business bullying", using large amounts of capital to takeover sections of the market, and that Wesfarmers somehow just got lucky with the retailer.

    Neither of these are true, of course. It's worth taking a quick look at the history of Bunnings under Wesfarmers to understand what really happened.

    Wesfarmers bought 20% of Bunnings in 1987, then purchased an additional 24.6% stake in 1992, effectively assuming control over the business. This was followed up by the purchase of the bankrupt McEwans hardware retailer in 1993 for $48 million, which gave Bunnings a retail presence in every Australian state except Tasmania.

    Newly appointed Wesfarmers managing director Mike Chaney wanted to transform the Bunnings business to be like the US-based big-box Home Depot. It was not a strategic move initially welcomed by the board of Wesfarmers. As the now managing director of Bunnings UK, Peter (PJ) Davis recalled while speaking of that time in a 2004 interview, Wesfarmers held a three-day retreat in Warburton in 1993, consisting of 38 executives, consultants and "ideas" people. While the ideas were new, the formula that would become the modern Bunnings was already well developed, as Mr Davis describes it:
    We saw our main demographic as young, growing families, and came up with things like playgrounds for the kids and cafes that would serve cappuccino, a hire shop and a special-order counter where customers could get items that might not be in stock or in colours not stocked.
    $4bn candy store gets its nuts and bolts right - The Age

    The next step was to open the first true warehouse store, which happened the next year, 1994, in the building of a former golf ball factory in Sunshine, Victoria. This was quickly followed by the opening of three more warehouse stores in Victoria. As the CEO of Bunnings, John Gillam, mentioned during a briefing regarding the acquisition of UK-based retailer Homebase by Wesfarmers, each of those stores was significantly different from the other, giving the company an opportunity to fine-tune its operations based on a wide range of data.

    While much was planned, the company also made discoveries as it went. According to Mr Davis:
    We also decided community involvement was important, that we should allow community groups to use this great facility to raise funds. We thought we would let them set up lamington stalls. Then a local scout troop asked if they could have a sausage sizzle, and we have never looked back.

    By 2001 Bunnings had grown to control around 6.5% of the Australian hardware market. It still trailed its main rival, the Mitre 10 group, which held around 12% of the market. In June of 2001, Wesfarmers made a bid for Howard Smith, which held a number of assets, including the hardware retail brands Hardwarehouse and BBC Hardware.

    The original $2.2 billion bid eventually became $2.7 billion. With the purchase Bunnings became the largest single retailer in the Australian market, with a 13% share.

    The next major move came when Wesfarmers announced in August 2004 that Mr Gillam had been appointed as the managing director of Bunnings, with the former managing director, Mr Davis, becoming the expanded division's new chief operating officer.

    In the five years that followed, Bunnings grew rapidly, in part through competitive moves such as the acquisition of five Mitre 10 stores in 2008. By 2009 it had completely outpaced all of its rivals.

    As even this brief history shows, far from "getting lucky", or simply dumping a lot of capital in its home improvement retail business, the early years of Bunnings at Wesfarmers were spent in a long, slow process of development -- some 10 years -- while the company worked out how to run a big-box home improvement retailer in the Australian environment.

    It required a lot of investigation, a lot of experimentation and a lot of very hard work. It also required a willingness on the part of its parent, Wesfarmers, to take on considerable risk in investing in a business model that had worked overseas, but never before scaled up in Australia.
    Mitre 10's retail strategy

    The purchase of Howard Smith by Wesfarmers in 2001 acted as trigger on Mitre 10. The company underwent a rapid rebranding, and by 2004 it had launched an entire new expansion program, with a clear focus on growing its retail DIY business.

    The response began with rebranding, and then extended to Mitre 10 launching a set of carefully differentiated stores, described in an AdNews article from 2004 like this:
    After conducting research into consumer shopping habits, Mitre 10 is converting its stores into four specific formats: Mitre 10 handy stores, for everyday hardware needs; solution stores, designed to appeal to women and home decorators; home & trade, for builders and tradesmen, and the MEGA stores, for everyone.
    The MEGA war in hardware - AdNews

    The MEGA stores, in particular, were designed to compete directly with the warehouse stores of Bunnings. From the same AdNews article:
    Mitre 10 expects 60% of MEGA shoppers to be women, so the stores are brightly coloured and easy to navigate, and include kitchen and bathroom displays, CAD (Computer Aided Drafting) systems to help with interior design, as well as consultants and installation services.

    In an interview with AAP, Mr Whitford expanded on the basic idea:
    What we do know is more than 40% of females in a recent survey have used a power tool or bought a power tool in the past 12 months out of more than 1000 people surveyedEIt showed that women are more and more doing DIY (do it yourself) activities and we think that's growing, we think that's going to grow enormously. The second thing is women very often are the decision-makers in house renovations in nearly 90% of the cases ... if we want to get to the decision maker, we think we need to get to the female.

    The financial goals for the MEGA stores were quite high. As an article in Fairfax Media explained in May 2002:
    Mitre 10 chief executive Frank Whitford said he planned to have 30 warehouse-style hardware stores operating within five years, a move he said would "generate over $500 million in turnover".
    Hardware war - The Age

    To build out the stores, Mitre 10 had to seek financing. It went to Investec Wentworth Private Equity, which invested $20 million, with $5 million used to establish the Mitre 10 Mega Property Trust, which would own some of the properties, with plans to list this independently in the future.

    The new strategy did not work. By 2009 Mitre 10 had crashed to a 5.9% market share, while Bunnings had grown to an 18% share. Mitre 10 was in serious financial trouble. Its recorded profit for 2007/08 was just $1.3 million, and in 2008/09 it reported a loss of $11.7 million, dragged down by the need to close and write-off its underperforming, corporate-owned stores.

    An ABC reporter described the overall situation Mitre 10 faced in December 2009 like this:
    Mitre 10 is in a mess. Sales are falling, profits are evaporating and underperforming stores are being closed. Only the Commonwealth Bank's generosity in not calling in a $55 million loan appears to be keeping the company solvent.
    Metcash looks to turnaround -- ABC broadcast transcript

    By the end of December 2009, Metcash had made an offer of $55 million for 50.1% of Mitre 10, with an option to purchase the remaining 49.9% in two years time. Mitre 10 accepted that deal over an alternative offered by private equity firm Anchorage Capital Partners.
    MEGA reminders

    Of the 30 MEGA stores planned for Victoria, only five ever became operational. Four of the five have ceased trading, with the final holdout, the Hardy MEGA in Packenham, closing its doors on 11 August 2015. The site is now occupied by a Bunnings Trade store operation.
    Harday Mitre 10 Mega

    The fifth, former MEGA store, Womersley's Mitre 10 along Springvale Road in Chelsea Heights (VIC) continues to trade, but let go of its MEGA branding in 2011.

    When HNN visited the store recently, we found it to be in a state of quite advanced disrepair, though posters at the entrance promised this would be temporary, with a refurbishment soon to come. Considerable portions of the store had, in fact, empty shelves wrapped with black-and-yellow "keep off" tape, and areas such as its bathroom display were filled with cardboard boxes. The only two places of order seemed to be the neat display of Makita cordless tools, and the STIHL display area. (With all sincerity, HNN does really wish the store and its owners the very best luck with their eventual refurbishment.)
    Womersley Mitre 10, Victoria
    Competition or strategy?

    In the standard narrative, the reason for the decline of Womersley's Mitre 10 can be found just a six or seven minute drive down Springvale Road. Not only is there a large format Bunnings warehouse, but straight across the road there is a Masters store as well.

    But does the "standard narrative" really hold up? Bunnings may be a very good competitor, but what is just as evident is that those who have sought to tackle the company head-on have done so without understanding just how difficult addressing the changing retail DIY market is in Australia.

    In the end, the mistake Mitre 10 made, and then Woolworths repeated just a few years later (with more capital) was not underestimating Bunnings, but overestimating their own capabilities.
    Mitre 10 today

    As mentioned above, Mitre 10's missteps in trying to enter the retail DIY market led the company to accept a buyout offer from Metcash at the end of December 2009. The offer was for $55 million (which repaid its outstanding loan) to buy 50.1% of Mitre 10, with an option to purchase the remaining 49.9% in two years time.
    The Anchorage alternative

    The Metcash offer was accepted over an offer from Anchorage Capital Partners, which was seeking a 40% to 49% stake in Mitre 10, rather than control. Its plan for the future of the retail group was substantially different from that of Metcash. It would aim, the company said at the time, to make Mitre 10 stores the equivalent of "hardware convenience stores", with an emphasis on development in more urban areas. Anchorage also wanted to make Mitre 10's product offering more "coherent", and to develop some categories which had not been used to their full potential, especially kitchens and plumbing.

