Thread: Bunnings to open specialty tool chain

Originally Posted by woodPixel

-- Bunnings is, fundamentally, a property business. Selling hardware is a secondary bonus. This simply adds cash flow. Their entire business has been strategically focused on getting the best land at the best prices near DIY and home market users.... NOT green-fields and industrial end users.

I don't know, it doesn't look like it?
I have here the Wesfarmers financial report and it looks like they have $0.8bn of owned land and buildings but they owe $6.1m of lease payments, more than half of which is Bunnings.
https://www.bunnings.com.au/-/media/...5726367CAC703F

It looks like the vast majority of their property is leased.

The key is to look behind the curtain.

Our Properties BWP Trust |

BWP is the invisible actor here



edit: speaking of Westfarmers... what a barking dog with fleas.... some people are buying up those shares hoping for a LOT of inflation! Almost 10-foot pole stuff

Ok, they have a 24% non-controlling ownership in a listed trust that owns 75 of their 300+ properties. To which they pay rent.

Dunno what's the meaning of that to be honest, probably works out better tax wise.

Probably is for tax ..by renting the properties the entire cost of the rent is tax deductible in the same year ...if they out right owned the properties it would be a depreciation right off over many years.

I knew a small one man business that ran out of a shed near ours...his self funded super fund owned the shed and therefore he paid full commercial rent rate to.........himself. For tax purposes.

Originally Posted by skot

Probably is for tax ..by renting the properties the entire cost of the rent is tax deductible in the same year ...if they out right owned the properties it would be a depreciation right off over many years.

I knew a small one man business that ran out of a shed near ours...his self funded super fund owned the shed and therefore he paid full commercial rent rate to.........himself. For tax purposes.

Yep, you got it in one. Renting back to yourself is a great way to separate the trading business form the 'real money earner'. I was an accountant for a car dealership for 24 years and that was the standard model. The trading company's smaller profit was where executive bonuses were calculated from while the dealer raked in multiples of that puny profit hedged from view.

It's not so much about depreciation, which is a minor factor with commercial buildings.

Back to Bunnies and their empire building, one has to remember that when you have a winning formula you are kind fo stuck constantly trying to find green fields to expand into. Got to do something with all that money rolling around.

I've dealt with Bunnings twice as a vendor, both times they ended up getting our services (in the $millions) just under cost.
It all came down to our CEO didn't want to tell the headoffice in Europe that "we lost our biggest customer".
Other idiots were submitting similar prices too, and that forced us to be "competitive".
Amazing stupidity all around.

Originally Posted by Spyro

I've dealt with Bunnings twice as a vendor, both times they ended up getting our services (in the $millions) just under cost.
...
Amazing stupidity all around.

Yep; standard operating procedures for BigChains.

About twenty years ago I was working as a management consultant and we had a lond standing client who was doing very nicely producing a product for "upper-middle" specialist retailers. He had been approached by one of the large supermarket chains and asked our advice. He had done the basic sums and it looked quite profitable; his overheads were already covered, direct marginal costs were modest and, prima facie, the proposal looked very profitable, initially.

We advised as follows:

• Customers of existing stockists viewed his product as superior to that stocked by supermarkets and were willing to pay a little more,
• Those customers would reconsider that evaluation if they saw his product on supermarket shelves,
• If he sold to BigChains at a lower price than existing stockists then they would be really p*ssed off.

It might be possible to repackage the existing product for supermarket sales only:

• with a new brand name and in different sizes from specialty stores lines (product differentiation), or
• as supermarket home brand lines only, and
• don't let any one customer be more than 20% of sales.

And never trust the b**stards.

Nevertheless, he did not accept our advice, we simply "were blind to a great opportunity" and we lost his account.

Five years later I was seated next to him at a function and he relished telling me how well he was doing. Sales were up by over 400%, he'd had to enlarge the factory considerably, banks came to the party willingly, and the world was great.

Three years later his company was in liquidation and he was personally bankrupt. Five generations of a family business no longer existed.

When he first approached us 100% of his sales were to small specialty retailers. They deserted him in droves and just before liquidation the sales profile had changed to:

• BigChain A - 40%,
• BigChain B - 30%,
• SmallerChain C - 10%, and
• Specialty retailers - 20%.

