Essential reading for retailers and suppliers in the home improvement market

Conventional wisdom has it that when you buy a business, you conduct a SWOT analysis. You find out what the business’s strengths and weaknesses are, and you set about building on the former and eliminating the latter. It’s not terribly revolutionary, but it’s tried and tested, and generally, it works.

Alternatively, it seems, there’s the Bunnings way. Thumb your nose at convention. Don’t waste time with the SWOT analysis – you don’t need to know about the strengths and weaknesses, because you have already decided what you’re going to do, and you know you’re right. Maybe the business you’ve bought does have a name which is known and trusted throughout the country (and which actually describes what the business does). That doesn’t matter – away with it. You’re going to replace it with a fresh new name – so fresh and new that 99.9% of your target customers (and 99.9% of the customers you have acquired with the business) have never heard of it. And the new name doesn’t give them any clue to what your business actually does. Doesn’t matter – you have already decided they are just going to love it.

Then there’s the stock. All those tired old brand names: Stanley, Black & Decker, Worx, Bosch. Who needs them? Clear them out at silly prices (thank you Bunnings – I happily filled a trolley with ridiculously under-priced power tools at Homebase in Ashbourne). After all, you’ve got a whole new portfolio of brands: fresh, exciting new brands which have never been seen in the UK before. The public are going to lap them up. Or alternatively (and let’s just be a tiny bit negative here), you’ve got a portfolio of meaningless labels which are devoid of any perceived brand value, and the public are going to stay away in droves. Because let’s face it, the customers actually know and trust those tired old brand names like Stanley, Black & Decker, Worx and Bosch – and there are plenty of other retailers who are happy to go on selling them.

So that’s the strategy, chaps: save the time and trouble of a strength-and-weakness analysis, and proceed on the assumption that it’s all weaknesses. Don’t waste effort trying to understand the differences between the DIY markets in the UK and Australia; just assume that what works in a large hot country in the southern hemisphere will be right for a small cold one in the north. Press on with scrapping an established retail brand with massive consumer awareness, strong customer loyalty, and nearly 40 years of reasonably successful trading behind it, and replace it with a completely unknown one. Throw out all the established blue-chip product brands, and fill the shelves instead with things your customers have never heard of. Spend millions re-branding and re-merchandising the stores, promise to have the widest choice (although you have dumped half the leading brands) and simultaneously pledge to offer the lowest prices in the market. What could possibly go wrong?

Well, now we know. Pretty well everything could go wrong. Bunnings approached the Homebase acquisition with a combination of tunnel vision and sheer arrogance which has damaged the business considerably – maybe fatally. It’s not as though Homebase was a great business before: in the 10 years up to 2016, it managed a sales increase in only three of them. But it also showed a modest profit in most years. It wasn’t a basket case. It may be now; the forecast is for a loss of £97m in the half year, and Bunnings is planning to close another 40 stores, costing hundreds more staff their jobs. Speculation is that it will try to cut its losses, and offload the business, but it’s hard to see many prospective buyers forming a queue. How could it be made more attractive? Maybe converting the 19 Bunnings stores back to the Homebase format would be a start.

 

PS: Writing for DIY Week in February 2017, I said: “Whether Bunnings' plans for Homebase are the right ones, only time will tell. It's a brave move to announce in advance that you're going to dump one of the best-known brands in the UK DIY market, and replace it with one which must have absolutely zero brand awareness amongst its target audience.” I rest my case.

 

View User Profile for Colin Petty Industry consultant Colin Petty considers developments in the DIY market.






Posted by Colin Petty | 6 February 2018 | 13:08 | More from: Talking Point

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