Bunnings Warehouse, an industry giant that has redefined what it means to indulge in DIY hardware. What began in 1886 as a small sawmill has now transformed into a multi-billion-dollar business with a continued upward trajectory.
What is Bunnings? Well, whether you desire a tool or are looking to complete a DIY project, it does not matter because Bunnings will lure you through its door and there is a high probability that you will not exit empty-handed. Selling hardware for home improvement, outdoor living, and commercial construction, the company attracts everyone from kids to grandparents.
Bunnings originated in Australia and eventually made their way to New Zealand and the United Kingdom. However, its success is primarily attributed to the former two.
Here is a quick look at the numbers for Bunnings Warehouse, as of June 2020.
Smaller Format Stores
Big things come in small packages, and Bunnings Warehouse is proof.
Featuring a legacy that inspires, the beginnings of Bunnings date back to the 1800s, and run their course through World Wars to achieve the reputation of success it holds today.
[Source – Bunnings AU website]
In 1886, two brothers Arthur and Robert Bunnings arrived in Perth, Western Australia from London with one goal:
To set up a sawmill.
Upon their purchase, the first step in the hardwood and construction industry had been taken. As they began their field of work, Australia’s long-standing history and relationship played into the hands of the brothers like a golden opportunity. With the gold mining boom in the country, the small sawmill expanded to enter the market for brickmaking and building supplies.
When was Bunnings founded? Bunnings Bros was incorporated in 1907.
During World War 2 (1939-45), the 3 sons of Robert Bunnings took over the business and the product range expanded to include the need of the moment: Snake Boats.
Bunnings Bros had ventured into shipbuilding and was working closely with the government to deliver tailor-made boats to be used by the Allied Offensives in the Japanese-controlled territory.
But this was not their key to success. It was what happened after the war that paved the way for Bunnings into the home construction and improvement sector.
After the war, there was an acute housing shortage worldwide.
War veterans returned to civilian life and required housing, many existing homes had been damaged or destroyed in the war, and cities had begun getting denser. Australia wished to take up the reins of control ASAP, and Bunnings Bros came in the limelight.
They immediately upped their game and included building supplies and hardwood to the existing timber business, becoming a key supplier to the home construction industry.
The accelerated success meant Bunnings went public in 1952, expanding product ranges, venturing into retail, and opening its very own hardware stores throughout the country.
The first Bunnings store opened in Western Perth in 1961.
The Bunnings knew their trajectory of success would be paved by identification, planning, and implementation. They identified opportunities, planned a localized expansion, and executed instantaneously (or however quickly they could) to skew their journey upwards.
The 1970s to 1990s thereupon became a time of expansion through conquering. In these years, Bunnings acquired:
These acquisitions were not a mere roll of the dice or split-second decision. Every merger and takeover was planned to facilitate expansion throughout Australia and enhance the exposure of Bunnings to the consumer base.
For example, while Alco Handyman helped strengthen the hold of Bunnings in the West Australian market, McEwans facilitated expansions to the East Coast, and Harry’s and Lloyds helped capture the Southern market.
These acquisitions too, however, were not reason enough for Bunnings to become a grand success. The game-changer was to come later on, in 1994, that set the tone for the success of Bunnings, and its upward stance has continued till today.
From the gold mining boom to the events during and post WW2, Bunnings diversified their products and later on, even stepped into new markets through planned acquisitions.
If we were to sum up the first century of Bunnings, it would be as 100 years of grasping every opportunity the company got.
Bunnings had grown gradually, venturing into different markets, expanding its portfolio and forming its brand image around Australia.
But for it to become the go-to store for customers, it needed to undergo a major transformation.
In 1994, that’s exactly what happened when Wesfarmers acquired complete control of Bunnings and initiated a new phase of growth and recognition for the company.
[Source – Bunnings AU website]
Wesfarmers is one of the leading listing companies in Australia today and at the back end of the 20th century, it was pursuing its ambitions to reach here.
It initially showed interest in Bunnings by acquiring a 10% stake in 1987 and soon adding another 10%. At the time, Wesfarmers saw a lucrative opportunity in capitalizing on the potential of the forest and timber business.
