BUNNINGS HAVE LANDED - MDJ2
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BUNNINGS HAVE LANDED
Having acquired Homebase in June 2016 for £340m, Bunnings were very quick to state their intention
to rebrand the business over a 3-5 year period. They opened their first official Bunnings store in St
Albans in early February and the mdj2 team went to visit.
KEY FACTS
Bunnings Warehouse, Griffiths
Way, St Albans, Herts, AL1 2RJ
Store Size: 67,000 ft²
Garden Centre Size: 19,000 ft²
Range: 30,000
Team Size: 68
Overall conclusions
We think that it is an impressive store that will do significantly better than its Homebase predecessor.
It is worth noting that there is no B&Q nearby so we would expect the performance to be good. It will
be interesting to watch as Bunnings and B&Q stores go head to head. We certainly think that
Bunnings is a bigger threat to B&Q (and Wickes) than Homebase was. Just as Homebase had moved
away from being a traditional DIY store, Bunnings is moving back into the core DIY heartland. While
the ranging may not be quite right yet, we assume that Bunnings will learn quickly about what does
sell in the UK and so will make appropriate adjustments to its ranges.
On the other hand we think that there are two key issues that may limit the speed of success and scale
of rollout for Bunnings:
Getting customers to switch: unlike in Australia where Bunnings IS the DIY market with an
incredibly strong brand, the customers it is targeting (regular DIY’er and ‘light’ Tradesman) are already
well served in the UK by a combination of well-established competitors (e.g. B&Q, Wickes, Screwfix,
Toolstation, Selco). Just as Masters found it hard to break into Australia, getting customers to switch
from their existing retailer to Bunnings will not be that easy or quick.
Making the economics work: we think that the sales will need to grow by ca 50% from current
Homebase levels to generate an adequate return. The much lower pricing (even if cost prices/sourcing
can compensate for some of this) and investment in higher staff costs will impact on margins. The
capex cost of the revamp (gutting the old store, removing the mezzanine) is significant (£1m+?) as is
the working capital injection of stock. Exiting some categories (Homewares) and reduced exposure in
others (Kitchens, Bathrooms) will also lower the ‘base’ sales line. Clearly sales will grow in core DIY
categories but will it be sufficient? Wesfarmers is well-funded and has said that it has entered the UK
for the long-term, so we will be watching their trading updates with interest.
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Store location
It is worth starting with a comment on the choice of store. At 67,000 ft² the store is large by
Homebase standards and is in a catchment with a strong Homebase presence. Bunnings have
announced that the second store for conversion will also be in St Albans (Hatfield Road) and this is a
smaller, more traditional sized store for the Homebase estate. The third store for conversion is in
Hemel Hempstead which is just 7 miles away. The area is relatively ‘under’-competed. Wickes have a
store near the Bunnings Hatfield Road store, as well as stores in Hemel Hempstead and Watford. B&Q’s
nearest store is close to the Homebase store in Hemel but is only a (small format) Supercentre. The
nearest (large format) B&Q Warehouse store is the ‘2 box’ Watford store, which is almost 9 miles
away.
So what is the Bunnings store like?
Well the first thing to say is they have done what they said they would do – Bunnings have delivered
their successful Australian DIY Warehouse format without adapting it for the UK market. It is a no-
frills store and there is not a cushion or candle in sight! To us it reminded us of visits to The Home
Depot in the US and to a B&Q Warehouse 20 years ago.
Walking the store it is clear to see that Bunnings have total conviction in the approach that has served
them so well in their home market. The store delivers strong first impressions on Price, Range and
Stock Depth – in retail terms it is bursting at the seams.
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Range
The initial impression when entering the store is one of range authority. Bunnings say there are over
30,000 skus (with additional lines available via special order) which is a 40% increase on its Homebase
predecessor. Although there is a huge choice of skus, our impression is that in many categories the
focus is on Entry Price/Good/Better rather than Best/Premium ranges.
