DIY is the next frontier for Australia’s grocery giants

No comments

Australia is a market that fared well during the economic recession thanks to its proximity and strong ties to Asia’s emerging markets.

In April 2010, when the IMF declared the global recession over, it stated that Australia had the best prospects in the developed world.

Reinforcing this statement, the last couple of weeks have seen a number of retailers post enviously positive results for their cross-channel retail networks.

The country’s largest retailers Woolworths and Coles performed well during the year with a rise in total net sales of 4.7% and 6.7%, respectively. Since its takeover by Wesfarmers in 2008, Coles has been working at closing the gap between it and its bigger rival Woolworths, and the year’s results proved this had been paying off.

One of the strongest divisions for Coles was in the DIY channel, which experienced a sales growth of 5.7% over the year (on top of a growth of 10.4% last year) driven by its Bunnings chain. This area of retailing will be the most closely watched over the next year thanks to Woolworths’ and US-based Lowes’ Masters joint venture.

The two existing leaders are showing due concern in respect towards the arrival of a new competitor that expects to have 150 big-box-style stores open within the next four years. In anticipation of the opening of Masters’ first store in Braybrook, New South Wales next month, Bunnings has significantly ramped up its number of new store openings in an attempt to establish itself in areas of the country it previously had no presence in.

The past year saw Australia’s third-largest retail chain Metcash acquire a 51% stake in Mitre 10 and set out an aggressive three-year business growth plan for the chain. Already the retailer has extended its SKU range and begun improving customer service through the creation of the ‘Mighty Helpful’ brand ethos.

However, Masters will benefit from Woolworths’ knowledge within the Australian market and existing customer base. Additionally, thanks to partner Lowes, it will have the advantage of experience gained from one of the hardware sector’s world leaders.

Masters will likely cause a big splash in this lucrative market and established players are now under pressure to continue to innovate in order to build reputation and drive loyalty from their existing customer base.