On its own, Bunnings had established its operations all around Australia after those series of acquisitions and mergers. Thus, for Wesfarmers, this up-and-coming company had already laid the platform for them to advance in this new industry and diversify their holdings.
In the following years, Wesfarmers continued to acquire more stakes in Bunnings and by January of 1994, they had completed the takeover by buying the remaining 52% of shares for $594 million.
Over this period, Bunnings had begun embracing a unique, new identity, and this would define it for many years to come.
In December 1993, they opened the doors to a warehouse-style store, which would be the first of its 274 signature one's today.
“Anything you need. Anytime at all.”
This was Bunnings’ slogan from 1991 until the takeover. For Wesfarmers, it was crucial that they rebranded the company in a way that conveyed to customers that Bunnings was now a place that had much more to offer while at the same time, it was the same brand that they had grown to trust over the years.
Keeping the relatable and simplistic image of Bunnings intact, an addition of the word “warehouse’ featured under the logo.
The major change, however, came with the introduction of the red hammer emblem in late 1995 and subsequently, a strategy-setting slogan “Lowest Prices Are Just The Beginning” in 1996.
Source - News Daily
The hammer symbolized the market Bunnings intended to capture - Hardware - and the slogan hints to customers of the company’s affordable solutions.
With this strategic, revamped outlook, the stage was set for Wesfarmers-owned Bunnings to make forward strides in the hardware industry - and so it did, as time would prove.
Warehouses and big box stores soon became the face of Bunnings. But that didn’t mean the chain didn’t maintain its presence in smaller towns and suburbs.
In fact, to this date, there are two operational formats for Bunnings’ warehouses. The larger stores where customers can find almost anything from hardware to garden supplies carry the “Bunnings Warehouse” label. On the other hand, the smaller, more localized “Bunnings” stores, stick to hardware goods.
So, while big-box stores account for over 60% of Bunnings' store network and capture the larger share of the market, smaller stores play an important role in cementing the company’s position in the suburbs while optimizing their resources.
The rebranding of Bunnings under Wesfarmers proved to be a successful move. Not only did the red hammer and attractive price slogan stand out, but it also resonated with the DIY hardware community. Simultaneously, Bunnings stuck to its main offerings and continued to cater to smaller regions as well.
Revamped logos, newer slogans, and modern formats; all of this will get a buyer through the door, but the purchase depends on one of the most important factors of all:
Having the right pricing strategy is the first step to reaping a freefall of rewards. In fact, a McKinsey research found a “1% improvement in pricing raises profits by 6% on average”.
While the study wasn’t there in the late ‘90s, the Wesfarmers certainly paid heed to their pricing strategy and created one that worked impeccably for Bunnings Warehouse.
[Source - Bunnings.co.uk website]
Bunnings operates on three strategic pillars, the first of which is Lowest Prices. However, the unique selling point of Bunnings was that it didn’t just talk the talk, it also walked the walk.
Their method of pricing was simple: Their products would be the least priced as compared to others. With e-commerce and ease of price comparisons today, informational mobility has increased manifold. While one could assume this will create problems for Bunnings, it became another unique marketing tactic.
If a consumer finds another business with the same product as Bunnings but with lower prices; a unique strategy comes into play. Bunnings states if you can find the same product in the market with a lower overall price (including tax and delivery costs), they will not just match the price but reduce it by 10% and make the sale!
Such a guarantee of low price was the final nail in securing Bunnings’ hold on most of the potential consumer base.
Why This Works:
One may wonder how Bunnings Warehouse would be making profits if it continued cutting retail prices by not 1, but 10%.
However, this was an incredibly smart tactic with instantaneous impact and an (unsurprisingly) frequently unobserved fine print. The addition of the word “same product” made all the difference.
Bunnings holds the offer for identical products, and ironically, most of Bunnings’ products aren’t sold by its competitors. In fact, competitors refrain from stocking identical products in fear of price cuts. In addition, in-house brands for the warehouse like Ozito are strictly, Bunnings-only, and don’t come in the 10% guarantee.
Therefore, Bunnings Warehouse is able to brand itself as the most inexpensive hardware store in Australia, without necessarily having to follow through.
Truly smart - isn’t it?
