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Bunnings lowers paint prices to unprecedented UK levels

Wickes BOGOF deal - August bank holiday

Competition between the major DIY retailers shifted up a gear over the weekend, as we witnessed just how low Bunnings are prepared to go, to maintain their 'lowest prices are just the beginning' claim.

In a decision we believe was designed to take further market share from the ailing Homebase business, Wickes made the first move on Friday with an aggressive 'Buy one get one free' offer across all branded and own label 2.5L tins of coloured emulsion, which ran until close of play on bank holiday Monday.

On a key, footfall driving product such as Dulux 2.5L coloured emulsion, it meant a consumer could purchase two 2.5L cans for just £15.99 or £7.99 a can. To put this into perspective, B&Q were selling a single 2.5L can of Dulux 2.5L for £14 over the weekend and Wilko were at a previously market beating price of £10.

The reaction from Bunnings surprised everyone close to the industry, as they dropped the single can price of 2.5L Dulux in their five Warehouses to just £7.94, keeping them below the comparable single tin price at Wickes. This price is unprecedented in the last decade and is more than likely below what Bunnings pay for the product. They also chose to drop prices across the own label coloured emulsion range, with a 2.5L tin costing just £6.94.

Interestingly, the deal was not replicated across the Homebase chain, the company preferring to maintain margins and sell Dulux at £14 a can over the peak weekend. However, this distancing of pricing strategy between the five converted Bunnings stores and the 250 remaining Homebase branches, leaving them uncompetitive at an absolutely crucial trading weekend, raises more, very uncomfortable questions over how they intend to generate any profit from Homebase in the months and years ahead.

Overall the Bunnings Warehouses were cheaper than B&Q, Wickes, Homebase and Wilko on 26 of the 30 fast selling lines we regularly survey as part of the Insight DIY iPaint30. The overall basket values for the 30 branded and own label decorative lines were Bunnings £233.22, Wilko £258.55(+10%), B&Q £288.01(+19%). Homebase £297.25(+22%) and Wickes £350.51(+35%).  Note the audit does not take into account Wickes BOGOF activity.

For more information on the iPaint30, click here.

To receive both the iPaint30 and iGarden30 audits on a regular basis, contact us here.

The Bunnings pricing policy is clearly detailed on the Bunnings.co.uk website as follows"-

"Lowest prices are just the beginning... that's our policy. Bunnings' price guarantee applies to any lower price on an item that is currently stocked and available from an online store, or in a physical store in the UK. It applies where the other retailer's final price, inclusive of delivery, taxes, fees and charges, is lower than our price on the day that the price guarantee is requested".

With only five Bunnings Warehouse stores currently trading, this policy (which is a copy and paste of what they have in Australia and New Zealand) at this point can easily be delivered in the UK and the decision to match and then undercut Wickes would only have had a minimal impact on their overall profitability.

As the largest Home Improvement retailer in Australia by miles, this policy works really well for Bunnings, as it provides shoppers with the reassurance that they are getting the best possible deal on home improvement and garden products. However, this only works because they are the largest. They lead the pricing in that market and competitors follow, giving them control over their margins and profitability. The competitive nature of the UK market is entirely different, with well established players such as Kingfisher, Travis Perkins and at some point Amazon, with much deeper pockets than Bunnings, add to that a growing number of aggressive on-line retailers free from the shackles of the costs associated with bricks and mortar stores. 

As the Bunnings chain grows, the impact of following this pricing policy and the necessary price matching and undercutting of their larger and more efficient retail competitors will mean they have virtually no control over their trading margins. This is likely to have a devastating impact on the profitability of a business that is already losing over a £1m a week across it's UK and Irish stores.

Read - Losses escalate at Bunnings UK & Ireland

In my view, committing long term to not only match, but to undercut these competitors in the UK market is nothing short of commercial suicide.

Source: Steve Collinge - MD Insight Retail Group

If you'd like to add your comments to this article, please visit my page on LinkedIn or alternatively contact me directly on steve@irg.co.uk.

Steve Collinge - LinkedIn

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29 August 2017

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