Bunnings builds on firm strategy

COST cutting is on the cards at Bunnings with a major review of its operations under way as the company beds down last year’s $2.2 billion acquisition of Howard Smith.

Addressing the WA Business News success and leadership breakfast series last week, Bunnings Building Supplies managing director Joe Boros said major changes were likely to occur at the hardware store business in the next six to 12 months.

“We are now looking at our structure post-acquisition. We are probably a bit top heavy at the moment and we expect some changes over the next months,” he said.

Mr Boros, whose annual salary package of $2.2 million makes him WA’s second highest paid executive, has indicated his intention to step down from his role in six more months, making way for likely successor Peter Davies.

Mr Boros has been behind the success of Bunnings since 1991 when the company embarked on a major review of its operations, which turned it from a trade store to a retail store.

“We also cleaned out the culture to remove things like favouritism. The business was tightened up and we managed the balance sheet,” Mr Boros said.

This was all done after undertaking a comprehensive two-year study of the success of other overseas hardware stores, in particular the UK-based Home Depot.

“More than 55 people went overseas. We got kicked out of so many stores taking photos and things like that,” Mr Boros said.

“We got as many catalogues as we could get our hands on and we changed the product mix. We really did our homework.

“We went right through the logo. Colour, advertising style and pricing. Customer service standards were also lifted.”

Shifting its focus toward the DIY market soon paid off for Bunnings. While other hardware stores continued to suffer in a competitive market, Bunnings succeed in obtaining a return on capital of 25 per cent within three years and a 50 per cent return on capital within five years, all without embarking on heavy special discounting of its products.

“We are perhaps the only store that has always-low prices. We don’t have specials. That is what part of our success has been from,” Mr Boros said.

Bunnings also negotiated Enterprise Bargaining Agreements for its seven-days-a-week stores before opening any of its outlets.

“We got what we wanted because they had no-one to talk to. Once you’ve opened a store you’ve got Buckley’s chance of negotiating a good EBA,” Mr Boros said.

Having good staff was one of the key ingredients to the success of the business, with the best rewarded, while complacency was stamped out.

“We’ve got a team that is passionate about our business, We don’t have people who don’t pull their weight. There are no preferences given or special treatment,” Mr Boros said.

“Complacency is the first sign of decay. That was the first message I learnt at my first training session as a 19-year-old.

“People can so easily become complacent. I think it’s important to keep a high level of dissatisfaction within the organisation to keep complacency out.”

Another part of Bunnings’ success has been in developing long-term partnerships with suppliers and contractors.

As an example, throughout the evolution of Bunnings it has consistently used the Brand Agency for its advertising work.

“Its easy to spit the dummy and put your advertising out for tender when it doesn’t work out, but it’s far harder to try to change agencies,” Mr Boros said.

“Developing long-term partnerships and working together is far more important.”

Joe Boros. Marketing dynamo? Not so according to the man himself.

“I’m just an administrator,” Mr Boros said.