    Anchorage's aim, as stated in December 2009, would have been to develop Mitre 10 over the next two to three years, and then consider either a trade show or an initial public offering on the Australian Stock Exchange (ASX).
    Metcash ownership

    Then managing director of Metcash, Andrew Reitzer, characterised the choice that faced Mitre 10 as being between a long-term wholesale partner in Metcash, and a short-term financial partner in Anchorage. In an interview with AAP, Mr Reitzer pointed out that Metcash had persisted with its IGA grocery business for 11 years to bring it to a 20% share of its market, and he promised a similar commitment to the hardware business.

    Metcash completed the initial acquisition in March 2010, then went on to acquire the rest of Mitre 10 in July 2012, paying $46.5 million.

    Shortly after the full acquisition of Mitre 10, Metcash began to suffer deterioration in its earnings from the company's core grocery supply business. Mr Reitzer exited the company in June 2013, and was replaced by Ian Morrice in the managing director role.

    In March 2014, Metcash announced it was entering into a one-year transformation plan, which would require it to, among other things reduce its dividend payments. In December 2014, the company released poor half-year results, and announced a dividend cut of more than 30%. It also suggested that its one-year transformation plan would take 18 months to complete.

    The full-year results released in June 2015 continued to be poor. An announcement that the company would suspend further dividend payments helped to send its share price to new lows.

    Metcash did manage to sell off its automotive businesses to Burson Automotive for $275 million in June 2015. This enabled it to pay off debt, and boost its reported profit for the year.

    Half-year results released in December 2015 showed a continued decline in underlying EBIT for Metcash. However, the share price recovered from lows of around $1 to trade in a range around $1.70.
    Share price for Metcash over the past year

    Results for the Mitre 10 portion of its business are shown in the chart below.
    Mitre 10 results
    Metcash/Mitre 10 outlook

    As Metcash enters the third year of its one-year transformation plan, its prospects seem brighter than they were a year ago, but the company remains in peril. There is really no end date on how long its current "transformation" will take. Metcash has gambled on its ability to lift the performance of its retail network close to that of the two major supermarket chains, Woolworths and Wesfarmers' Coles.

    The difficulty is that, as those two chains go head-to-head, the competitive pressure continues to build. Added to this is the expansion of discount chain Aldi to areas such as South Australia, where Metcash's IGA chain is thought to be vulnerable.

    In light of this, there has been persistent speculation that Metcash will seek to spin off Mitre 10. As with its divestment of its automotive businesses, such a move has two benefits. It provides additional capital with which to reduce the company's debt burden, and it also reduces the company's assets, thus lessening the chance that, should its share price plummet below $0.90, a hostile takeover would take place.

    As for Mitre 10 itself, its loss of 19 stores in its network, offset by the gain of six more, is likely a consequence of a lack of investment by its parent over the past two years. For example, during much of FY 2014/15 there seemed to be a dire lack of marketing budget for the brand.

    The company has suggested that its "Sapphire" store program might offer some hope that the performance of the overall network could be improved. As HNN has commented in the past, the Sapphire stores are really quite good efforts, but there is nothing particularly spectacular about them.
    Can Sapphire tip the balance for Mitre 10? - HNN

    Slightly ironically, if they are modelled on anything, it would seem to be the kind of "hardware convenience store" that Anchorage had suggested when it made its takeover offer in 2009. In fact, Mitre 10's store of the year for 2016, the lovely Sunlite Mitre 10 store in Paddington (NSW), could serve as a model for that exact concept.
    HTH Group

    After the dramatic upheavals of the Mitre 10 story, the HTHG narrative seems somewhat calmer -- this despite the big drama of Masters Home Improvement playing out. Under the considered guidance of its general manager, James Aylen, HTH Group has managed to steadily improve its fortune, carrying on the tradition of profitable business established when it was formerly the independent Danks hardware retail group. Results for the three years where we have reliable numbers are shown below:
    HTH Group results

    Unfortunately, somewhat like Mitre 10, there are indications that HTHG also was denied the kind of funding it likely deserved, as Woolworths' loss-making Masters venture made further investment in hardware difficult. HTHG did manage, nonetheless, to launch one of the better TV advertising campaigns in the industry, and it is a pity they did not have the funding to continue with this. Even so, HTHG did manage to creatively extend that campaign onto the internet, producing a truly humorous Christmas campaign.
    The future

    With HTHG definitely for sale on the market as Woolworths and Lowe's exit the hardware business in Australia, and a sale of Mitre 10 seen as a positive by its owner Metcash, it's not such a surprise that the financial markets would suggest combining the two in some way.

    It's not a surprising suggestion, but what has been surprising is the poor level of analysis offered regarding the proposition by media, financial analysts and even some hardware retail stalwarts. There has been the suggestion, for example, that by combining the two operations, and coming up with revenue of close to $2 billion, such a newly formed company could "take it" to Bunnings and pose a real threat.

    Not only is Bunnings likely to post revenue for the current financial year of $10.4 billion, it is also worth taking a look at the EBIT ratios as well. EBIT ratio is the EBIT divided by the total revenue, and it provides a measure of the earnings efficiency of a business. Mitre 10's EBIT ratio goal -- only its goal -- is 3%, and it's likely HTHG has a similar target -- which neither retailer has yet reached.

    Bunnings has a steady EBIT ratio of around 11%. In part that is reflective of the fact that Bunnings and the two independent brands are really in slightly different businesses. Bunnings is a pure retailer, while Mitre 10 and HTHG are wholesale suppliers to hardware retailers. It is also reflective, however, of the different markets they pursue. Bunnings is largely all about the high-margin retail DIY market, while Mitre 10 and HTHG are predominately in lower margin trade businesses.

    You can add to that the fact that, as mentioned above, Bunnings is about to expand its total sales by an additional $2 billion, through its purchase of the UK-based home improvement retailer Homebase. Where $12.5 billion plays $2 billion, it is easy to see who has the advantage.

    In fact, should the combination of Mitre 10 and HTHG ever actually take place, it is quite likely that Bunnings will simply see this as an opportunity to take additional market share away from them, without triggering any anti-competitive tripwires. It's worth remembering that Bunnings in Australia now has a new managing director, Michael Schneider. Mr Schneider will be keen to continue the kind of growth that Mr Gillam has made a regular feature of Bunnings' results.

    As with the unfortunate events around Dick Smith Electronics, the only real beneficiaries of such a merger and listing would likely be the private capital companies that help set it up, and some initial investors who sell out before an almost inevitable collapse comes about.

    Though, of course, there might be one other beneficiary as well. A private equity controlled HTHG/Mitre 10 would need an operating supply-chain. Metcash could find itself replacing Mitre 10 with a $2 billion supply contract, providing it with steady revenue at the cost of almost no risk.
    The way forward

    What is really needed is not quick fixes or superficial strategies. The first decision that Mitre 10 and HTHG -- or their prospective future owners -- really need to make is whether the retailers can actually survive for long by primarily focusing on trade sales. If so, then there is a great deal of work that needs to be done in improving the efficiency of that business.

    If instead they decide it is worth expanding into the largest and most profitable sector of the business, retail DIY, then they need to develop a strategy that will enable them to work out the best way to grow that portion of their business. At the moment, DIY is treated as a kind of extension of trade business. As the Bunnings experience shows, while this might have been true 20 years ago, it is no longer the case.

    If we were to say what the difference is, how this market has evolved, we might point to the phrase "hardware retail". Not so long ago, it was the "hardware" part that was overidingly important -- the need for specialised knowledge. Today, the second word, "retail", has equal importance. "Retail" in the sense of actively discovering and meeting the needs of the customer.

    This could mean that the best partner for Mitre 10 or HTHG (or both together) would be not a wholesale operation or private equity, but a solid retail-based company looking for an expansion opportunity. Certainly, in terms of putting these operations on the market, there would be a larger range of partners to choose from in that category.

    It could lead "independents" towards developing a whole new identity that better matches the current marketplace, and helps to better secure their futures.

    Until next time,

    Betty

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

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    Bigbox
    Wesfarmers results H1 FY 2015-16
    Bunnings results 2016H1
    Yahoo! Transcripts
    Wesfarmers results 2016H1
    Store map for Bunnings
    Click to visit the ITW website for move information
    Wesfarmers announced its results for the first half of FY 2015/16 on 25 February 2016. The company reported that its operating revenue was $33.5 billion, up by 4.7% on the previous corresponding period (pcp), which is the first half of FY 2014/15.

