PRODUCTIVITY SPECTATOR: Nailing down the Bunnings customer

Bunnings would be pleased with its last quarterly sales figures, but the hardware giant has plenty more to do fend off its rapidly expanding rival, Masters.

Productivity Spectator

Wesfarmers investors would be pretty pleased with the way Bunnings stores have performed in the last quarter. Given the dual headwinds of competition from Woolworth’s Masters stores and a rapidly declining housing sector, a 3 per cent growth in store on store sales looks pretty good.

But Bunnings is now literally going head to head with Masters in some suburbs, where superstores are on the same block.

MD of Home Improvement, John Gillam has been working furiously to ensure that his suppliers are locked into exclusive contracts and don’t also hit Masters shelves. I know of a number of suppliers who were warned not to engage with Masters’ buyers for fear of losing their lucrative contracts.

At a recent new-product expo at the Melbourne Showgrounds, Gillam wouldn’t admit that has been a tactic. As he put it, suppliers were offered the opportunity to work with Bunnings to create new products based on a much deeper integration of sales data and trend forecasting. For local suppliers, that can be a huge opportunity. Taking a slice of Bunnings $7 billion in sales will definitely make millionaires of some Australian business owners. It would be a brave small supplier who would challenge the Bunnings behemoth but other much larger brands such as Dulux, Ryobi and Makita have also determined that their lot is better cast with the industry leader.

The new-product expo says a lot about how Bunnings thinks about the power of its salesforce and the importance of the relationship with one of their most important customers – the Australian tradie.

10,000 Bunnings staff will have been exposed to products from 190 suppliers in exhibition halls across the country. For Bunnings, ensuring staff have deep product and industry knowledge is critical.

John Gillam has to ensure those all-important tradies don’t defect to Masters stores. As a result, he doesn’t see the expos as opportunities to increase sales per associate, instead as an opportunity to deepen the relationship. "We think of the lifetime value of a customer and what we need to do have an enduring relationship. We want to right-sell, we don’t want to upsell, or trick-sell, we want to help the tradies” he said. (Watch the video above to see how John Gillam at the expo)

Of course, some tradies haven’t been having the best time of it of late. The fall in new house building has hurt many, leaving lots of skilled workers looking to either head to the boom areas or stay local and pick up smaller jobs. It’s in this sector that Bunnings is seeing some important growth. According to Gillam, the light commercial sector (that is renovations and handyman work) has been performing much more strongly. He says that DIY has become one of their most important areas in the last three years too.

It seems that as homeowners shelve their plans to trade-up to a new house in this uncertain environment, more and more are strapping on a toolbelt and trying to be tradies at home.

Bunnings has spotted this trend as is pushing hard into outdoor products, figuring that the growth in home renovation will see much work transforming the back yard.
That makes training more important than ever. Renting out exhibition buildings and giving 10 thousand staff some time off work to learn about new products seems like a good investment.

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