Whereas the first department on site in many of the old Homebase stores was Homewares (e.g.
candles, cushions, mirrors), this category has been abandoned in favour of traditional DIY categories,
especially Tools. The Tool corral has a huge range of both hand and power tools that are not just
aimed at the DIY’er. Judging by some of the high price points (wrenches for over £100, Mitre saws for
over £700) and brands (Makita, DeWalt), Bunnings is serious in targeting the Trade customer. We
counted 35 different (standard) saws (by comparison a typical Homebase now has ca 20 and pre-
Bunnings Homebase will have stocked a lot less) and we counted 22 (standard) hammers (ca 14 in a
typical Homebase). The tool corral was strongly supported with branded supplier presence doing
demonstrations and interacting with customers.
As well as the number of skus, what was equally
striking was the depth of stock (including many of
the high price point items), again a big contrast
with pre-Bunnings Homebase. And the stock was
evident not just on shelf/peg but also in top
stocks. Clearly Bunnings have invested significantly
in stock, reinforcing the impression of traditional
Big Box Warehouse retailing.
The ranges in Decorative and Outdoor are also
impressive. Both are important categories for
Bunnings, as they were for Homebase. Paint is at
the heart of the Decorative category, led by 3
brands (Dulux, Crown and Johnstone’s) with a
large Paint mixing area as well as a colour wall
with over 3,000 colour tiles. The ranges of
decorating accessories and even wallpaper are
extensive too.
www.mdj2.co.uk
Range (continued)
Given its Australian heritage it is unsurprising that Outdoor ranges feature prominently. Here the
impression is that much of the range has been brought over from Australia (e.g. BBQ’s, patio heaters,
decorative fencing, gun cabinets, pet cages, artificial grass, outdoor displays/ornaments). While some
of these new ranges may sell, the different climate in the UK is likely to mean some adjustment to
ranges once Bunnings has seen what sells well/less well. In contrast to the interesting ranges of
decorative fencing, the range of standard fence panels was limited. There were a number of
landscaping/paving skus though they looked in the Good/Better rather than Best/Premium price points.
And if you want a wheelbarrow there was certainly plenty of choice. As with Tools there were some
high price point items such as £999 water fountains and £500 olive trees.
In comparison with Homebase, Bunnings has a more traditional ‘DIY’ approach to the Kitchens
category. There are 8 styles (compared with 26 at Homebase currently) all under the kit & caboodle
brand (one they use in Australia). The premium Schreiber and Odina ranges sold by Homebase in
its HRG days are not available. The ranges are on display but these are limited in comparison with
Homebase, B&Q and Wickes. Kitchen specialists are on hand to help customers who are encouraged
to use the instore Kitchen Planning tool, available at a couple of terminals in the department. Staff
did say they would come and do a home visit to measure. Bunnings does not offer its own
Installations service but we were told that they could recommend approved installers.
In contrast to its UK DIY competitors and Homebase, a category that was noticeable more by its
absence was Bathrooms. For example, there were only 3 baths (all displayed in the racks rather
than in a ‘show’ bathroom) and a couple of shower enclosures in a basic display. The focus
appeared to be only on ‘takeaway’ ranges. The ranges of taps and showers was more impactful.
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Range (continued)
For ranges aimed partly at the Tradesman we thought the range of heavy building materials was
limited (e.g. bricks, plasterboard). Ranges in Plumbing and Electrical look like a distress / top-up for a
tradesmen, rather than being first choice. That said range width in Plumbing looked more
comprehensive than that in Electrical with no sign of trade bulk packs for example.
Decorative ranges of electrical switches & sockets as well as door furniture looked tight compared with
the ranges in larger B&Q Warehouse stores.
Layout and Visual Merchandising
The store is true to its Warehouse roots, with a no frills, low cost approach. The initial impression (low
price, promotional dumpstacks with handwritten prices at the entrance, the warehouse racking, the
tool corral, banners highlighting brands stocked) reinforces range and price authority. Unlike many of
its competitors (and the old Homebase) there is nothing in the way of visual imagery and inspiration.