    Overall earnings before interest and taxation (EBIT) also rose on the pcp by 1.6%, coming in at a total of $2.11 billion. Net profit after taxation (NPAT) was declared at $1.393 billion, an increase of 1.2% on the pcp.
    Wesfarmers results 2016H1

    The results seemed to disappoint the market, with the Wesfarmers share price falling by over 10% during the week of the announcement.

    Wesfarmers' home improvement retail division Bunnings posted results that were considerably better than those of the overall group. Revenue for the division was $5,500 million for the half, a 10.9% increase on the pcp.

    EBIT was $701 million, up by 13.4% on the pcp. Overall EBIT was boosted by some gains in property trading, which amounted to $33 million, as contrasted to $14 million during the pcp. Pure trading EBIT, excluding the property gains, came in at $668 million, up 10.6% on the pcp.
    Bunnings results 2016H1

    Bunnings also experienced good store-on-store growth, which grew by 7.9%, as compared to the pcp. This was down slightly on the figure for the previous half, with was 9.1%. Return on capital (RoC) was high, coming in at 35.8%, as contrasted to 31.6% during the pcp.

    Bunnings reports adding seven warehouse stores and closing three during the reported half, making a total of 240 now operational. Four more warehouse stores were expanded, and there are currently 13 under construction. Bunnings also added a net of two smaller stores for a total of 67, and closed one Bunnings Trade Centre, bringing the number to 32. One warehouse store was opened in both New South Wales and Victoria, and two in South Australia.
    Fallout from Masters exit

    In response to an analyst's question, Bunnings Group CEO John Gillam indicated that he had ongoing concerns for the side effects produced by the exit of the Woolworths-owned Masters Home Improvement. Mr Gillam said:
    If [Masters] closes and if they have an aggressive liquidation approach then there's going to be some short term volatility in margins. Small businesses are especially at risk in that sort of environment. It's really too early to predict the impact or how it will play out because there's no clarity yet around the quantum or the disposal approach. So we're monitoring this very, very closely.

    Mr Gillam also indicated that Bunnings had an ongoing interest in around 15 properties Woolworths might be liquidating, both in expansion areas and as replacements for existing locations.
    Bigbox
    Big box update
    Bunnings is eyeing 15 Masters sites
    HNN Sources
    Bunnings managing director John Gillam warns of a potential liquidation of Masters' products
    Bunnings New Zealand general manager Jacqui Coombes
    Click to visit the ITW website for move information
    Bunnings revealed it may be interested in taking on 15 Masters sites; Bunnings managing director John Gillam believes margins could be compromised on products currently held by Masters if it held a fire sale; Bunnings plans to open five more stores in New Zealand; and speculation about Metcash being a takeover target back in September 2015.

    Wesfarmers has also secured the purchase of UK DIY retailer Homebase after Home Retail Group shareholders approved the sale. This follows approval in early February from Home Retail's banking syndicate. Both approvals were required for the GBP340 million purchase.
    Masters sites reviewed by Bunnings

    At Wesfarmers' recent presentation for its half-year financial results, John Gillam, managing director for home improvement and office supplies, said he would be watching carefully what happens to Masters and its sites. He said: "In rough terms, there are over 100 properties all up, 63 developed into stores and there are 15 or so that we are interested in."

    Gillam also predicted there will be strong competition for Masters sites: "We don't think for a second that we are the only ones looking at the opportunities here."

    Wesfarmers managing director Richard Goyder told the media that Bunnings is interested in Masters sites if it can acquire them at the right price, and if not, the retail giant will let someone else take over the 15 or so sites they are considering.

    Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany the potential acquisition of Masters sites by Bunnings would likely be challenging for independent retailers. He said: "However, the challenge for smaller hardware businesses as businesses like Bunnings mop up additional Masters sites, which is inevitable, is...to differentiate and be viable in areas like range and price -- hence the rise of banner groups and competitor networks."

    Walker also believes Bunnings won't be the only big box retailer looking to potentially pick up Masters sites. He said: "It wouldn't surprise me to see super retailers the Gerry Harveys, the A-Marts of this world having a bit of a look. Kmart and Target have openly discussed expanding Kmart so there aren't too many times in the market that these fitted-up big box retail sites become available."
    Potential fire sale alert

    Bunnings managing director John Gillam has warned a potential liquidation of tools, hardware and goods held by failed home improvement rival Masters could impact negatively on margins for the entire sector.

    Masters' uncertain future could lead to an avalanche of hardware stock being dumped on the market at heavily discounted prices. This could send shockwaves through the hardware and home improvement industry by ruining sales and profits for both large and small retailers.

    An "aggressive liquidation" could impact hardware sector earnings in the second half, according to Gillam. He said: "The issue around the inventory that Masters holds, and if it closes, and if that inventory is liquidated, that's an industry wide issue, for all parts including home improvement, outdoor living and the whitegoods sectors.

    "There is a fair bit that is unknown, so the first thing is if it does close but if it closes, and if they have an aggressive liquidation approach then there is going to be some short term volatility in margins and small businesses are especially at risk, in that sort of environment."
    Five more Bunnings NZ stores

    Bunnings will tap into the demand for housing construction and renovation in New Zealand -- especially in Auckland -- by opening another five stores.

    Bunnings NZ general manager Jacqui Coombes said the New Zealand unit has quadrupled turnover to NZD898 million for the 2015 financial year since setting up in the country in 2002.

    Bunnings has 50 stores in New Zealand including 25 warehouse stores, 19 smaller format ones, and six trade centres which supply heavier construction materials.

    Coombes said the company didn't have a target number of stores to hit in New Zealand but still sees plenty of opportunity for growth despite strong competition from main rivals, Mitre 10 and Fletcher Building-owned Placemakers.

    Bunnings is relocating a Taupo store to a bigger site and opening new stores in Petone and Naenae in Wellington by the end of the second half in July. The big box retailer is also opening stores in Grey Lynn and Westgate in Auckland in the first half of the 2017 financial year, and one store in south Hamilton by early next year.

    First NZ Capital analysts said as well as good management, the Bunnings chain was benefiting from a significant housing tailwind, providing a buffer to the impact of rising cost of goods.
    Takeover of Metcash?

    Sources told DataRoom (a column in The Australian) that a consortium backed by a Chinese retailer is believed to have been planning a takeover of Metcash last year, when the target's share price was about AUD1.

    According to the column, the un-named party was interested in Metcash because of its distribution channels as a wholesaler.

    The news comes as the company competes against the success of German chain Aldi that is impacting heavyweights Woolworths and Coles as well as Metcash and its independent IGA stores.

    Apparently Metcash never had an official approach from the Chinese consortium last year.
    Careers
    Seeking opportunities
    An SA-based sales manager (trade) position is available at Dulux
    HNN Sources
    Blackwoods requires a Sydney-based area manager
    Selleys is offering a position for a brand manager
    Visit the Mecca Website
    Dulux is seeking a sales manager (trade) based in South Australia; an opportunity for an area sales manager at Blackwoods in Sydney; and Selleys requires a brand manager.

    For further information, simply click on the images provided.
    Leading Dulux trade sales in SA

    The role of a state sales manager (trade) in SA for Dulux will be tasked with managing, developing and leading a team of sales professionals in a highly competitive market. With a proven track record of driving sustainable brand and category growth within a trade based environment (or similar), the ideal candidate will leverage strong functional experience, commercial acumen and leadership capability to identify and implement profitable opportunities for the business.
    Dulux has a trade based role in South Australia
    Career driven sales manager

    Industrial retailer Blackwoods requires a Sydney-based area manager who will report directly to the state sales manager. Responsibilities include exceeding budgets through effective management and implementation of new sales strategies and procedures. Tertiary qualifications in business management, sales or similar will be highly regarded but not essential.
    Blackwoods is seeking an area manager
    Work on brands at Selleys

    Selleys is offering a position for a highly creative and strategically minded brand manager. The successful individual will be mainly responsible for the repair and fix category that includes brands such as Aquadhere, Araldite, Quick Fix and Tarzan's Grip. This is an opportunity to be involved in all aspects of the marketing mix including strategy, communications and innovation.
    A brand manager is required at Selleys
    Retailers
    Ace Hardware delivers growth, again
    Revenues from the corporate-owned Westlake Ace chain increased by 7.7% over the year
    BusinessWire
    There was an increased number of customers and average transaction size
    John Venhuizen, Ace Hardware president and CEO
    Click to visit the ITW website for move information
    The retailer-owned hardware cooperative has reported total fiscal 2015 revenues of USD5 billion, an increase of USD344.5 million or 7.3% from the previous year.

