Barry Fagg

Fagg's Mitre 10 Home & Trade

In the independent sector, further consolidation of family-run building materials businesses is likely.

Often these businesses have been in the same family for a number of generations, own valuable real estate and for a variety of reasons sell out to multi-branch operators.

These operators will be a major supplier to volume project home builders.

The single-site operators will increasingly concentrate their efforts with specialist builders and those tradespeople who do renovations and extensions. However, the renovation/extension market will is largely dependent on real estate prices growing.

If for any reason prices drop, this market would be at risk.

Smaller hardware stores (less than 500sqm) operating in traditional shopping strips in metropolitan or large regional areas will have to question their viability.

Hardware retailing is now often not the highest and best use for retail space in popular shopping areas.

Bunnings will continue to roll out new stores, particularly their smaller formats (6-8,000 sq m) in regional areas of Australia.

These regional areas are the current market strength of Mitre 10 and Danks stores.

Independent operators who have not invested in upgrading their business in recent years will struggle.

While Bunnings are a powerhouse in the retail sector, they have had limited success in the trade area, particularly in the eastern states.

Their new stand-alone trade depots may change this situation but the independent timber & building materials merchant will prosper if they provide the service levels that builders/contractors need.

Trade business is often based on personal relationships, stock availability, fast delivery and other relevant services which Bunnings to date have not been always able to deliver.

In the hardware wholesale sector, rapidly rising distribution costs (particularly freight and labour) will encourage rationalization of resources.

Traditional supply chain systems will be under considerable pressure.

Growth opportunities in our sector include timber used in outdoor living situations, such as decking and feature screening/fencing, engineered timber product and products for energy efficient building requirements.

The challenge of finding the right staff will continue.

There are good employment opportunities in the merchant sector and we need to encourage young people to join the industry as a career.