DIY filling the gaps in tougher times

Photo / Glenn Jeffrey

Cost-conscious do-it-yourselfers are picking up where tradespeople left off at big-box hardware stores.

The traditional Kiwi home improvement working bee will be in full swing this long weekend, and it's this part of the market that's helped push PlaceMakers, Bunnings, Mitre 10 and Hammer Hardware into expansion mode.

The huge revival in gardening, the sustainability push and the Government home-insulation drive have also helped.

PlaceMakers' emphasis on the DIY segment was revealed in Fletcher Building's annual report, out in the last week.

John Beveridge, chief executive of Fletcher distribution, which owns the 63-store PlaceMakers in joint-venture arrangements with local operators, said DIY had been a bit of a saviour.

A decline in one sector of the market was being offset by a boost in others.

Nationally, residential construction was down 39 per cent since June last year, he said.

But Kiwi enthusiasm for DIY had helped PlaceMakers.

"PlaceMakers maintained market share in both the trade and serious DIY segments," he said.

Beveridge believes PlaceMakers needs to focus more on developing its share of "the serious DIY customer segment by focusing on trade-credible products with competitive pricing and authentic 'know how, can do'." But he noted the competition was steep.

"PlaceMakers' sales fell by 18 per cent for the year due to the decline in residential building activity in New Zealand. Operating earnings, excluding unusual items, were 59 per cent lower at $30 million with margins affected by competition and lower turnover," Beveridge said.

PlaceMakers, with a "giant Labour Weekend sale", has opened a new trade store in New Plymouth and has refitted stores at Kumeu and Antigua St in Christchurch. Other stores are being refitted, including two in Auckland.

Its key to success is not to simply target the handyman/woman but to treble its target by appealing hugely to trade sectors and sell own-brand lines.

As Beveridge notes, PlaceMakers is not only a market leader in "core trade segments" but also provides direct distribution channels for Fletcher Building product.

For this, think the hugely popular brands made here such as Pink Batts, Winstone Wallboards and Laminex surfaces for benchtops and cupboards.

Add to those strengths dedicated frame and truss manufacturing plants spread around the country and this division's power begins to show.

"We are refitting two stores in Auckland to lift our presence and two out of Auckland," Beveridge said.

"Insulation is significantly up, as you would expect. We are getting new customers and heightened awareness of the benefits of insulation.

"And having an energy-efficient home is not only good for health reasons but [also for] resale or rentability. It leads into other discussions on energy efficiency and heating solutions which we can sell up to DIY and trade.

"Serious DIYers buy what the trade do, for example hard building lines for projects and not the 99-cent bucket.

"The recession has seen existing home improvement rather than new builds.

"A makeover adds value in the downturn without the risk of selling or building in an uncertain market.

"We cater to the serious renovator with our know-how position in the market. It is our core business and our offer reflects this. Big drive-throughs, knowledgeable staff, loyalty offers, good price and value," Beveridge said.

"These customers don't walk into the store, they drive in to collect or we deliver in volume."

The scope of the lucrative DIY market is reflected in the range of classes Bunnings has run recently, including how to make a coffee table, plan a new kitchen, repair floor boards, lay laminate flooring, insulate, install plasterboard, save water and energy, install a smoke detector, fireproof your home, make a planter box, lay stepping stones, grow vegetables and herbs, make and manage compost and build a deck.

Specialist classes for women and kids are also on.

"Each Bunnings Warehouse store has new DIY classes taking place every month as well as special occasion workshops such as the ladies DIY night and school holiday events," a Bunnings spokeswoman said this week.

Richard Goyder, Wesfarmers' managing director, said Bunnings' ebit in Australia and New Zealand was well up. Operating revenue from Bunnings'
Australasian home-improvement business rose 9.1 per cent to A$5.8 billion ($7.1 billion) for the year to June 30. Ebit grew 11.9 per cent to A$659 million and trade earnings (net of property sale contributions) rose 13.9 per cent.

By the end of last year, Bunnings had 175 warehouses, 56 smaller-format stores and 22 trade centres here and in Australia.

Wesfarmers was this week trading around A$25.50 on the ASX.

Rod Caust, Bunnings NZ general manager, said: "The downturn seems to have sparked a renewed interest in DIY. Through August and September especially when the weather was fine, we noticed an increase in exterior painting, landscape and other garden projects. Still very popular is the grow-your-own-vege kits."

He said traffic on the Bunnings website had recently risen by up to 50 per cent with customers seeking DIY information and sustainability solutions.

On the insulation front, Caust said his chain supported the Government's insulation programme through the Energy Efficiency and Conservation Authority.

"Bunnings will try to encourage better home insulation and healthier living through better communication on the energy saving from insulated homes, the use of the appropriate 'R ratings' insulation products and delivering of more cost-effective insulated homes by helping our customers with the 'how to do it yourself' programme," Caust said.

But Bunnings' $150 million expansion in New Zealand appears to be taking longer than expected.

The hardware retailer has been forced into the Environment Court over its proposals for new warehouses in Hastings and Glenfield where it has zoning and traffic issues. It cannot build on the sites it has already bought without getting a ruling overturning rejections from local authorities.

Construction of the new Dunedin store is at site-work stage. Te Awamutu, Lyall Bay, Takanini, Mt Wellington and Westgate are still only planned although building work at East Tamaki is about to start.

Craig Wilson, Mitre 10 chief executive, said 10 new Mitre 10 Mega stores would be "very close to being opened" by next December and he named Timaru, Mt Wellington's Lunn Ave in Auckland, Masterton, Pukekohe, Paraparaumu and Warkworth as just some of those 10 locations.

Mega stores are 7250sq m-12,500sq m and Wilson said the largest would be the Lunn Ave store.

Greenstone Group is developing this $20 million building as a design-and-build project.

"A lease has been negotiated with Mitre 10 and the development has been designed and priced. Consent is imminent and will allow a 10,000sq m Mitre 10 Mega to be constructed on the site," Greenstone says.

"In addition there is a future development area of 5000sq m to allow for additional retail and maximise the development of the 2.5ha site."

Wilson said a long wet spell lately had not helped sales. Paint and gardening products were two product categories he named as booming.

"It all depends on how you define DIY. Paint has picked up dramatically as people are tidying their houses for sale. Paint sales are the lowest-cost [product category] and often to make a house look better."

Mitre 10's store sales in July, August and September were up on last year, Wilson said. Insulation sales had been less spectacular, partly due to the backlog in installers meeting huge demand.

For Wilson, the best thing this weekend can bring would be fine weather - the optimum climate for DIY store sales.

STORE WARS

PLACEMAKERS:
* 63 stores in NZ
* Fletcher Building-controlled
* Joint-venture ownership
* Employs 2500 people
* Total revenue $928 million
* Boss: John Beveridge, Mt Wellington

BUNNINGS:
* Part of Australia's ASX-listed Wesfarmers
* 2400 NZ employees
* Annual NZ sales of more than $500 million
* 41 NZ stores
* Boss: Rod Caust, Mt Wellington

MITRE 10:
* Big-format store Mitre 10 MEGA
* Smaller-format are Mitre 10 "blue"
* Also has 72 Hammer Hardware stores
* 110 stores in NZ
* Sales turnover about $900 million
* Employs more than 3500 people
* Boss: Craig Wilson, Glenfield