Articles

Bunnings Needs More Time To Make A Fist Of The UK.

It can be argued that Wesfarmers learned very little from Woolworths foray into hardware in Australia. After all, taking on a dominant number one in any market – let alone a market dominated by trade relationships such as hardware – is fraught with disaster. Just ask Eric Watson about his Countdown UK electronics retailing fiasco.

Dominant market players are very hard to unseat but in the United Kingdom, B&Q is more than dominant. It is what Bunnings is in Australia – a deeply entrenched monster. So buying a seriously flawed Homebase was always a risky move. But having bought the business, the peanut gallery now needs to back off and give Wesfarmers time to work out how to make the business profitable and sustainable. B&Q – like any goliath – can be beaten. But it takes an approach that the management of Bunnings has no experience at. The history of Bunnings has been littered with very fortunate timing from the moment of its inception, including its consolidation of BBC Hardware and Hardwarehouse under the Bunnings banner – a move that would arguably be blocked today on competition grounds. Timing is the great determinant of success in retail.

To make Bunnings UK successful however will take more than investment prowess and process engineering. It will take a strategic innovation that changes the paradigm that Bunnings operates under in Australia and New Zealand and redraws foot traffic patterns in the UK market. An innovation based on intimate appeal to a specific segment, fresh product exclusivity, pricing dominance or a pioneering service breakthrough. Or a combination of all these things.

Bunnings can get the business profitable and use it as a springboard to grow its European operations. But the big question is one of time. As was seen with Masters, if the market grows impatient disaster follows as investor pressures lead to bad management decisions and often very expensive capitulation.

Wesfarmers does have other issues in its portfolio, not the least of which is the self-inflicted damage it has done to Target (once Australia’s most profitable department store). But it has the depth and range of resources to cover the UK foray as long as it is given the time and space to allow it to develop a strategy that can provide the breakthrough it needs to redress the entrenched trading patterns that dominate that market.

As usual there is a wall of sound – most of it negative – about how Bunnings entered the UK and the naivety of its launch model. But Wesfarmers has a lot of smart people in its circle of orbit who are capable of undertaking what most retailers take for granted – the constant refining of the strategic and operational models of the business. It does have risk but that is what a business needs to embrace to grow, in particular in overseas markets.

Talent and capital are a must have to solve the imposing issues to be conquered by Bunnings UK operations. But so is time. For without the patience to allow them to find the right solutions, this investment decision will be viewed from the benefit of hindsight and the discounting of the obstruction of negative thinking on throwing the baby out with the bath water before it has had a chance to grow. As is ever the case these days, we are at the mercy of the market.

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