Ryobi signing exclusivity deal with Bunnings/Bunnings reducing range in power tools ?

[Greywolf]

Working in a Bunnings tool shop in Sydney as I do, I've come across this rumour from three different sources, although in three different ways.

First I heard of it, a rep from a competing company asked me to keep my ear out for a rumour suggesting that Bunnings would be cutting back on his product lines. Nice enough bloke, I said sure I'd do that.

Cut to a couple days later, having a good chat with a nice bloke down Geelong way who manages an independent hardware store. He hands me the tidbit that Ryobi may soon become exclusive to Bunnings ! I hadn't heard that specifically yet, so came as some what of a sure. I'm not the biggest fan of Ryobi, as I consider it not much better than GMC and Ozito in most products, but much higher priced.

That same night, I heard the same rumour come from a more experienced tool shop collegue than myself,a part timer that knows a lot more about tools than I've come to learn so far, not sure where he heard it from. He did make mention though that what he heard is that Bunnings wants to move to the diamond shape of merchandising. High and low quality items being at the top and bottom points of the diamond, allowing for a limited range of product, and the middle spread of medium quality/medium pricing products being in abundance. Unfortunately for myself, I consider Ryobi to occupy the lower echelons of quality.

So I browse the web tonight, and this is what I find.

http://www.accc.gov.au/content/index...mItemId/776499

and

http://www.accc.gov.au/content/index...mItemId/776499

So from what I've been able to interpret, it sounds exactly the direction Bunnings may be moving in. Techtronics, being the parent company of Ryobi, by signing an exclusivity deal with Bunnings would mean having to bring in their full range of tools. I wouldn't imagine that they'd be signing the deal on the basis of what exposure they have now, which for my store is pretty small. Ryobi products DO sell out of my store, but it's more due to people having misconceptions on the quality of the product rather than we as salesmen pushing it (baring one chap who has a rather distastful infatuation with the stuff).

I'm not against cheap tools per se, I don't like cheap tools masquerading as items of quality. Ryobi's replacement warranty does mean we do see our fair share of products come back, which would increase if we started selling higher volumes. In our particular store, Bosch is the biggest seller by manufacturer, just because they have a good price point and generally good level of quality. It's all about horses for courses, and you don't go selling grandma a trade quality item, and vice versa.

Unfortunately for Ryobi, their price point puts them very close to the Bosch products a lot of the time, and I know which one I'll recommend each time.

I thought I'd put this post up for some thoughts and discussion, and I thought I'd put my own take on it in there as a different way of saying hello to everyone here. It may well be someone may come to a very different point of view on what the exclusivity dealings going on between Ryobi and Bunnings means, and I'd love to hear them !

Well off to bed, another long day at the 'office' tomorrow.

[ssgt]

Greywolf, now if u check out the thread on Triton in bunnings and the stopping of the triton demonstrations it will become clear all that triton has a very limited life left at the big B. I have been told that triton have been requested to remove stock from Bunnings because of the Ryobi deal, this is subject to confirmation from triton.
ssgt

[Batpig]

Dear Greywolf,

Good post.

Now am I missing something, or does the way those exclusivity-arrangement applications to the ACCC read, mean that nothing else besides Ryobi will be sold at the BigB...

Or if the arrangement is subject to interpretation - such as Bunnings saying to Ryobi that "DeWalt does not compete with you" - then what about the following scenarios:

1) Ryobi's more expensive industrial range (look similar, but better built) would face competition from DeWalt. Would DeWalt therefore go?...

2) Does Maktec go, but Makita stay? Again, does Ryobi's industrial range compete with Makita?

3) Would Black and Decker get the boot, but not DeWalt? Both should go since DeWalt is from Techtronic's competitor - Black and Decker...

4) Same with Bosch Green and Blue: Does one go or both?...

5) What about the BigB's own house-brand, the BigO (Ozito)? Very much a Ryobi competitor...