If you are aware of psychological pricing, you would know about the 99-cents philosophy. In fact, it was proven by research in 1996 that items worth almost-whole numbers drew in greater revenue than rounded amounts.
Wesfarmers understood this phenomenon and paired it with their idea of the lowest prices to calculate prices. Instead of placing items at 1 cent less than the whole dollar, their items were priced at $24.98, $23.49, and so on.
Every Bunnings store thrived on such result-oriented strategies, and soon, in 2001, the overall countrywide operating revenue improved by a staggering 118% in the first half!
All this shone to one aspect - whatever Wesfarmers was doing, it seemed to work for Bunnings and its Australian clientele.
Why This Works: Such pricing produced an impression that Bunnings doesn’t merely provide consumers a low price, they round it to the least cent possible. Again, a psychological tactic that unsurprisingly, churned immense revenue.
The understanding of consumer psychology was a forte of the management of Bunnings Warehouse, and it played wonderfully in their court. They understood the common consumer perception that higher prices are hidden, and cheaper ones are blatantly visible.
For example, while luxury designer clothing rarely hangs off racks with a price tag, the prices of every product at Bunnings were clearly stated, and every advert showcased them in large, bold letters.
[Source: Bunnings 2010 ad]
Why This Works: This appeals to the reverse psychology of buyers. They assume since the price tag is large and so visible, the product must be cheap. Therefore, they continue to add it to their cart (physically back then, and virtually too, today) without a moment’s hesitation.
Bunnings pricing strategy isn’t just about keeping prices low. It’s about building that image in customers’ minds that there is no place cheaper and then, staying true to that proposition.
Also, employing subtle techniques, such as price visibility, and utilizing the effect of price points is crucial to pricing strategies.
Normally, a person only thinks about visiting a hardware store when they need hardware. After all, it isn’t part of your daily or weekly grocery run.
However, Bunnings isn’t that usual boring hardware store. It curates an experience that keeps customers coming back, whether or not they want to buy something.
It’s become a fun and attractive place for families, with entertainment, food, and much more that turn a quick visit into an hours long outing.
It’s difficult to drive by any major town in Australia and not come across a Bunnings’ warehouse. They’re just so much more accessible that you don’t have to plan a trip to the store in advance.
The Bunnings logo is clearly visible from afar and it creates a sensation that customers find difficult to resist. As a result, they end up heading to the store anyhow.
Although Bunnings is a hardware and supplies store for anyone, they’ve identified a target market - a rather unexpected one too.
Families with little children.
The thing about parents with kids and bringing them to a store is - convince either party and you have yourself a client. Bunnings have cracked this code and played it to their advantage.
For example, when a family plans a fun outing they think about somewhere with fun activities, playground, balloons, and all that stuff for kids to enjoy their time. At the same time, they need a place where parents can watch the children and grab a snack while at it.
A hardware store definitely doesn’t come to mind when you picture such a place. Then again, Bunnings isn’t just a hardware store. It’s the whole package.
They always have something or the other going on for kids. From seasonal events, such as Halloween trick or treat to jumping castles, petting zoos, and painting activities, children have the perfect place to run around.
A crucial part of Bunnings’ strategy is keeping the adults engaged with activities of their own.
What better way to do that than by offering free DIY workshops to learn new skills? While kids are having their fun, parents get a chance to interact with staff and find out more about the store.
They roam around, window shopping much more enthusiastically than they would at a mall. Every item is displayed enticingly to create a picture in their mind: a dream spa set or outdoor furniture to make the most of summer.
These aren’t items they really need, but items they aspire to have. They might end up buying them; they might not. But it’s surely left its impact on their heart and it probably will have them coming back.
Where did it all start? With fun for kids and workshops for adults. Wow!
The iconic Bunnings sausage sizzle, a day out isn’t complete without a wholesome snack, right?
Bunnings knows that.
They have one type of customer coming in to collect a few basic items. Another to enjoy with their family and eat out. There’s also the one that’s simply here for the delicious snacks and they’ll probably grab something from the hardware side on their way out!
[Source – Bunnings AU website]
This intricate attention to enhancing the customer experience is another one of Bunnings' strategic pillars: Best Service.
