It might be hard to believe, but the very Aussie hardware store Bunnings is not doing so well with the Pommies.
During their annual analyst briefing, Wesfarmers, who owns the Bunnings brand along with other mainstays such as Coles and Officeworks, noted that the United Kingdom and Ireland branches of the famed Green-And-Red Behemoths drew a net loss of $89 million over their first full financial year of trading.
And it seems the problem may not be a British aversion to their signature snags. According to economists, the major issue is that the entire retail market within the UK focuses more on one-off specials, as opposed to Bunnings tried-and-true credo of “everyday low prices”.
Speaking during the briefing, Merrill Lynch analyst David Errington said that Brits prefer promotions over price guarantees.
You’re going to try to convert the market to non-promotional, that is a real worry. What’s the risk they turn into a real disaster? You guys were pretty aggressive saying [Bunnings UK and Ireland] wasn’t going to lose money. Where is this business going to go?
However, Wesfarmers noted that the real issue may have to do with the nature of how they entered the market. See, Bunnings didn’t just suddenly set up shop; they bought out British homewares company Homebase and rebranded them as all-purpose DIY stores. This meant changing how hundreds of stores operate, as well as setting up a few pilot warehouse locations that are closer in look and feel to their Australian counterparts.
As such, Bunnings managing director Michael Schneider said that it’s “going to be a long slog” for “customers to understand what the stores are there for”. They also noted that customer reactions to the stores have been “mostly positive”. They still hope that the stores will become profitable in the next few years.
But really, it still doesn’t feel right. Not one bit.
