The Mercury

Builders Warehouse ‘a true blue ocean strategy’


MASSBUILD, the do-it-yourself (DIY) division of Massmart, has been a good bet for the group, which eight years ago recognised a gap in the market and an opportunit­y to cash in on what has since become a R45 billion home improvemen­t market.

Through the acquisitio­n of several businesses since 2003 the division now includes 80 stores under three brand names – Builders Warehouse, Builders Express and Builders Trade Depot. Despite being Massmart’s smallest operation, it is making great strides.

In the six months to December 26 last year, Massbuild lifted sales 18.6 percent to R3.78bn and trading profit before tax grew 36 percent to R209.8 million, outstrippi­ng gains made by the group’s other divisions.

Massbuild chief executive Llewellyn Walters recently said that the business’s success was driven by getting efficienci­es right, cutting operating costs and by growing investment.

Massbuild is expected to gain further traction with the backing of Walmart, which received permission last week to buy a 51 percent stake in Massmart.

Bryan Roberts, the director of retail insights at Kantar Retail, said Massbuild had huge potential. He said Walmart had indicated that Massmart’s building division was a capability that it wanted to learn from MASSBUILD offers three brands targeting homeowners, building contractor­s, subcontrac­tors and do-it-yourself enthusiast­s.

Builders Warehouse, with 27 stores in major urban and regional areas, targets living standards measures (LSMs) 6 and higher. The average basket size at the chain is R480.

“Builders Warehouse is a true blue ocean strategy. There is no other store like it,” Massbuild and apply to other markets.

Walters said building supplies and DIY had previously been considered cyclical, but since 2008 Massbuild had been growing at double digits and during the financial downturn increased market share.

Massbuild is the largest business in the category with an estimated 13 percent market chief executive Llewellyn Walters said.

It competes with a variety of retailers including Mr Price Home, House & Home and builders’ merchants. “Our challenge now is to take it into peri-urban areas,” Walters said.

Then there is Builders Express, with 24 small neighbourh­ood stores, targeting upper income consumers who own homes with swimming pools share. Based on 2009 data Massmart’s DIY sales through all its brands, including Game and Makro, gave it a 16.5 percent market share, compared with rival Cashbuild’s 12 percent and Illiad’s 9.4 percent share.

Builders Express director André Steyn said the business was driven by “home improvemen­t”. He added that part of and gardens. Paint is the cornerston­e of this brand, supported by the garden centre and tools. The average basket size at Builders Express is R204.

Builders Trade Depot, with 29 stores, targets lower to middle LSMs and caters for both the structural needs of building a houses, such as roof trusses, and finishes, such as paint and cornices. The average basket size is R540. – Samantha Enslin-Payne Massbuild’s success was the design and location of stores, which made them appealing to women as well as men.

“The gender crossover is very important,” Walters said, adding that an equal number of men and women shopped at Massbuild stores.

Building depots and hardware stores have historical­ly been located in areas of urban decay. Massbuild locates its stores in areas that are regarded as safe and the store design is light and airy, which makes women feel comfortabl­e to shop there.

Wide aisles, uncluttere­d shelves with good stock descriptio­ns and panels identifyin­g what the products should be used for has encouraged novice DIY enthusiast­s.

Underpinni­ng growth in store expansion, Steyn said: “We have opened stores faster than competitor­s.”

Walters said Massbuild’s biggest threat was finding new sites and qualified staff.

Elsewhere in Africa Massbuild acquired Kangela in Mozambique, which has 13 stores countrywid­e. A Builders Warehouse store has been opened in Botswana while a second site for a Builders Trade Depot has been secured.

Sites have also been located in Zambia, while plans to buy a business in Namibia were stymied by ownership requiremen­ts there that are contrary to Massmart’s plans for an employee scheme.

Other countries the group is considerin­g include Angola and Nigeria. AS WALMART expanded its internatio­nal business, the company wanted to bring ideas from Massmart to other markets, executives said last week.

Walmart’s hotly debated purchase of a majority share in Massmart will also put Walmart in the building supply business. The company expects the acquisitio­n to close in June.

JP Suarez, senior vice-president of internatio­nal business developmen­t, said Walmart intended to expand Massmart’s footprint in southern Africa, where the chain operates as far north as Ghana and Nigeria.

One priority was to offer more refrigerat­ed food, a category lacking among Massmart and its competitor­s, Suarez said.

“It’s going to be a real win for the customer. It’s something Walmart has great expertise in,” said Cathy Smith, Walmart’s internatio­nal chief financial officer.

The Massmart acquisitio­n gives Walmart access to 50 million new customers.

Massmart’s Builder’s Warehouse line would be a new venture for Walmart, which Suarez said had developmen­t potential. “We do want to take that capability and learn and apply it to any other market it might be relevant to,” he said.

Smith said Walmart was working to expand online offerings overseas. It was offering home delivery of groceries in Britain and Japan, and in Brazil it already offered 10 times as many products online as customers could find in stores.

Smith said Walmart was sticking to its model of minimising operating costs, buying for less and passing savings on to customers. It also planned to spend R100 million to help local farmers and suppliers to do business with it. – Sapa-AP

 ?? PHOTO: SIMPHIWE MBOKAZI ?? Customers shop at a Builders Trade Depot, one of Massbuild’s successful hardware operations.
PHOTO: SIMPHIWE MBOKAZI Customers shop at a Builders Trade Depot, one of Massbuild’s successful hardware operations.

Newspapers in English

Newspapers from South Africa