To ensure customers are constantly catered to Bunnings employs over 40,000 team members in its Australia and New Zealand stores.
Undoubtedly, the team seems to be doing something right. In 2018, in an average four-week period Bunnings received eleven million shoppers. 89.8% of those were highly satisfied with their experience - a stunning statistic indeed.
In the following year, the chain achieved an impressive feat of 20 successive months as the “Hardware Store of The Month” and consequently, earned the “Hardware Store of The Year” award.
Bunnings managed to completely transform the concept of a hardware store. Or from another perspective, grew out of that limited perspective. Now, its focus is on tailoring experiences for families and attracting them to step through their doors. After that, boosted sales is just the next natural step.
Bunnings is what they call a ‘category killer’. It’s a brand so dominant in the Australian DIY home improvement industry that no competitor even comes close.
There are several reasons behind it as we’ve seen in its superior customer service and price strategies. Along the way, the company has also been helped by the fact that its competitors didn’t learn from Bunnings' strategies and as a result, their shortcomings became their reasons for closure.
Within the home improvement industry, there was no name strong enough to challenge Bunnings supremacy. The threat had to come from outside and it had to have a strong backing.
So, it happened - in 2011, Woolworths, Australia’s leading supermarket chain, entered into the home improvement arena by launching Masters’ Home Improvement stores.
This new entrant showed promise but it never really took off. It couldn’t offer an enticing point of differentiation from Bunnings. To make its mark, Bunnings had offered a whole in-house experience that made it such a success
Then, why would people make the switch from a store they trusted for so many years?
Simultaneously, Masters’ was unable to appeal to customers simply because of its branding.
Where Bunning had paid a great deal of attention to connecting with the common customers and opening the world of DIY hardware to them, Masters’ couldn’t shake off the image of a store for specialists only. Also, Bunnings’ already occupied the best locations, making it literally more visible and hindering the exposure its competitors needed.
Another reason for Master’s downfall was not catering to changes in customer demand. They maintained a rigid stock system and often, products would go unsold.
Besides the customer side, Bunnings had a significant edge on the supply side. It maintained a monopoly over major suppliers in the country and any new entrant had to find a way around.
Moreover, Masters’ couldn’t match Bunnings' aggressive prices without gaining access to suppliers and reaching the point where they achieved economies of scale. Even if it did manage to lower prices, Bunnings would follow their “we'll beat it by 10%” plan.
All these factors combined, and in 2016, Masters’ had to officially close the doors to their 60+ stores where 7000+ employees worked.
Masters’ struggle didn’t last long but there are still smaller, more established players in the home improvement market and Bunnings hasn’t let their eyes off them.
In fact, their acquisition of competitor Adelaide Tools has raised quite a few alarm bells, where stakeholders are worried soon there would be any noticeable competition at all.
But that didn’t stop Bunnings from pursuing another major takeover in 2021. It acquired Australia’s largest tile retailer, Beaumont Tiles, ending more than 60 years of family ownership.
According to experts, the path is well and truly clear for Bunnings to keep expanding its market share and maintain its dominant position for at least the next decade.
In 2019-2020 alone, the retailer earned a staggering $15 billion in revenue. If the competition trends remain the same, there’s not much to stop Bunnings rise other than Bunnings itself!
As any firm grows exponentially in industry, new entrants try to cash in the market potential too. However, Bunnings showed that any competitor that cannot offer the same level of service, value, and experience, cannot make a dent in the market leader’s share.
Bunnings growth in the Australian and New Zealand markets is truly remarkable, and it lies in their understanding of the local customer.
They found out what the everyday person preferred and turned them into a part of their customer base. But that doesn’t mean every customer in every part of the world would have the same tastes and needs.
Bunnings learned this the hard way when their exploits in the UK market through Homebase proved to be a major disappointment.
To understand what went wrong and how Bunnings proceeded, we need to first find out what they did right initially.
[Source – Bunnings AU website]
Bunnings has been quite popular in Australia and has been a hands-down success.
Due to the following three main reasons:
In the hopes of replicating the success it achieved in the Australian market, Bunnings ventured into the UK with the same business model and acquired Homebase with its 265 well-located stores, only to later write off $1.7 billion after failing to make an impact in the UK.
