Psychology tools in the hardware trade
Why would you do your own bargainhunting DIY when there’s a 15 per cent discount if you find something cheaper? Rob Stock ventures into the world of price guarantees.
Only a minority of DIY enthusiasts appear to be watching prices closely and holding Bunnings and Mitre 10 to their price guarantees. Both retail giants, which together sell over $2.7 billion of hardware and gardening supplies each year, promise that if theirs is not the lowest price on a locally-stocked item, they will beat the price of their local rivals by 15 per cent.
But Bunnings completes an average of 400 price ‘‘matches’’ a month, and part of the reason appears to be a relatively limited product crossover between Australian-owned Bunnings and its big New Zealand co-operative rival Mitre 10.
Even when it comes to big-name tool-makers like DeWalt, Makita and Stanley, the two chains often don’t carry the exact same products, preferring to stock slightly different models, or equivalent models of a different brand.
Sometimes they appear to do deals with big brands enabling them to sell ‘‘exclusive’’ products.
The prices of the two giants are under the spotlight as the Commerce Commission prosecutes Bunnings under the Fair Trading Act.
Late last month the consumer watchdog won a legal tussle when the High Court at Auckland refused Bunnings’ application for evidence to be thrown out.
The commission charged Bunnings with 45 offences in 2016, alleging the company’s ‘‘lowest prices are only the beginning’’ claim was false and misleading following a complaint from Mitre 10, which had been tracking Bunnings’ pricing.
The two rivals manage the cost exposure to their price guarantee system through expensive price-surveillance programmes, but also what may amount to a trick of consumer psychology.
Bunnings director Jacqui Coombes said the company spent over $5 million a year running a system to constantly check its competitors’ prices online and in-store across Australian and New Zealand.
The commission prosecution was triggered by pricing information gathered by Mitre 10 on Bunnings, which tried unsuccessfully to use the court process to get a peek at its rival’s pricecomparison algorithm.
‘‘Within every store our price integrity team check the local market, and this is backed up by our 15 per cent price guarantee policy which has been in place for almost two decades,’’ Coombes said.
Retail expert Chris Wilkinson from the First Retail consultancy said the price guarantees may have the effect of providing comfort to consumers, and effectively dissuade them from doing their own price comparisons.
‘‘The reality is these statements (the price guarantees) do provide a degree of confidence,’’ Wilkinson said. ‘‘There’s a general assumption that if there are price differences, they are not going to be so great.’’
Retailers sought exclusivity in product lines both to give them individuality, but also to support higher margins, he said. Comparing offerings online shows significant range differences, though Mitre 10 said not all products sold in stores were listed on its website.
But on March 3, Bunnings listed 225 Stanley products on its website, and Mitre 10 listed 367. Mitre 10 had 68 Stanley Fatmax-branded tools versus Bunnings’ 130, and Mitre 10 listed 34 Fatmax tools as ‘‘exclusive’’, meaning they were not sold by rivals.
Mitre 10 had 477 DeWalt tools, compared to 325 at Bunnings, and 23 of Mitre 10’s best-selling