    Fiscal 2015 consisted of 52 weeks compared to 53 weeks in fiscal 2014. The 53rd week in fiscal 2014 added approximately USD49.4 million in revenues in 2014. Excluding the 53rd week in fiscal 2014, revenues increased USD393.9 million or 8.5%.

    Net income was USD156.2 million for fiscal 2015, an increase of USD14.9 million or 10.5% from fiscal 2014. John Venhuizen, president and CEO said of the results:
    My sincere gratitude to the team for delivering shareholders an impressive pre-tax return on equity of 33%.

    The approximately 3,000 Ace retailers who share daily retail sales data enjoyed a strong fiscal 2015, with increased customer count and average transaction size driving a 4.6% same-store-sales increase. This excludes the impact of the 53rd week in 2014.

    Revenue increases were noted across all departments with outdoor living, electrical and lawn and garden showing the largest gains.

    Ace added 158 new domestic stores in fiscal 2015 and cancelled 98 stores. This brought the company's total domestic store count to 4,311 at the end of fiscal 2015, an increase of 60 stores from the end of fiscal 2014.

    Retail revenues from Ace Retail Holdings (ARH) -- essentially the corporate-owned Westlake Ace chain -- were USD251.7 million during fiscal 2015, an increase of USD17.9 million or 7.7%. Average ticket price increased 3.3% and customer count increased 1.3% compared to fiscal 2014. The largest increases in these stores were in lawn and garden, consumables and electrical.
    Annual wholesale

    Wholesale merchandise revenues from new domestic stores were USD104.7 million in fiscal 2015. This increase was partially offset by a decrease of USD43.8 million due to domestic store cancellations.

    Wholesale merchandise revenues to comparable domestic stores increased USD172.8 million in fiscal 2015 compared to fiscal 2014.

    The new store, cancelled store and comparable store amounts all exclude the impact of non-recurring Paint Studio equipment revenues of USD46.8 million in fiscal 2014 and the impact of the 53rd week of USD49.4 million.

    Wholesale revenues from the company's Ace Wholesale Holdings (AWH) subsidiary contributed USD196 million to the overall increase from both new and comparable domestic stores.
    Fourth quarter results

    The fourth quarter of fiscal 2015 consisted of 13 weeks while the fourth quarter of 2014 contained 14 weeks. Total revenues for the fourth quarter of 2015, ended January 2, 2016 were USD1.2 billion, an increase of USD2.4 million or 0.2%, from the fourth quarter of 2014.

    Excluding the extra week in the prior year quarter, fiscal 2015 fourth quarter revenues grew USD51.8 million, or 4.7%.

    Net income was USD12.1 million for the fourth quarter of 2015 compared to USD12.7 million in the fourth quarter of 2014.

    Same-store-sales at the 3,000 Ace retailers who share data were up 3% for the fourth quarter of fiscal 2015. This result excludes the impact of the 53rd week in 2014.

    Retail revenues from ARH were USD59.8 million in the fourth quarter of 2015. This is an increase of USD4.5 million, or 8.1%, from the fourth quarter of 2014. Same-store-sales were up 3.8% versus the prior year with lawn and garden, consumables and paint showing the largest increases.

    Total wholesale revenues were USD1.1 billion, a decrease of USD2.1 million, or 0.2%, as compared to the prior year fourth quarter. The decrease is the result of one less week in the fourth quarter of fiscal 2015 compared to fiscal 2014.
    Quarterly wholesale

    Wholesale merchandise revenues to comparable stores decreased USD3.7 million in the fourth quarter of 2015.

    Wholesale merchandise revenues to new domestic stores activated in the 2014 and 2015 fiscal year periods contributed USD21.6 million in incremental revenues during the quarter, while wholesale merchandise revenues decreased USD9.7 million due to stores that cancelled their membership in 2014 and 2015.

    New store, cancelled store and comparable store amounts all exclude the impact of non-recurring Paint Studio equipment revenues of USD1.5 million in fiscal 2014 and the impact of the 53rd week of USD49.4 million.

    The company's AWH subsidiary contributed USD47.5 million of incremental revenue.
    Expenses

    Retail operating expenses of USD95.7 million increased USD4.2 million, or 4.6%, in fiscal 2015 as compared to fiscal 2014, primarily as a result of higher expenses associated with ARH's acquisition of five retail stores during the second quarter of 2015 and the opening of a new retail store in the third quarter of 2015.

    Wholesale operating expenses increased USD24.4 million, or 6%, for fiscal 2015 as compared to fiscal 2014. The increase was primarily driven by additional operating expenses resulting from the AWH acquisition of distribution business Jensen-Byrd in December 2014, increased warehouse costs associated with the higher sales volume and advertising expenses.

    This was partially offset by the settlement of a gain contingency relating to ARH vacating its leased warehouse facility and some of the employees who were employed there.
    Highly ranked franchise

    Ace Hardware has been ranked number one in its category on Entrepreneur magazine's latest Franchise 500 list. It ranked No. 14 overall out of more than 462,500 individual businesses that were evaluated for the highly regarded list. Dan Miller, vice president of retail operations and new business at Ace said:
    Ace Hardware offers entrepreneurs the strength of a brand that is globally trusted and locally embraced, accompanied by a business model that allows you to tailor your product mix to your local market...With no royalty or franchise fees, plus a new store incentive, and a best-in-class support system...new Ace Hardware retailers are set up for success from the very beginning.

    From the onset, Ace Hardware store owners are offered retail market surveys and analytics, support for site acquisition, lease negotiation, and interior and exterior store design.

    The retail co-op also has resources to assist with training, day-to-day store operations and advertising. Ace offers its retailers a marketing plan that includes four different levels of advertising support, including national, regional, local and one-to-one.

    Mark Driscoll recently became part of the Ace Hardware cooperative when he opened Sugar Grove Ace Hardware in Sugar Grove, Illinois. He said:
    After 36 years running retail grocery chains, I really wanted to break off and start my own business. I have always loved and wanted to stay in retail -- but I wanted to find a business opportunity where margins were still lucrative, and service still played a major factor. After six months of looking at many opportunities, Ace looked to me like the perfect fit.

    Published annually, the Franchise 500 rankings are determined using an exclusive formula that takes into account objective and quantifiable factors including financial strength, stability, growth rate and size of the system. All franchises are given a cumulative score, and the 500 franchises with the highest cumulative scores become the Franchise 500 in ranking order.

    Related:
    Ace Hardware Q3 results show its continuing popularity - HNN
    Retailers
    Hot property lifts profit at Harvey Norman
    Sales across Harvey Norman stores rose to $2.72 billion for the six months ended December 31
    Fairfax Media
    Billionaire chairman Gerry Harvey
    Harvey expects "robust" construction and housing activity in Australia to continue
    Click to visit the ITW website for move information
    Harvey Norman has reported that underlying profit before tax -- excluding net property revaluation adjustments -- lifted 22% to $241million.

    Sales across Harvey Norman stores rose $194 million to $2.72 billion or 7.7% for the six months ended December 31. Like-for-like store sales were up 8.8%.

    Net profit rose 31% to $185.5 million in the six months to December 31.
    Building on success

    Record low interest rates, low unemployment, record new home building, and strong house prices are all driving stronger sales at Harvey Norman. Chairman Gerry Harvey told Fairfax Media:
    We've got a situation where there's another million people in Australia today than there were three-and-a-half years ago and we'll have another million soon enough. You've got to house them and they need jobs and there will be fridges and bedding sold.

    Australians broke ground on a record 211,860 new homes in 2014-15, up 13% on the previous record of 187,000 set in 1994. The Housing Industry Association is tipping the 2015-16 year to exceed 200,000 new home starts.

    Harvey believes the market is hot and the electronics, computers and technology segment is enjoying a "mini-boom". He said:
    Australian macroeconomic conditions have had an upward trend for three years and have been favourable for consumption in the homemaker and lifestyle categories.

    Harvey expected "robust" construction and housing activity in the year ahead to drive further sales, "particularly in NSW, Victoria and the ACT" where dwelling starts are "materially above long term averages".

