30 December, 2011

This year it’s renovation throughout the nation

Melbourne Herald Sun, Friday December 30, 2011

If you’re taking some time off this Christmas season, my bet is that part of the time will be spent in your jeans and runners, hammer or paintbrush in your hand, doing a bit of renovating.

The amount depends on whether the place is owned or rented, but this is the perfect time to get those things done that have been bugging you all year. Rest assured that you will not be alone in these tasks.

A major result to come from the astronomical house prices and the prohibitive cost of changing homes, is that renovation is back in a big way.

Take Bunnings. Their annual report was able to boast a 5.7 per cent sales growth when so many other retailers were bemoaning a declining market. And they opened a further 27 of their huge stores around the country. That’s an awful lot of hammers and nails.

Dulux also told a happy story at this month’s AGM. Home renovation has been a major factor in driving their underlying net profit close to $80 million this year.

We know that these increases were not caused by new home building because the Housing Industry Association reports a further decline in new residential work. This past year’s new housing starts were down by five percent, and the HIA predict that next year’s will be twice as bad.

This is hard to understand, at a time when existing houses are so over-priced and the need for more homes so obvious. Meanwhile, the September quarter saw renovations hit a new high of $2 billion.

Like all the rest of Australian retail, hardware is going bi-polar. Bunnings have ruled the roost for years now, squeezing the other chains like Mitre 10 and Thrifty-Link, forcing them to grow big or disappear.

But another chain of aircraft-hanger sized stores has started moving in, armed with lots of street cred.

Where Bunnings is part of Westfarmers, which owns Coles, it completes that mogul's royal flush of dominance in the marketplace from coal and fertiliser to retail chains and stationery to fuels and hardware.

Of course Woolworths wants its own toolkit, too. And now they have it. In partnership with American hardware giant Lowe's, they have started building the Masters hardware chain. The first opened recently in Braybrook in the City of Maribyrnong. Another 150 are already on the drawing boards.

This is a market where you have to be big to survive. If you've ever renovated you'll know what it's like - you desperately need an articulated gusset to fill the hole you've made in the wall but the first couple of local stores are too small to stock the range you need. You drive the extra miles to Bunnings, and that becomes a habit whenever you need something.

Mitre 10 know this and are rapidly building bigger stores, now bankrolled by grocery distributor Metcash who bought into the franchise chain this year.

The other big franchiser, Thrifty-Link, have announced the theme of their conference at the end of January: fighting back at the competition.

Even though Woolworths have committed $100 million to the Masters roll-out, they will open at most 20 a year. So it will be quite a while before they are able to stand toe to toe with Bunnings' 289 stores and trade centres.

Now finish your coffee, fold this newspaper, pick up your paintbrush and get back to work on the house. And do be sure to have a very happy - and productive - New Year.

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