Now, why did Bunnings fail in the UK?
At the core lies the simple fact that Bunnings' Australian business model was just not right for the Uk market.
There was a clear mismatch between what the customers in the UK wanted and what Bunnings had to offer.
Everything from the product line to the store layout and display didn't appeal to the masses in the UK.
It must be noted that people within the UK like things done for them and buy finished goods and projects rather than tools and parts to get their own hands dirty.
While Australians are more into DIY and value it, in the UK, people prefer DIFM - Do It For Me.
Moreover, the way the stores were designed didn't appeal to people in the UK, who generally like to see displays and aisles.
Plus, products such as outdoor furniture or BBQ grills, which are extremely popular in Australia, are not at all popular in the UK.
Last but not least, Bunnings did not market effectively to its target audience in the UK, and the brand was literally unknown as it simply took over a business. No wonder it had nothing to show for its stint in the UK.
Many successful businesses make the mistake of thinking that if they are successful in one market, they can replicate it in another one. However, that’s not the case. Each market is different; hence, taking the time to understand the market and developing a tailored strategy to exceed customers' expectations is essential for success.
The Covid-19 pandemic ravaged economies and businesses worldwide in ways never seen before.
Bunnings not only remained steadfast in the face of the worsening crisis but thrived, as evident from its double-digit growth in 2020.
This is primarily because it rethought and re-invented the way to do business in a radically different business environment, embracing the new normal.
Wesfarmers Share Price
Sales Surged In Distinctive Shopping Waves
Bunnings has long been the rock and a staple in Australia.
As the lockdown restrictions were imposed and customers’ needs evolved, Bunnings made sure it adapted accordingly and continued to serve customers.
While first, the customers came in for protective equipment and cleaning goods, they followed up to build their own home office and gym, and finally to get some home improvement and gardening products for projects to keep them entertained and occupied.
Bunnings catered to all their needs even as global supply chains were disrupted. Plus, it strictly complied with the Covid-19 regulations and took strict measures to ensure that customers were safe while shopping.
From physical distancing to constant monitoring, queuing, and limit on the number of customers in the store at a time, Bunnings went above and beyond to gain customers' trust and ensure the safety of everyone.
Digital Innovation Driving Success
In addition to operating safely, Bunnings realized very early on that going digital is the best thing it can do. Hence, it strived to fast-track the process of digital transformation and offered the ultimate online experience.
Here’s how it did just that:
Difficult times test resolve and offer opportunities. Bunnings remained agile and adopted a test and learn mindset to navigate the tricky waters and came out on the other side a winner. By going digital and adapting to the change in the way consumers shop, Bunnings made sure it achieved competitive advantage and became the go-to choice of customers.
Bunnings Warehouse is a force to be reckoned with. It is an institution that almost every Australian relates to in one way or the other. From people lamenting the loss of the popular weekly sausage sizzles during lockdowns to the talks of coining “Bunnings Barometer” to gauge the retail sector’s health and consumer confidence, there are a number of instances that highlight the importance of Bunnings and the integral role it plays in the overall economy.
A$ 14.9 billion
A$ 11.6 billion
Bunnings' philosophy of test and learn empowers it to take risks, grow iteratively, and continue to get better. While it isn't easy for a business as big as Bunnings to remain flexible, such is the tenacity and willingness to adapt to the ever-evolving consumer needs and market dynamics that Bunnings finds a way to remain agile and be creative every time.
One thing that Bunnings does quite well and that has contributed immensely to its success is that it draws customers in and keeps them hooked. Getting entire families together on the weekend with classes, activities, face painting, special events, DIY workshops, sausage sizzle, and free handouts and testing is a master-stroke that works well.
Bunnings is all about delighting the customers. From providing an extensive range of options to offering the lowest prices and the best service, Bunnings makes sure it caters to all the needs of its customers and exceeds their expectations. Such obsessiveness to do right by the customers has meant that Bunnings has gained the trust of people.
Too often, businesses get distracted by focusing on irrelevant things such as different product categories that have nothing to do with the core business or the competition and new entrants in the market. Bunnings proved that if you continue to enhance the quality of products, services, and experiences you offer, no one can do you any harm.