While the overall departmental signage is clear, there is very limited ‘in bay’ navigation and the lack of
Point of Sale material to help customers choose products means that several categories are difficult for
customers to shop. This is the case in sku-intensive categories in hardware (nails, fixings etc) where
UK competitors have invested more (e.g. each product is on display, colour coding based on usage) to
aid finding the right product. Even selecting the right hammer from the 35 on offer is not made easy.
For the regular DIY’er with a large project to complete this may not be an issue. But we wonder if this
approach will limit the appeal to the occasional DIY’er just popping in to pick up one or two items,
even if the increase in staff numbers can help address this.
www.mdj2.co.uk
Layout and Visual Merchandising (continued)
The use of highly-relevant clipstrips to drive add on sales was impressive. In contrast some of the
aisles probably had too many dumpstacks, making them hard to shop when the store is busy. The
Timber aisle which has pallet stacks down the centre is not just hard for customers to navigate but also
may be hard to replenish, given the bulky nature of some of the items in the racking.
While the broad category adjacencies and flow make sense, there are some aisles (Garden Power at
the front of the store, nowhere near Garden, Electrical & Storage, Cleaning & Window Furnishings)
where the adjacencies are not typical. Much of the Garden/Outdoor ranges are ‘outside’ in the Garden
Centre under a canopy. Given the damp UK climate, this may lead to some of the cardboard packaging
looking old rather quickly. A bigger issue is that some powder-based products may deteriorate – rose
fertiliser being a case in mind.
Pricing
We did not conduct any detailed price surveys but it is fair to say that price is a key component of the
proposition, starting with high visibility of the ‘lowest prices are just the beginning’ strapline. Early
indications suggest that in many categories prices are set at rather than below existing market levels.
We were surprised that the price of Dulux 2.5L paint had gone up from £11.99 on a visit on Friday
February 3rd to £14 on our second visit on Thursday February 9th. Crown paint had been reduced from
£14 to £13 between the two visits.
In DIY retail, due to the infrequency of purchases, it is as much about price ‘perception’ as ‘reality’ and
Bunnings certainly delivers a strong price message. The dumpstacks, promotional ends, hand-written
signage, warehouse racking all contribute to a low cost/price feel.
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Service(s)
A key part of the Bunnings proposition is great service and they have made no secret of the major
increase in staff numbers (almost doubling to 68, hiring of product experts) as well as the significant
investment in staff training (50+ hours per person). Staff were highly visible, though a number looked
busy doing tasks rather than interacting with customers. Providing great and consistent service across
the whole store estate has always been a challenge for UK DIY retailers and it will be interesting to
observe if the strong Bunnings service culture can overcome this as more stores are converted.
In addition to the Homebase staff, there were numerous supplier reps in the store, doing
demonstrations and merchandising tasks. The Bunnings ‘partnership’ approach with suppliers is in
contrast to current developments at Kingfisher and could create interesting opportunities for suppliers.
We will be interested to see if this high level of support from suppliers continues after the launch
period.
Services included tool and van hire, home delivery, timber and key cutting, engraving as well as DIY
workshops for adults and kids. As mentioned above, Bunnings does not offer a Kitchen or Bathroom
Installations service.
It is interesting to note that there is no multi-channel offer or facilities for Click & Collect in contrast to
the recent revamps in B&Q and Wickes which have a collection desk at the front of the store.
There are 6 tills which should be sufficient for most trading times but there may well be queues down
the aisles during the Easter and spring bank holidays as well as key weekends.
We plan to return to the store to see how it has settled down and is trading in the peak spring season.
What do you think? If you have been to visit the store please do get in touch and share your thoughts!
Neil, Steve, Andy and Clive at mdj2.
www.mdj2.co.uk
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