    Stronger economic conditions in Ireland also saw Harvey Norman achieve its first profit in the country since December 2007, while sales in New Zealand were strong on the back of solid conditions there.
    Companies
    Hoist maker plunges to $69m loss
    Hills booked $66 million in impairments, posting another huge loss
    Fairfax Media
    It continues to make its transition into a technology company
    Grant Logan replaced Ted Pretty as chief executive in 2015
    Subscribe to HNN weekly e-newsletter
    Hills Ltd has crashed to a bottom line loss of $69 million in the first half of 2015-16. It is in further talks with its bankers over more refinancing which it hopes to have in place by the end of April.

    As the inventor of the Hills hoist clothesline in 1945, it became a fixture in Australian backyards in the post-war period.

    Since late 2014, it gave up control of the Hills range of clotheslines and gardening products in a deal with retailer Woolworths which secured the exclusive distribution rights in Australia and offshore for 19 years.

    A large part of the range was sold through the Masters hardware chain which Woolworths is shutting after major losses.

    Hills chief executive Grant Logan, who succeeded Ted Pretty in May 2015 after Pretty's aggressive transformation of Hills ran into strife, said the company had $182 million in tax losses which could be utilised in future years "so that the tax Hills pays in the next few years will be close to zero". He said:
    In the second half we plan to continue with cost and working capital reductions.

    Hills booked $66 million in impairments after a review of the assets in the business which sent the bottom line plunging to a loss of $69 million for the first half, compared with a net profit of $9.2 million a year earlier.

    Revenue at Hills was down 28% to $164.1 million. Logan said it was "disappointing and distracting" to have to book more impairments. He reiterated that Hills was now taking a "back to basics" approach.

    During the first half of 2015-16 Hills reworked its financing facilities, reducing an unsecured $110 million facility to a secured $55 million facility. Further talks are underway with the bankers to refinance the smaller banking facilities and an agreement is expected to be finalised by April 30.

    Related:
    Hills will maintain Masters royalty deal - HNN
    Hills will continue to go tech - HNN
    Retailers
    Last minute bid for UK's Home Retail Group
    Steinhoff owns the Freedom furniture chain in Australia
    Bloomberg
    It is seeking to gain control over more than 800 shops including the Argos chain
    Steinhoff switched its primary listing from Johannesburg to Frankfurt in December 2015
    Click to visit the ITW website for move information
    Global retailer Steinhoff International has made a GBP1.4 billion (USD2 billion) counter bid for Britain's Home Retail Group (HRG), taking on supermarket group Sainsbury's for control of the company.

    Steinhoff has a strong presence in Australia through its ownership of the Freedom furniture stores, franchised bedding chain Snooze and discount furniture retailer POCO, which opened its first store in Blacktown (NSW) in 2013. It also owns local department store chains Harris Scarfe and Best & Less through its purchase of Pepkor Holdings in 2014.

    The all-cash proposal from Steinhoff values each Home Retail share at 175 pence, according to a statement from the company. That is more than the 161.3 pence a share in cash and stock that Sainsbury agreed to pay.

    Steinhoff unexpectedly entered the fray just days before a February 23 deadline for Sainsbury to make a formal offer. It is seeking to gain control over more than 800 shops as part of HRG including the Argos chain.

    Home Retail confirmed it received the approach, which it said it's reviewing. Steinhoff said it is seeking a recommendation from the UK company and has a deadline of March 18 to make a formal bid under British takeover rules.
    European presence

    Acquiring HRG would further increase Steinhoff's presence in Europe, where it gets more than half its 135 billion rand (USD8.8 billion) of sales from operations in the UK, France and Germany. Founded in Germany in 1964, the business listed in Johannesburg a year after the 1997 acquisition of a stake in a South African furniture company.

    Steinhoff switched its primary listing from Johannesburg to Frankfurt in December 2015, reflecting Europe's increased importance to a company that is now based in Amsterdam.

    A takeover of Home Retail would be Steinhoff's biggest since it bought South African clothing retailer Pepkor Holdings Pty Ltd. for 62.8 billion rand (USD3.8 billion) in 2014.

    Steinhoff has not yet revealed what its plan for Home Retail, specifically Argos, would be if its bid becomes successful. Sainsbury wants to snap up the Argos brand to create a "leading food and non-food retailer of choice for customers" in the UK and because it believes it can contribute considerable earnings to its overall results in the first year of ownership and deliver substantial cost synergies.

    Steinhoff said its offer comprises 147.2 pence a share in cash, plus a 2.8 pence dividend and 25 pence to reflect Home Retail's sale of the Homebase home improvement chain to Wesfarmers.

    Related:
    UK's Sainsbury's agrees to takeover of HRG - HNN
    Bigbox
    How Lowe's robot serves customers in-store
    Lowe's robot, OSHbot in action
    Fast Company
    The robot at the Orchard Supply Hardware store in San Jose, California
    Kyle Nel, executive director of Lowe's Innovation Labs
    Click to visit the ITW website for move information
    Fast Company magazine recently sent one of its writers, Jessica Hullinger to experience the Lowe's robot in a realistic store situation. The Lowe's-owned Orchard Supply Hardware store in San Jose, California set the scene for this encounter.

    The 5-foot-tall autonomous robot is called OSHbot and just celebrated his one-year anniversary at the store. His job is twofold: to help customers find items they need, and help store managers with inventory tracking.

    When Hullinger approached OSHbot, his facial-recognition technology identified her as a human customer and he cordially introduced himself. He said in a robot-like monotone voice:
    Hi, I'm OSHbot. I can help you find things in the store. What are you looking for?

    For the sake of research, Hullinger replied, "LED lights."

    On a screen, a list of LED bulbs appeared. She scanned and picked one at random. A map of the store appeared on the screen, with a green dot indicating their current location, and a red dot suggesting the lightbulb Hullinger chosen was across the store. The robot asked:
    Would you like me to take you to the LED?

    After pressing "yes", the robot said, "Sure, follow me", before rolling away with Hullinger in tow.

    The robot uses the same navigational technology found in driverless cars to look for obstacles. It swerved around product displays and customers on its quest to find the item. After about a minute, the robot came to an abrupt stop in front of a wall of LED lights and declared: "We are here".

    Kyle Nel is the executive director of Lowe's Innovation Labs and the brains behind OSHbot. He has a background in applied neuroscience and has been tasked with transforming the world's second-largest hardware chain from the traditional place dads go to buy power tools, to a hotbed for retail innovation that brings science fiction to life. He told Fast Company:
    People ask me, 'Why do you work for Lowe's?' One of my metrics of success is how often people go, 'Robots at Lowe's? What?' We're really good at retail and understanding home improvement, which means we understand how people live in their homes. Why can't we also continue to iterate and innovate in uncharted ways?

    At Lowe's, Nel basically gets to experiment and play however he wants. For example, a few years ago, he invited a group of science fiction writers to create stories about the future of retail based on Lowe's research and trend data. OSHbot was one idea they came up with.

    Nel is a self-proclaimed comic nerd and had the stories turned into comic books, which he gave to his team members along with a mission: Get this built. Within eight months, OSHbot was on the floor of the Orchard Supply store. He said:
    On the outside, the whole thing might seem like a gimmick. But we didn't build robots for the sake of building robots.

    The robot actually does things human employees can't. For example, it is multilingual. So far, OSHbot is fluent in English, Spanish, and five different Asian languages. Nel explains:
    Our research showed language was a huge pain point for customers. Knowing you can walk up to a robot and communicate with it and you know it's going to speak Japanese or Mandarin is a big deal.

    The robot also tracks inventory in real time and can tell employees when an item is out of stock, misplaced, or has possibly been stolen. Nel said:
    The real-time inventory thing in retail is like the holy grail. Right now, inventory tracking at all retailers is a very tedious and very time consuming and inaccurate process, so we're trying to attack that.

    Soon, OSHbot will be able to scan items customers bring in and tell them what it is and whether the store stocks it. The robot can also spot previously unnoticed trends that could shed light on new revenue opportunities. Nel said:
    People always come in asking for mailboxes. Who would have thought? So, are we missing an opportunity to do more with mailboxes?

    Nel is also overseeing other innovations such as using eye-tracking gear to see how people navigate a Lowe's store and then identify confusing areas. In one test, they wanted to see if people could find the holoroom - a 3D room - in the store, but realised quickly that shoppers were confused by a set of recently installed ads that were obscuring the aisle signs. Nel said:
    We were like, we gotta take those signs down. It's very simple things that have big ramifications and make the overarching experience intuitive and better.

    According to Hullinger, customers seem to like OSHbot. Sometimes they stoped to take pictures of him. One frequent shopper named Don Kahrs professed his love for OSHbot after using it to find carpenter glue.