Besides all that, the whole thing stinks! The BigB has wiped out almost all of the small guys. Now that it's eliminated competition, it's going to wipe out product choice as well...

Needless to say, GMC's had it too...

Wow! That's a big one, Greywolf! Scoop of the year...

Best Wishes,
Batpig.

[rat52]

I the big b only sell ryobi who would bother shopping there for power tools.
choice is what it is all about. Being able to compare makes and prices against your needs and wallet.

[Tools]

The BigB has wiped out almost all of the small guys.

A bit off the topic, but I have just handed over a new Bunnings store in inner city Melbourne. When we started the job, there was a timber yard across the road that I can remember from I was a kid. It was a family company over 100 years old. They objected to the Bunnings development but lost, so they moved a few kms away, and within 3 months they had gone down the gurgler, and took a few of their suppliers with them as well. Tools

[pharmaboy2]

my local bunnings employs about 30 people fulltime - so someone elses loss is someone elses gain.

If I were a HW store proprieter - you stick around if you can compete, but if you cant then get out while the goings good. paradoxically, this deal will be good for other retailers, as the other brands wont die, but people need to compare so will shop around - taking them to other retailers.

Bunnings floor space ratio for tools is very very low - the range is limited and the stock levels are as well - i'd suggest their market share is also very low - i havent seen any dedicated tool shops shut down, and only one decent sized HW store in my city - lots of ma and pa operations that think $70 a can of no name brand exterior paint is a deal - wonder why they have gone out of business???????

[Batpig]

my local bunnings employs about 30 people fulltime - so someone elses loss is someone elses gain.

Hmmm... I'm not quite sure that's the case. Economies of scale allow them to shift the same amount of product as all of the small retailers they killed off, but using less employees than the collective total of those small retailers. Know it firsthand from the industry that my folks were in. Happens all the time...

If I were a HW store proprieter - you stick around if you can compete, but if you cant then get out while the goings good.

Theoretically, yes - unless:
1) You paid a fair whack to buy or set up the business in the first place, because who's going to buy it off you once the BigB turns up down the road.
or
2) You're too old (as in your early 40's probably these days) to be able to get a job anywhere else.

paradoxically, this deal will be good for other retailers, as the other brands wont die, but people need to compare so will shop around - taking them to other retailers.

Only trouble is, what new hardware store or chain can successfully open up within the catchment area of a BigB? But I get your point - should see more GMC getting pushed at K-Mart, etc.

i'd suggest their market share is also very low

Heck, I would have thought it was massive. They belong to a historically somewhat recent category of retailing that in the U.S. they have coined the term "Category-Killer" to describe... (Quite aptly I think...)

i havent seen any dedicated tool shops shut down, and only one decent sized HW store in my city

Since closest Bunnings turned up, I've seen 5 shut down within a 3km radius.

lots of ma and pa operations that think $70 a can of no name brand exterior paint is a deal - wonder why they have gone out of business???????

I'm afraid that that's about the best they can do, because their cost price is usually a little bit higher than the big guys retail price for the same item. Once again, know that for a fact from the industry that my folks were in. It's heartbreaking when you know that the one that the big guy is selling came off exactly the same production line as the one that you're trying to sell. There's a motto in the soft drink world regarding Coca-Cola profits, that explains the unfair principle of it all quite nicely...
It went: "Coke gets their volume out of the big guys, and their margin out of the little..."

Sorry Pharm - hope I haven't bitten too hard, but small v's big in the retail world is a very touchy subject for me due to what Mum and Dad went through...

All The Best however,
Batpig.

[pharmaboy2]

BP, you miss that bunnies has massively increased the size of the market - so when i said "market share" i was amiss - its more of the others havent declined, but bunnies have taken up a lot of the growth from cheapo chinese imports - 20years ago, normal household didnt have drop saw - that was a $600 item - now they do - people owned one drill and hand tools - now if you need to screw a screw, you go buy a battery drill!

