Paul Donaghue

Magnet Mart

Our industry, like all industries, is built around the consumer.

When analysing our industry as to where it is today and looking forward to what shape it will be in say two to five years - I will give you my thoughts.

The bottom line will be whether as an industry we have maintained, increased or decreased our share of the discretionary dollar.

This will solely depend on the perception the consumer has on our industry.

As an industry our primary individual competition is not Bunnings or other hardware operators.

It is other industries i.e. gambling, entertainment, hospitality, travel, sport (yes, sport) and other forms of retailing, all fighting for the discretionary dollar spend.

In turn, how our individual businesses fare from now to 2010 will again be determined by the perception the consumer has on our individual businesses - that being whether we are corporate, part of a group or an independent.

The consumer rules? - Sure does!

So who are the major players and what are the elements affecting our industry?

The first thing to recognise is that business is now global and that goes for our industry.

It is fair to say that the retail hardware industry in Australia has been a cottage industry and to a large degree still is. This changed of course some 15 years ago with the entry of the large warehouse stores such as Hardwarehouse and Bunnings.

There is now, of course, only Bunnings, who are by far the most dominant player and the main ‘within industry competition’.

This should not be confused with our primary ‘all industry competition’. Their entry sent and is still sending shock waves through our fragmented industry.

The other largish players are Mitre 10 who seems to be becoming more of a distant second and The Danks Group who look to be more than holding their own in third place.

Before we project forward, I believe there is a real lesson for us all in looking back as to why our industry never progressed from a cottage industry.

It had - I believe - a lot to do with the mentality of taking the easy way out and putting the consumer’s expectations in second place behind what the industry selfishly wanted for themselves.

Please explain: OK, in a nutshell it was when the so called industry leaders were getting into bed with politicians to make cosy political decisions on trading hours and store employee numbers.

These so called industry helpful decisions stultified growth and condemned the industry to a non progressive ingrown mentality, ie: a store with over 20 employees could not trade after 12 noon on the weekend - when we all know most of our business is done.

The absurdity of this - which our company fought in Canberra (and won), and Frank Penhalluriack went to jail for in Melbourne - was that if you grew your business to say 21 employees you would have to close for the best part of the weekend and then probably sack six or seven people because of the reduced trading.

I mention this because if there is still an element of that mentality in our industry leaders, and I suspect there still is, these people should be sidelined.

So where to from here?

Firstly, let us look at the positives.

A big positive is that Bunnings have substantially grown the market - the DIY pie is now much bigger.

The key is to leverage off this positive with an attitude to make the pie bigger for the benefit of the total industry. Yes, including Bunnings.

So how do we do this and what are the crucial factors?

It is a fact that perception is greater than reality; however, it is more important to quantify this perception in the eyes of the consumer. This will mean identifying and addressing these crucial factors.

Developing critical mass by operating in an efficient uniform way similar to corporate. This would include having a standard integrated software package encompassing all retail and reporting functions.

Further development could be uniform, H.R., and staff training, store benchmarking, market research and setting key performance indicators for selected staff in uniform industry positions including suggested rewards.

Planning for efficient logistic supply lines.

Developing a marketing presence that reflects these positives.

Last but not least, having a positive attitude to improving and where appropriate expanding each individual store.

To do the above effectively there would - I believe - have to be some more rationalisation in our industry.

It is probably inevitable that Mitre 10 and The Danks Group would merge in some form within the next five years. This might mean a new brand name, however, research will determine that.

With my industry hat on, the above is how I see our industry could move forward to everyone’s benefit.

Time will tell.