    Nel said the review ratings have been very positive, and not just among the tech savvy. The data shows non-millennial adults love the robot. He said:
    So it isn't just a tech thing, or that the robot is cool, but this solves a problem, it helps me find a thing.

    Employees are so used to OSHbot's presence that they basically ignore him. The idea is to roll the robot out in actual Lowe's stores soon, though Nel did not give an exact date. He said:
    All these projects might seem disparate, but they're all so interconnected. The holoroom helped us develop a proprietary way to create 3-D assets, which allowed us to do things with robots. It's all tied together. We really are focused on trying to make a real omnichannel where you can just get whatever you want, whenever you want.

    Related:
    Lowe's 3D room makes renovation a (virtual) reality - HNN
    Lowe's is going galactic - HNN
    Companies
    Online entrant in reno market
    MD Finishings is targeting the residential and commercial renovation markets
    Power Retail
    Temple & Webster recently slashed its full year earnings forecast
    Milan Direct has moved the renovations market online
    Subscribe to HNN weekly e-newsletter
    One of Australia's largest online furniture retailers, Milan Direct, is going after the DIY renovations market. It has revealed a new retail website, MD Finishings that will serve both DIYers and commercial renovations. The website will offer complete fit-outs for offices, hotels or restaurants.

    The site has close to 2,000 products for the bathroom, kitchen, laundry, walls and doors, lighting, outdoor and general DIY. MD Finishings enables Milan Direct to use its brand and manufacturer network to expand its capacity into the renovations market. Milan Direct co-founder, Dean Ramler told Power Retail:
    I saw that there was a lack of affordable, high-quality finishings available online, and reached out to some of the brands we have a great relationships with to bring them together under one banner online at the best price for our customers.

    The Housing Industry Association has valued the residential renovations market alone at around $29 billion in 2015. At the moment, many homeowners seem to be choosing to renovate rather than try their luck in Australia's highly priced housing market.

    IBISWorld industry research indicates that the online market for hardware items has also been performing well, growing by more than 12% over the past five years.

    The struggles at Masters could have presented an opportunity for Milan Direct to capitalise on a gap in the online building supplies and finishings market. However Ramler sees the situation slightly differently. He said:
    Our decision to enter the finishings and home renovation market was independent of the issues Masters had. Rather, the move into home finishings was a natural progression for Milan Direct, we've seen great success selling furniture online and the home renovation market fits so well into our business model.

    Ramler explained that it is not the company's intention to compete with big-box hardware stores like Bunnings.
    Even though Milan Direct has been competing head on with Bunnings for 10 years now with our strong outdoor furniture range, it is not our intention to compete directly with Bunnings in finishings, as our models are completely different. Bunnings and Masters are huge cost-base businesses that require massive showrooms Australia wide, with high stock holdings.
    In contrast, MD Finishings being a pure-play online retailer, has unlimited floor space, and we have the ability to list thousands of products and offer a much broader range, without taking any stock risk. We believe this low-cost market place model is the key to our success.

    MD Finishings made a "soft" launch in late 2015, explains Ramler. During this time, it experienced revenue increases of 40%, with conversion rates also up 70 to 80%. He said:
    After the strong initial response, we're already planning to expand our offering and are adding another 1,000 products to the site.

    MD Finishings is the first initiative from Milan Direct since Temple & Webster acquired the company late last year.
    Temple & Webster grows through acquisitions - HNN
    Temple & Webster results disappoint

    Shares in Temple & Webster have more than halved after the online homewares retailer slashed its full year earnings forecast. Investors dumped shares in the retailer, wiping about $45 million off its market value in the process, as it warned it would miss its revenue and earnings forecasts.

    The warning came as the retailer reported its first set of interim financial results since listing on the share market last December. While shoppers had been spending more money on its website, the company's advertising and marketing campaigns had failed to attract lots of new customers.

    The company warned its full year revenues could come in up to 10% below the $76.2 million forecast in its prospectus. Its $8.5 million underlying loss forecast could also blow out by up to $5.5 million.

    Shares in the company nosedived to 20.5 cents, down 42.5 cents from its previous close of 63 cents. The stock is now just a fraction of the $1.10 investors paid during the retailer's IPO.

    Managing director Brian Shanahan said marketing had not performed as expected, leading to fewer customers. He said:
    The initial campaign and sales outcome has taught us a lot. We will be fine tuning our marketing spend, customer acquisition channels and product mix during the second half to improve new customer and sales performance.

    Shanahan said revenue per active customer had actually risen to record levels, and Temple & Webster is now focused on building better customer retention. He said:
    We remain the largest player in a high growth segment and are well capitalised with circa $27 million in cash and no debt.

    The company is confident it will break even in the 2018 calendar year, according to Shanahan.

    Temple & Webster's first half net loss widened to $17.7 million from $3 million. Costs associated with the company's sharemarket listing and the acquisition of furniture e-tailers Milan Direct and Zizo weighed on the result.

    Pro-forma underlying losses were $7.5 million, compared to $7.8 million a year earlier.
    Temple & Webster gets hammered
  • Net loss increases to $17.7 mllion from $3 million
  • Sales revenue up 47.2% to $21.3 million
  • No interim dividend declared
  • Reports
    Slow recovery for renovations
    Strong property prices have boosted demand for renovations in markets like NSW
    The Australian
    Renovation have become a more appealing idea for homeowners
    The cost of hiring a concreter rose by 22.4% compared with the same time last year
    Subscribe to HNN weekly e-newsletter
    The Housing Industry Association (HIA) says renovations activity is slowly getting its momentum back after declining to a 10-year low in 2013 following the global financial crisis.

    The HIA expects a gradual upturn in renovations activity will be underpinned by a steady increase in the number of detached houses aged 10 to 20 years. They account for a disproportionate amount of renovation jobs, between now and the mid-2020s.

    Strong property prices have boosted demand for renovations in markets like NSW. HIA senior economist Shane Garrett said many Sydney households that had been planning to move house find it is now more affordable to undertake a major renovation instead.

    Homeowners have previously leaned more towards upgrading if they outgrow their current property but renovation appears to have become a more appealing idea, according to Mortgage Choice spokeswoman Jessica Darnbrough. She told AAP:
    Recently because property prices have continued to go up, people are seeing more value in renovating, using the equity.

    Darnbrough believes that while homeowners could sell in the price boom, they would also have to buy again at high prices. So they are now thinking the cheapest and most effective way of making their property work for them is renovation.

    The modest recovery will also be helped by record low interest rates and improvements in economic growth and the labour market, although the tightening of mortgage credit conditions towards the end of last year has cast an unwelcome shadow, said Garrett.
    We're still seeing activity accelerating gradually...If prices in say NSW weren't growing as quickly as they're growing at the moment, what would have happened is that people who wanted to upgrade their home would have just moved home.
    But because prices are growing so quickly, the cost and expense involved in moving to a bigger home now is so punitive that people are saying, 'look why don't we just renovate our home instead and achieve our increased living standard in that respect'.

    Garrett said the knock-down and rebuilds market has also strengthened on the back of stronger home price growth.

    Riki Tawhara, Hills District and western Sydney manager for buyer's agents Cohen Handler, is tipping an increase in renovators.
    A lot of my clients who bought 12 months ago at the so-called peak of the market have managed in a year to manufacture quite a lot of equity in their property -- not enough to buy again, but enough to draw that equity out and do a renovation on their property, increase their yield and the overall value of their property.
    Renovations market at a glance
  • Peaked at $33.15 billion in 2011
  • Fell to $27.93 billion in 2013
  • 1.5% growth in 2014, 3.9% in 2015
  • Growth forecasts: 0.4% in 2016, 0.6% in 2017, 3% in 2018 and 3.2% in 2019
  • To reach $31.6 billion in 2019.

  • Source: Housing Industry Association
    Costs of renovating

    The quarterly Renovation Consumer Price index from ServiceSeeking.com.au found that renovation costs in Queensland fell by 0.35% to $62.09 an hour in the last three months of 2015 compared with a national average increase of 1.48%.

    The index, which analyses 52,000 quotes submitted by tradespeople on the website, found landscaping, plastering and painting costs had fallen.

    Although there was a decrease overall, Queensland homeowners are still paying 5.4% more than Victorians, the cheapest state for renovations. There were big increases in concreting and carpentry costs.

    The cost of hiring a concreter rose by 22.4% compared with the same time last year, rising to $65.82 per square metre. Carpentry and building rates also increased, rising by 10.41% and 1.8% respectively.