The banks readily extended credit for both working capital and to finance the rebuilding of the factory, but asked for personal guarantees as "routine" which he signed.
Then BigChain A asked for a very substantial price reduction "to match chinese competition" which he was unable to grant. He lost the account and the on-going overheads overwhelmed the much smaller sales base. The banks foreclosed and called in the guarantees.

PS: Spyro never worked for him! Same story. Management literature refers to this as "narcotic marketing". Get them hooked on your cashflow and you are in charge.

Originally Posted by woodPixel

A book to read is The Walmart Effect, it is highly enlightening. Companies like Bunnings are a cancer on society.

You blokes REALLY need to read The Walmart Effect.

Really, really.

Well things are hotting up here. As if we aren't oversubscribed as it is, a new hardware store is nearly ready to go, owned by the Cairns hardware conglomerate. Also Trade Tools is about to purchase a property and open as well. Spoke to one of the Bunnies rep's and their trade tool shops are opening in WA first.
Interesting times.
Rgds,
Crocy.

Very near me there is Trade Tools, more recently Total Tools and now Sydney Tools. Prices are all clearly advertised and they compete online against others. So plently of competition.
One thing about Bunnings is that it very hard and time consuming to find and get someone to help you. When you do get someone it is likely someone who knows how to use the checkout or stock lookup application but has no idea about the discipline/industry/problem that I am trying to address. They lean on one or two semi-retired men for all the advice - if they even employ anyone knowledgable.

Bunnings is a massive time drain. Being a hobbiest, typically I only figure out that I am in need of something in the weekend. Then it's always - is there anyway around this which means I don't have to got to Bunnings and waste a good bit of my time?

Whereas when I go into Total Tools for example, they are super helpful and when I'm not so keen on browsing I'm in and out with a good tool for the job I need to do. They are a franchise and so they are very keen to be helpful and priced well and get you comming back.
It's hard to see how a Bunnings buy out of one of these tool chains would be good for anyone but Westfields in the long run.

Originally Posted by Old Croc

. Spoke to one of the Bunnies rep's and their trade tool shops are opening in WA first.
Interesting times.
Rgds,
Crocy.

Their name will be "Tool Kit Depot" according to a recent press article.

Originally Posted by DaveVman

Very near me there is Trade Tools, more recently Total Tools and now Sydney Tools. Prices are all clearly advertised and they compete online against others. So plently of competition.
One thing about Bunnings is that it very hard and time consuming to find and get someone to help you. When you do get someone it is likely someone who knows how to use the checkout or stock lookup application but has no idea about the discipline/industry/problem that I am trying to address. They lean on one or two semi-retired men for all the advice - if they even employ anyone knowledgable.

Bunnings is a massive time drain. Being a hobbiest, typically I only figure out that I am in need of something in the weekend. Then it's always - is there anyway around this which means I don't have to got to Bunnings and waste a good bit of my time?

Whereas when I go into Total Tools for example, they are super helpful and when I'm not so keen on browsing I'm in and out with a good tool for the job I need to do. They are a franchise and so they are very keen to be helpful and priced well and get you comming back.
It's hard to see how a Bunnings buy out of one of these tool chains would be good for anyone but Westfields in the long run.

That is why they don’t do that well with the tradies as well. The smaller specialist guys are all over it by comparison and much easier to deal with.
Bunnings are good if you know what you want and can find it on the shelf otherwise there are better places to shop

Originally Posted by Beardy

That is why they don’t do that well with the tradies as well. The smaller specialist guys are all over it by comparison and much easier to deal with.
Bunnings are good if you know what you want and can find it on the shelf otherwise there are better places to shop

While I do see many more tradies at places like TotalTools, most tradies usually know what they want - replacing or adding to an existing tool fleet. Like the time a few months back when I parked alongside a tradie in the Bunnings car park - it was about 7:30am. He was unloading a trolley full of just purchased power tools into his vehicle. His pickup with all his stools had been stolen and he was replacing some basics to do an urgent job.

I too hate going to Bunnings, seems to take an inordinate amount of time to get the few things I need. But here in the West there are few alternatives open on a weekend.
As a inveterate and perpetual renovator (DIY) I have managed to strike up a relationship with a trade rep there and with a day or so notice she will assemble my order ready for collection. I don't abuse this by asking for two or three things and try and get the order to at least a couple of hundred dollars. Helps enormously time wise.