It’s showtime.
Plop yourself into a comfy chair, kick back, and watch as the contest unfolds.
Woolies has announced plans to buy into hardware in a classic case of he did – so I will too.
Wesfarmers owns Bunnings and Coles, and in the not-too-distant future Woolies will own Safeway and yet-to-be-named-new-hardware-chain.
It’s big news, it even made the Wall Street Journal.
The scene is set for a ferocious battle of two retailing giants (well, they are giants by Australian standards).
Both ambitious, both well-resourced. It sure will make for an interesting battle.
So what’s behind the move? Well, according to Woolies chief executive Michael Luscombe, the expected demand for construction off the back of first home owner grants is an excellent time to enter the fray. Of course, in the other corner, the champion at hardware is telling the media that the chain relishes the opportunity to compete with any new entrant.
Woolies versus Bunnings: What’s Gonna Happen?
If you are a small independent player in the hardware industry, be worried about your future.
Right about now, I’d be doing a couple of things.
One, I’d be thinking about how much my little business is worth and setting my price for selling it to Woolies. (In case you missed the snippet in the news, Woolies has just bought your distributor. It has declared itself to be ambitious. You might well find you’re in its way.)
Or I’d be thinking about a change of position.
The smaller outlet can position itself differently to the big chains. There may be room to move into a convenience position – becoming a bit like the 7eleven of hardware. It works well for my local hardware store. We’re inner city apartment owners – we don’t really need or want to be part of the weekend scuffle at Bunnings.
If you are Woolies, don’t imagine it will be a walk in the park.
You’re not going to snap your fingers and in the blink of an eye (well, 5 years time) rip the leadership from beneath Bunnings. You’d better be praying that Bunnings makes some colossal blunder if you’re banking on that hope.
Bunnings has an excellent track record in consumer hardware. It has a strong brand reputation and more than 250 stores in Australia and New Zealand. It has beaten you into this market, cemented its position and established its brand credentials.
Like any challenger brand, you are going to have to offer consumers a compelling reason to switch to your brand. So the onus is on you to offer a genuine alternative to Bunnings – or at least find a decent enough weakness in the Bunning’s strategy that you are able to exploit to your advantage.
If you are Bunnings, you have time on your side as the market leader.
You will be doing what market leaders do – and that is you’ll be moving into defense.
You’ll be locking up key corporate accounts, sharpening your prices so that it becomes expensive for Woolies to enter, snatching up any available distribution locations and outpacing them with your expansion plans. By the time they catch up, you’ll be established and they’ll be positioned as a laggard.
Either party, of course, might introduce their own house brands – in much the same way as supermarkets have – thus improving their margins, strengthening market power and applying further pressure on Australian manufacturers of branded hardware goods, such as paint for example.
The Woolies versus Wesfarmers battle for the builders and brickies is not the start of the almagamation of entire retail industries under superstore ownership. Heck, we’ve already seen it with supermarkets. But what it does serve to do is remind small businesses that they need to be agile and quick-thinking, and innovate to avoid being crushed by the stampeding herd as the giants make their dash for the finishing line.
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