So bunnies plus all other HW stores are moving a crap load more total amount of stuff - hell you cant move for people in bunnies on a sat morning - literally hundreds and hundreds of people in them - doing up their backyards, putting in decks, changing colours, buying plastic pieces of nifty ????.

category killers are good for consumers, bad for manufacturers/distributors, and bad for small business who try to compete. I cant deny it is bad for some, but the whole picture has to be looked at - the gains and the losses, not just the losses in isolation.

Coke is bad example bTW, everyone knows about it, but its an exceedingly uncommon situation - secondly it was largely caused by the volume of the buyer dictating to coke what they would and wouldnt do - the whole merchandising paradigm shift away from shelf space yields to selling space on a national basis - smart corner stores simply started selling cans and small bottles - just what coke wanted them to do -p no need to advertise to the populace that you cant compete by still carrying the item.

ATEOTD, we nearly all shop at big chain supermarkets because the offering is better - price position choice and parking, same as we all visit myers, kmart, target, dick smiths, harvey normans etc - we bleat about it alot, but we still spend our hard earned there anyway.

The only different thing about bunnies is been next door and competing doesnt help like it does with HN's, myers etc where customers are attracted by the big store - though i reckon a big toolies could make a killing next door, as long as they dumped the cheap chinese crap hand tools - you cant get decent stuff at bunnings - only sell decent stuff and you'll do alright - start selling GMC/homebrand ala home and mitre 10 and you're doomed

[Batpig]

Nice reply Pharm - fairly well thought through. You've got a bit more of a clue about retailing than what I had you pegged for after your first post, so I guess you must have some idea of the pain that the little guy goes through...

Whatever the situation, it will be very, very interesting to see how it all unfolds at Bunnings. Heck, I thought that the BigB's own Ozito was gearing up for a big year. What does Bunnings do with them now? (can hear many, many of you out there in cyberworld almost melting your keyboards to be the first to "quote" me and then add "Who cares..." ) And what will GMC do with Triton, now that they've tried to work up some momentum with all of those new tools and stationary gear?..

Best Wishes,
Batpig.

[Pat]

Heck, I thought that the BigB's own Ozito was gearing up for a big year. What does Bunnings do with them now? (can hear many, many of you out there in cyberworld almost melting your keyboards to be the first to "quote" me and then add "Who cares..." )

Best Wishes,
Batpig.

Who Cares . . .

You have your wish Batpig

[Batpig]

Who Cares . . .

The early bird gets the worm Pat...

Best Wishes and have a safe weekend,
Batpig.

[pharmaboy2]

cheers Batpig

Noticed the ACCC only has one submission linked ATM, and its from Trade Tools who give the agreement their blessing!!!!

So at least one competitor would rather that bunnings stick as much to the lower end as possible, and leave them to real tools. bunnings 10% promise pisses competitors off a bit - I've rung up for items and they will only quote the price from bunnings, and says if I go lower , you'll go to bunnings and get 10% less!! - too much cynicism!

on the plus side, if the accc aproves, then have to watch bunnies carefully for some clearance of stock lines!

[Groggy]

FWIW I heard the same thing. Industry pundits reckon Ryobi have made a mistake. This is going to bite Bunnies and Ryobi I think, deals will be done elsewhere to counter their buying practices; the next few months should be interesting. Who is going to stock Ryobi if Bunnies are going to price match them? Maybe not too many.

[pharmaboy2]

groggy the whole point is its an exclusive arrangement - thus no-one else will be stocking Ryobi at all - so you cant get bunnings to price match within ryobi products - unless they start to compete with other bunnings stores !~ ;D

[Groggy]

groggy the whole point is its an exclusive arrangement - thus no-one else will be stocking Ryobi at all - so you cant get bunnings to price match within ryobi products - unless they start to compete with other bunnings stores !~ ;D

Good point, missed that 'exclusive' bit (slow morning). When something comes off the shelf it will hopefully be replaced by something else though, introducing an opportunity for a competitors brand.

I am not keen on big companies throwing their weight around like this, it removes choice from the consumers and is anti-competitive (IMHO).