    Master Builders Queensland deputy executive director Paul Bidwell said building costs were still rising, driven by shortages of some trades and rising prices of raw materials. He told the Courier Mail:
    There are currently shortages of bricklayers, carpenters and site managers, which is going to have an impact on costs. With the lower dollar, prices of imported materials such as hardwood also are rising.

    Bidwell said he did not see building costs falling in the foreseeable future because of these factors.
    Products
    Shedding light on smart homes
    The Sony Multifunctional Light can switch on the TV
    CTV News
    A video of the Sony Multifunctional Light
    The sensors know when someone is in the room
    Click to visit the HBT website for more information
    The Sony Multifunctional Light can illuminate a room in any colour of light available on the visible spectrum. It doesn't need a switch because its sensors know when someone is in the room. These sensors can also track temperature, sound and humidity, and pass on this information to other devices such as air conditioning and thermostat units.

    And because it knows when someone walks in, it can turn the television on and then be used as a speaker system for enhancing the viewing experience. But if that person is an uninvited guest, the overhead light doubles as a burglar alarm.

    The accompanying app serves as an intercom system for the entire home and can receive voice commands regarding other gadgets under its control. It also has a microSD memory card slot.

    A recent report from technology market intelligence company, ABI Research indicates that sales of individual smart home devices are set to double during 2016. By end of the decade, many of us will be paying for a smart home services package in the same way we do for an internet connection. Jonathan Collins, principal analyst at ABI Research said:
    As the smart home functionality continues to push into new homes, vendors are benefiting from initial device and system revenues but the goal is to bring these sales into long-term recurring revenue services. Managed smart home system pricing, like traditional home security services, is geared to win new consumers with reduced device and equipment sales in return for long-term recurring revenues.

    The company notes that service providers are already taking established devices like Nest Thermostats or Philips Hue lights and bundling them as an integrated package. If this trend continues, then a device like the Multifunctional Light or Amazon's Echo could soon be seen as the ideal unobtrusive hub for controlling such packages.

    Whether or not ABI's forecast is accurate, Sony's smart light suggests that companies are increasingly looking beyond smartphones to other electronic outlets to channel their creativity.

    The Sony Multifunctional Light is set to go on sale initially in Japan later this year.

    You can watch the video here:

    News
    HI News Vol. 2 No. 2
    Download the latest HI News, issue number two
    HI News Vol. 2 No. 2
    Price plateaus at Bunnings, the extended version
    Matt Tyson resigns as managing director of Masters
    Click to visit the HBT website for more information
    The HNN e-newsletter can be accessed in one convenient PDF. Easy to read onscreen, or print it out. Just use the following link to download the PDF:
    http://hnn.bz/hinews-2-2.pdf

    In the latest edition, we provide additional analysis to the way Bunnings uses prices to reset markets and achieve an advantage over its competitors. This is an extended version of the original story.

    We also examine how Boral is making use of the transition in the marketplace in its first half results. In other company news, ITW's annual results show its overall revenue has declined but there are positive trends in other key metrics. The increased performance in its construction products division in the Asia-Pacific region is led by Australia.

    Sunlite Mitre 10 wins the retail group's best small store awards and there are profiles of two Queensland-based stores, one sells tools and industrial supplies and the other is a builders and DIY rental business.

    In the big box sector, Masters managing director Matt Tyson resigns and Bunnings Warehouse Property (BWP) Trust looks at opportunities to take on Masters sites.

    Other major retail stories include Lowe's takeover of Rona in Canada; Sainbury's purchase of Home Retail Group and how independent hardware retailers are faring in the UK.

    Additional news features focus on houses that cost USD20k in the US and how Canadian company BuildDirect is attempting to be the "Amazon" of home improvement. Local vacuum specialist Godfreys makes a "green" acquisition and BBQ maker Weber takes on more app-enabled brands. ACDelco Tools also makes its entry into the Australian market.

    Mr Fothergill's new seeds and bulbs are profiled along with the Guild power tool brand in new products, and another roundup of home improvement stories in hot links.
    Companies
    Boral results build on past development
    Boral results first half 2015/16
    Boral
    Boral construction materials and cement results 2015/16 H1
    Boral presentation: geographic markets
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    Australian-based building products company Boral has reported positive results for the first half of its FY 2015/16 year. While revenue dipped slightly, earnings climbed substantially, as years of development work in some sectors began to generate returns.

    Revenue came in a $2,200 million, a fall of by 4% over the previous corresponding period (pcp), which was the first half of FY 2014/15. Earnings before interest and taxation (EBIT) climbed by 19% to $200 million. In the wake of these good results, and Boral's share buybacks, earnings per share (EPS) climbed a substantial 28% to reach $0.182. Profit after tax and net profit after tax (NPAT) were both $137 million.
    Boral results first half 2015/16

    Mike Kane, Boral's well-known and highly respected CEO, was very positive about the company's prospects. In his introductory remarks at the results presentation made to financial analysts, he said:
    Boral's profitability continues to strengthen, with cost and productivity improvements supporting significant profit growth in the first half of financial year 2016.
    . . .
    Reported sales revenue of $2.2 billion was down 2% or 4% but that reflects the fact that we no longer import revenues from our Boral East Coast Bricks Operation, following the formation of the Boral CSR Bricks JV in May 2015 and the equity accounting of that business. Excluding the East Coast Bricks business revenue impact, the revenue was broadly steady.

    The construction materials and cement division contributed $9 million to EBIT growth, while its Boral USA operations contributed $16 million to EBIT growth.
    Construction environment transition

    Mr Kane particularly went to some lengths to explain the Boral situation as being a fortunate one. He suggests that, for Boral, Australia's transition form a mining/resources-based construction environment to an infrastructure-based construction environment has been buffered by increases in residential building demand, especially in New South Wales.

    Mr Kane was also emphatic in pointing out that, for Boral, residential building support has come predominately from multi-dwelling and high-rise construction, with detached (single-family houses) residential continuing in a slump. Using an evocative phrase, Mr Kane said:
    At the highest point of housing starts in recent history in Australia, the detached market is pretty punk.
    Return on funds employed (ROFE)

    Of particular note is Boral's ongoing improvement in its return on funds employed (ROFE). In the company's analysis of its performance for FY 2012/13, its below-par performance in ROFE was called out for particular attention. At that time, in its strategic priorities, it stated:
    Boral's EBIT return on funds employed (ROFE) for FY2013 of 4.7% is unacceptably low. Efforts are focused on improving margins through price and cost management as well as imposing strict evaluation over capital expenditure returns. The business objective is to return ROFE to above 10% within around five years. [Statement from FY 2012/13 management analysis, not reported half.]

    In this half the company reported an ROFE of 8.6%, up from 6.9% in the pcp, and part of an ongoing, steady improvement. In terms of individual divisions:
  • Construction materials and cement: 14.8% ROFE
  • Building parts: 9.5% ROFE
  • Gypsum: 8.5% ROFE
  • Boral USA: 2.4% ROFE
  • International markets

    The company reports a positive outlook on growth in the US residential building market, as well as multi-dwelling building and the alterations and additions market in Australia. In Asia, it sees growth in its South Korean markets, and a flat market in Indonesia.
    Boral presentation: geographic markets

    Mr Kane offered some helpful descriptions of international markets in response to a question from an analyst:
    You've got Australia and Korea, gangbusters, strong markets. You've got Thailand and Indonesia, emerging markets that have been challenged recently with currency issues and adjusting to the strengthening of the US dollar. Indonesia in particular is most challenged because all their inputs are -- and supplies come in US dollars and their currency has taken a massive hit. So, we get a favourable translation from Indonesia, Thailand into the Australian dollar, it doesn't matter if it's been beaten up in terms of profitability because it's been buying its raw materials and inputs in US dollars.
    Now I'm not worried about Indonesia and Thailand. To me that's -- this is classic examples of stops and starts in Asian developing markets. It's been happening for 20 years. I still believe that the underlying story is 7% compounded annual growth over a 20 year period in these markets.
    Divisional performance

    All divisions reported positive growth results for the half.
    Construction materials and cement

    Revenue for this division fell by 8% to $149 billion, while EBIT rose by 6% to $159 million. Contributors to the EBIT rise included $4 million in damages paid by the Construction, Forestry, Mining and Energy Union for its alleged secondary boycott activities, as well as operational efficiencies.
    Boral construction materials and cement results 2015/16 H1
    Building products

    Revenue for this division fell by 27% to $192 million, while EBIT rose by 15% to $17 million. The growth was driven by the performance of the company's brick making joint venture, strong roofing sales, while earnings from timber declined slightly.
    Boral Gypsum

    Both revenue and earnings climbed for this division. Revenue grew by 13% to $718 million, while EBIT increased 30% to $91 million. One of the main drivers of this division's success was its Sheetrock product, which achieved both volume and price gains in the market.

