Bunnings UK looks to e-commerce
Bunnings UK and Ireland (BUKI) will look to open a transactional e-commerce platform in the next 18 months, as parent company Wesfarmers look to ensure that its offer is suited to the local market.
BUKI managing director PJ Davis told investors during a presentation on Monday that digital engagement in the UK is “very important”, and that the information-only digital model employed by Bunnings Australia wasn’t sufficient.
“In this market we believe strongly that we need to be transactional,” Davis said.
“The next step is to lift [online] to make sure that it’s really strong pre-shop engagement and transactional for the UK.”
While Davis said the BUKI team are in no rush to roll-out an e-commerce platform, he set-out an 18-month time frame for the implementation, noting that its current store portfolio couldn’t service all of the UK and Ireland while generating adequate returns.
BUKI plans to add to its St Albans flagship with another store in three weeks, and then three more stores before the end of the fiscal year.
Davis said that the next store will be considerably smaller than the first, as it looks to test different formats on the local market. He revealed that Homebase stores are being completely stripped before conversion, including pre-existing mezzanine levels, and brought into line with Bunnings Australia’s format.
There are, however, still a number of sceptical investors with lingering concerns over Wesfarmers’ near $50 million first half loss from its new venture. Davis fielded multiple questions from investors over the nature of the loss, refusing to give any specific forecast for the second half.
Instead, he explained that decisions to move ahead with removing Homebase concessions, which Wesfarmers regard as a necessity, were made in the first half at the expense of earnings, costing the company as much as $13 million.
“You have nowhere to hide these days, retail is very exposed and mediocrity does not win. You must be excellent in your execution and you must have clear strategies,” Davis told the room.
He conceded that Homebase operations could be better, and that in particular there were many lessons learnt from first half trading in the kitchen and bath categories. BUKI has since engaged a new Italian based supplier to manufacture a large proportion of its kitchen offer.
New supply arrangements have also been organised with a variety of other leading brands, as Homebases’ private label offer takes a back-seat to Wesfarmers’ broader strategy for the market.
There are more lessons to learn though, Davis said the team is still wrapping their heads around trading in the UK’s dynamic climate, which he defined by “micro seasons”.
Wesfarmers are now more than 12 months into its ambitious expansion, after it acquired Homebase for $540 million in February 2016.
The move has been overshadowed by wider macro-conditions in the UK driving fears over its ability to generate returns. But Davis has repeatedly said that while the effects of Brexit are real, there are strong underlying fundamentals in the British home improvement market.