In a piece in Crikey about Officeworks and the part played by Stephen Goddard’s leadership in the success of the business, a correspondent wrote: “making Officeworks successful was like backing a horse which had already won.” This appears to be based on the belief that Officeworks “lifted the entire business plan from Staples and Office Depot.” Don’t be too quick to agree…
There have been many successful overseas retail concepts that stumbled when imported into Australia. Sometimes we have the benefit of a comparative study to help us understand why some succeed and others do not.
In the early nineties we saw the essentially parallel launches of HardwareHouse and Bunnings Warehouse. Both were based heavily on the successful US Home Depot concept. Did lifting “the entire business plan” from Home Depot guarantee success for both?
Not entirely. The two new businesses, aiming at the same sector, soon experienced divergent paths.
HardwareHouse was managed along more traditional retail lines. They focused on sales per square metre, wages to sales ratios, shareholder value, maximising gross margin and a management culture in which everyone aimed to please those higher on the totem pole while kicking the cr*p out of those below. The numbers were always the drivers. They had a model of perfection and woe betide anyone who did not achieve it. HardwareHouse was managed to within an inch of its life.
Bunnings Warehouse was born when a group of managers from the Bunnings Western Australia (then a very different business from the one we know in the eastern states) gathered around their new purchase; the pile of ashes formerly known as McEwans. The sand gropers, with two or three senior former McEwans people, went right back to first principles. They articulated what this new business would be like to supply to, shop at, work in and have as part of a community. The vision and core values resulting from this were nothing more than what any group of decent people would come up, with provided they felt they had the freedom to do so.
Bunnings had a plan based on range, price and advice and a belief that if they got the first principles right, success was unavoidable. I say success, not perfection, because there was always a clear understanding that perfection does not exist in retail and that success was a journey rather than a destination.
Bunnings stuck hard to their model. They ensured that the team in each new store was allowed the freedom to create their own vision and values. Surprise, surprise; when Bunnings gave this freedom to the new group, time and time again different groups kept coming up with pretty much the same vision and a very similar set of values.
Customers said HardwareHouse was only interested in trade customers. Unless you were dressed in overalls, you were invisible to the staff. Truth was, the staff had other priorities. If the boss was coming on a store visit, they were busy prettying the place up. If they had been asked to count stock, the customer had to wait. The team members at Bunnings understand what they are there to achieve rather than what they are there to do.
If the Managing Director of Bunnings were to visit a store on a Monday morning and see it a little trashed, his reaction is likely to be “Had a big weekend did we?” He would understand that the team’s priorities during the weekend would have been customer service. Housekeeping could wait until Monday’s quieter times. I suspect that if you ask a Bunnings team member what their job is about, they will answer in terms of outcomes and accountabilities, rather than a list of tasks.
Bunnings wanted to show us their range; more paint than a pint specialist and 25 different lawn mowers. Not just three ranges; good, better and best. If they were in a category, they wanted to be category captain. As consumers, we now feel that if we ask for it in Bunnings, and they don’t have it, we probably asked for the wrong thing.
And as consumers we feel that Bunnings is a better shopping experience. The team members make eye contact and create the distinct impression that they enjoy being there. Try getting that in any other billion dollar Australian retailer.
So what happened to the two retailers, both based on a successful US concept? HardwareHouse achieved a poorer result than Bunnings on almost every measure. Sales per store were lower. Gross and nett margin were also both lower. Staff turnover was higher. Almost any customer could articulate differing shopping experiences. We know Bunnings swallowed HardwareHouse. One of the most difficult challenges facing Bunnings in the former HardwareHouse has been to turn this culture around.
The difference between these two businesses was almost entirely down to the leadership. A serendipitous coming together that created, and is still creating, a business that has gone from a pile of ashes still climbing past sales of $4 billion in a decade. It is arguably Australia’s greatest post-war retail success story.
Peter Davis led the Bunnings group, just as Stephen Goddard’s leadership was crucial to OfficeWorks. Taking a hot US retail model is not much chop if the leadership is not up to it.
Till next time!