    In his opening remarks to investment analysts, Mr Kane commented that:
    We, in collaboration and working very closely with USG's technical people across all the board lines that we've converted, have been able to achieve something that we didn't expect to achieve in this joint venture and that is cost neutrality for the institution of the new technology at these plants. We have not increased our costs as we had expected to do when we initially entered into this joint venture. It's an extraordinary achievement of the manufacturing and technical people, mostly from USG.
    Boral USA

    This division turned around a negative EBIT of $8 million in the pcp to record a positive EBIT of $8 million in the reported half. Revenue rose by 28% to reach $512 million.
    Positives and negatives

    While results were overall good, the company did report some areas of ongoing concern.
    Positives
  • Concrete earnings up
  • Quarries earnings stronger
  • Cement sales stronger in NSW
  • Cement prices overall higher
  • Boral CSR Bricks joint venture
  • Price increase for bricks and roofing products
  • Shift to higher-priced roofing products
  • Sheetrock products achieve 5% price premium
  • Sheetrock volumes in Australia up 12% with 5% price increase
  • Boral USA bricks prices up 1%
  • Boral USA roofing revenue up by 11% as volume increases by 11% and price growth of 1%
  • Negatives
  • Concrete has weaker volumes (2% decline due to LNG projects)
  • Quarries have lower volumes
  • Asphalt earnings weak in Queensland
  • Asphalt has lower volumes in Victoria and Western Australia
  • Timber earnings declined slightly
  • Understanding the transition

    Boral presented an interesting slide which illustrated how much of a transition year 2015/16 is for the company:
    From Boral: Road funding flow, Australia

    This chart, based on data from Macromonitor, reveals a number of interesting features. One is the extent of work in road construction that will take place in NSW, with the combined NorthConnex and WestConnext project, along with Queensland's Bruce Highway upgrade, making up about 50% of the peak expenditure in 2018 and 2019.
    WestConnext transport project
    NorthConnex tunnel motorway
    Bruce Highway project
    Western Distributor, Victoria

    In his introductory remarks to the analysts presentation, Mr Kane said:
    We are in the middle of a transition period, currently feeling the impacts of a slowdown in major resource-based projects, but confident that the pipeline of major roads and infrastructure work that is coming later this year and more so in financial year 2017, we're well positioned to supply at least our fair share of that work.

    In answering a question from analyst Emily Smith of Deutsceh Bank on the development of the US market for Boral products, Mr Kane said:
    I looked at the results last night coming out of [US/Canada-based aggregates and building materials supplier] Martin Marietta, which were very positive about the materials market. I look to those guys because they lead me into what I can expect to see in housing results broad building products.
    I saw a similar result over here with [Australia's] CIMIC, Leighton's, this morning, confirming our view that in both markets we're seeing very positive signs for the immediate future and the long term.

    [CIMIC reported a 20% increase in profit on a continuing operations basis for its full year 2015, and has forecast continued growth in 2016.]

    Mr Kane responded to a further question from Ms Smith by explaining more about the effects of the transition directly on Boral, especially the cushioning nature of housing:
    The second thing you have to understand is as we move from mining and resource projects, a lot of these -- the only ones that we really got benefit from were the LNG projects which as you know contributed about 10% of our revenue during the peak of the LNG projects.
    That is clearly tailing off, but at the same time we've been buoyed by this housing phenomenon in the eastern states, which I'm grateful for, because there's a delay between the mining and resource falling off and the road, highway and infrastructure coming on which is really a 2017, 2018, 2019 phenomena.
    So, the air under our wings has been this housing, which is really a misnomer. It's not housing. It's apartments and high rise buildings. So that's why you see our construction materials division and our Gypsum division taking full advantage of this.
    Whereas our building products division has to struggle because they're just a detached housing story and that detached housing story hasn't been all that dramatic through this period in time.
    At the highest point of housing starts in recent history in Australia, the detached market is pretty punk.
    Analysis

    The extent of the low point that has occurred for 2014 and 2015 is quite marked. HNN believes that this is in part due not so much to reduced expectations caused by the global financial crisis (GFC) of 2008/9, but rather to an actual difficulty in planning itself. The GFC did not simply crash a number of forecast models, it altered the nature of forecasting itself in Australia.

    In the past, much of Australian urban planning has dealt with balancing the benefits of centralisation from a productivity standpoint with the advantages of decentralisation from a built environment and shared infrastructure standpoint. These new projects in NSW and Queensland mark a move away from these concerns towards the creation of Economic Development Zones which, instead of being encompassed by cities, encompass cities within them. As the "Project Overview" document for WestConnex from the NSW Government states:
    With another one million people calling Sydney home over the next 10 years, the M4 and M5 corridors will perform an even more important role in linking the Global Economic Corridor in Sydney's east with the growing population and new development areas across western and south western Sydney.

    In contrast, Victoria remains committed to a 1990s view of its planning as being about centralisation. It seems unlikely that this will be sustainable. What is more likely will be the emergence of a similar Economic Development Zone strategy post-2022, with a subsequent release of more public funds for road and infrastructure development.
    Bigbox
    Big box update
    Masters managing director Matt Tyson resigns but says on as a consultant
    HNN Sources
    BWP Trust considers acquiring Masters sites
    A valuation is expected on Masters soon
    Click to visit the ITW website for move information
    Matt Tyson resigns as managing director of Masters Home Improvement; BWP Trust, the listed company that owns Bunnings Warehouse properties, is looking at acquisition opportunities on Masters sites; and placing a value on Masters.
    Masters boss quits Woolworths

    Matt Tyson, who became managing director of Woolworths' home improvement division in January 2014, will leave the business by the end of February, This will leave former finance manager, David Walker to take over. But Tyson will continue to work as a consultant for Woolworths after his departure to "advise on the home improvement exit process", according to Fairfax Media. Woolworths said Walker would report to outgoing chief executive Grant O'Brien.

    Tyson's imminent departure comes as Woolworths and its Masters joint venture partner Lowe's try to reach agreement over a price for Masters. One analyst suggested that Tyson's departure could play a strategic part in Woolworths' negotiations over the value of Masters, but he said the real issue was the performance of Woolworths' supermarkets. He told Fairfax: "The core business, the supermarkets, is the problem here; I think that's the monster issue for Woolworths not Masters."

    The appointment of Walker is also being interpreted as significant by some market watchers, who suggest he will apply his number skills to the huge inventory in Woolworths home improvement.

    Suppliers claim Masters has not altered its stock ordering since Woolworths announced its plans to quit home improvement in January and draw a line under the $600 million it has burnt trying to make Masters work over the past four years.

    Tyson plans to return to the UK and Woolworths said he would not receive any exit payment.

    To read more, go to:
    Woolworths loses Masters hardware boss - HNN

    Related:
    Masters-Woolworths results - can they get going in time? - HNN
    BWP Trust monitors Masters sites

    BWP Trust owns almost $2.2 billion worth of Bunnings stores - which are leased to Wesfarmers -- as well as other industrial properties. Managing director Michael Wedgwood recently told the Financial Review: "We're monitoring the Masters sales process in terms of opportunities that comes out of that...The location of stores and access to the right demographic are more important to us than store size."

    Wedgwood also told analysts at its results briefing recently that making new acquisitions had become "increasingly more challenging" with Bunnings stores trading at very tight capitalisation rates. He said: "Yields hit a new low in the last calendar year and I expect they will remain tight as a function of the low interest rate environment."

    BWP Trust made no acquisitions during the reporting period. It last added to its portfolio in February last year, when it bought a Bunnings site in Maribyrnong, Melbourne for $39 million.

    Instead, the trust has taken advantage of the more favourable seller's market to offload property. A Bunnings in Cairns is in due diligence and a Bunnings in Lake Macquarie will be offered for sale this year, alongside an industrial property in Blacktown.
    Independent valuation on Masters

    Woolworths is expected to announce details of an independent expert's valuation of its Masters hardware chain and, potentially, the name of its new chief executive, when it reports its half-year results.

    There has been market speculation that both Woolworths and Lowes are firing up their legal teams ahead of what could be a tough battle over the