Masters’ $700 million fire sale to add fuel to fight between Bunnings and independent DIY sector

Masters – A failure of corporate governance?

Failed home improvement chain Masters will close its final chapter with one of the biggest fire sales in Australia’s history, leaving a combined Mitre 10 and Home Timber & Hardware group and independent hardware retailers to continue to face off against Bunnings.

Woolworths has set December 11 as the closing date for Masters stores and will start selling off its inventory of paint, timber, hardware and home products from later this week in a sale that will include around $700 million of stock, for which the retailer expects to collect around $500 million.

Bunnings managing director David Gillam reportedly showed some concern when speaking to analysts about the the volume of cut-price inventory that will be on offer from its rival, but others believe the Masters exit will give Bunnings an easy ride in its expansion into smaller markets. This is a result that will likely put even further pressure on independent hardware operators.

“It’s difficult to know the impact of the immediate fire sale until we know what the nature of the stock moving out of Masters will look like,” chairman of independent hardware operator J.C. Dahlsen, John Dahlsen, told SmartCompany.

“But Bunnings will also be worried, because it is an enormous amount of stock to be moved.”

In an open letter to the Prime Minister in September 2015 Dahlsen forewarned the market that “if Masters withdraws, Bunnings will be achieve a monopoly position” in the Australian hardware and DIY market.

“The Bunnings operations team is very strong and effective, if not brutal, in driving performance,” he wrote at the time.

IBISWorld senior industry analyst Nathan Cloutman told SmartCompany that Woolworths’s decision to draw a line under their hardware store experience will open up a new challenge between Metcash and Woolworths, after Metcash announced it would buy Mitre 10 and Home Timber and Hardware (HTH) from Woolworths for $165 million.

“It will be hard for Metcash to respond to Bunnings,” Cloutman says in regards to the ad spend and brand operations.

“But what we’re going to see going forward is Metcash being a bigger player in the industry – you’d think the independent hardware space will be worried.

“This whole trend is likely to see the end for many smaller operators … Bunnings is only expected to further expand.”

Dahlsen says the hardware industry has always been affected by one big story – cost savings.

“Service has always been a strength of the independent sector, but there’s been a massive myth about Bunnings around price,” he says.

“They only ever discount a limited amount of line stock, and with their massive advertising budget is just looks like things are cheaper.”

In a statement to the market, Woolworths said the retailer will honour all customer warranties, gift cards and lay-buys, and will “work constructively with all suppliers” during the wind-up. The company says it will “work hard” to find thousands of Masters employees other positions within the Woolworths Group, while expecting to net $500 million from inventory sold.

Woolworths chief executive Brad Banducci thanked staff who had worked “extremely hard in an uncertain environment”.

Last night Masters social media team took to Facebook to say that over the coming months “there will be more reasons that ever to shop at Masters” – a nod to the upcoming sale.

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Oblivious Troll
Oblivious Troll
4 years ago

What is left unsaid in all these articles is how Bunnings and other dominant retailers treat their suppliers.

It can work out to be quite unprofitable to sell your product to the public through them – if not ruinous.

For example:
– you have to have a large workforce employed or outsourced to be able to go around all the stores and stack shelves etc
– all your employees who “interface” with the retailer have to go through time consuming accreditation processes AND keep up to date
– you have to wear their payment schedule
– you have to accept that you will be charged back for all returns (plus the return freight) regardless of how long since the item was shipped/purchased or why the item was returned. These retailers will not query their customer as to what is actually wrong and it can be as trivial as the item being the wrong colour.

fair go
fair go
4 years ago

interesting to hear obviously the way bunnings treats its local vendors is completely different to their chinese sourced rubbish that they dont stand behind or honour warranty at all. buyer beware…