The following article in the Australian Hardware Journal offers an alternative perspective on the troubles facing Bunnings as they attempt to change the trading model of their Homebase chain
It seems the European hardware industry has become even more tumultuous, after recent news that the UK's big green box has reported an $89 million loss in its first full financial year - since the acquisition of UK chain, Homebase.
Wesfarmers executives were recently asked questions about the dismal performance of the UK and Ireland business, with Merrill Lynch analyst, David Errington, describing it as a “big loss”, and questioning the strategy of moving Homebase stores from a promotional to an everyday low pricing model.
“The whole UK market is a promotional market. You're going to try to convert the market to non-promotional – that is a real worry. What's the risk they turn into a real disaster? You guys were pretty aggressive saying (Bunnings UK and Ireland) wasn't going to lose money. Where is this business going to go?" Mr Errington said in a recent news.com.au report.
Although he agreed that there is a risk in doing this, Bunnings Group Managing Director, Michael Schneider also pointed out that in 1994, the Australian retail landscape was similarly based on a “"high-low” promotional strategy, until Bunnings “came along and introduced EDLP” (every day low pricing)
"It's going to be a long slog, but what we're seeing in the Bunnings pilots is that they are performing well. When they (the UK consumer) see what EDLP is, they (will) trust it," Mr Schneider said in the news.com.au report.