Poised for transformation, former Home Retail Group-owned Homebase is in early stages of being morphed into Wesfarmers’ DIY brand Bunnings.
The fight is on to dictate the colour of living rooms and which bathrooms are in style as Homebase’s new owner tools up to take on its established rivals, DIY market leader B&Q and Wickes.
First impressions are looking good. Customer transactions at Homebase have shot up 7.5% in the four months since Australian conglomerate Wesfarmers acquired the retailer.
Wesfarmers’ full-year results were published today, and the retailer said trading so far has been ”steady”, particularly given “disruption” resulting from the need to make essential changes in store and “repositioning activities” associated with the Homebase overhaul.
The retailer highlighted three strategies that the leadership team, now headed in the UK and Ireland by Homebase Bunnings managing director Peter Davis, has implemented, and which have in turn contributed to its boost in transactions.
Changing and increasing stock
Upon making its £340m purchase of the business in February, Wesfarmers unveiled plans to remove concessions from Homebase stores and to stop selling decorative and soft furnishings lines.
The new owner plans to gradually turn Homebase into a hard-end, home improvement retailer – like Bunnings in Australia – and core ranges are being rapidly reshaped to fit. Expect more tools and fewer cushions.
Retail Week Prospect analyst Duygu Hardman points out that this is a dramatic shift away from Homebase’s traditional proposition.
She says: “Homebase’s offer was differentiated before, but now its products are going to be similar to B&Q, Wickes and Screwfix, with an emphasis on trade.”
Pointing to Screwfix’s double-digit growth, Hardman adds: “This could be a good move, because trade has been one of the strongest growth areas in the market, mainly because of the do-it-for-me trend.”
Additionally, the retailer is targeting a broader range of products and aims to hold more stock in stores as it moves away from the former Homebase model.
Under Home Retail’s ownership, Homebase was developing its multichannel and online capabilities and benefiting from synergies with then Home Retail Group stablemate Argos.
Hardman says: “With consumer attitudes towards DIY shopping changing and younger shoppers preferring to go online or to more convenient locations, it seemed that Homebase’s former omnichannel focus was a wise one.”
But she cautions: “I’m sure Bunnings will continue to leverage omnichannel capabilities, but changing stores into big warehouses like its signature mega-sheds in Australia may not necessarily be the root to success.”
Rival B&Q, which currently stocks up to 45,000 products in an average store, is seeking to cut down stock levels, realigning its business away from big sheds towards a multichannel approach.
Marketing and everyday low prices
Homebase’s new owner has also taken a fresh approach to marketing and pricing strategies. Homebase’s marketing slogans have changed, and in store, prices are being slashed.
Its new strapline is ‘Always low prices’, which resembles Bunnings’ marketing approach in Australia, where its adverts procliam ‘Lowest prices are just the beginning’.
Hardman says: “Previously Homebase had a very different marketing strategy, driving the quality of goods and appealing to female DIY consumers. The new marketing campaigns target more of a core DIY consumer – older and often male consumers.”
Wesfarmers has cut ties with rewards programme Nectar in order focus on low prices.
Hardman believes that Homebase’s new price focused campaigns and value-led credentials show how it could present a challenge to B&Q.
She says: “Homebase can afford to cut prices because Wesfarmers and Bunnings are so big. They already have immense supplier networks and well established direct sourcing capabilities in place. This puts them in a very strong position.”
The way price is communicated has also changed. Similar to Bunnings’ approach in Australia, large orange price labels are affixed to items of stock.
Leadership and people
In the week that followed its acquisition of Homebase, Wesfarmers axed the entire Homebase board in order to bring in its own directors.
It also cut nearly 20% of Homebase head-office staff in a bid to “streamline support functions”. Today, Wesfarmers said the restructure of the support team has been completed.
At the top level, Davis took up the role of managing director in April alongside finance boss Rodney Boys.
“Having started his career on the shopfloor and serving as chief operating officer since 2004, Davis has deep knowledge of Bunnings’ operations, which will help him drive the right pricing and marketing strategies for the chain to be successful in the UK,” says Hardman.
Working alongside the leadership team is a UK advisory board comprising former Asda boss and Kingfisher executive Archie Norman, former B&Q Asia chief executive Matt Tyson and ex-McKinsey partner and Lazard adviser Michael Mire.
According to Wesfarmers, the new leadership team is now “well established”. Bunnings chief executive John Gillam confirmed earlier this year that a total of six executives have been brought over from Australia to manage the Homebase transition, but their names have not been revealed.
The UK’s first pilot Bunnings store is on track to open as soon as October, and between four and six Homebase conversions are pencilled in for the 2017 financial year.
It is early days, but the new team seems to have made a good start and may soon be painting the town – or maybe the UK’s living rooms – red.