How Bunnings Took Over Australia

[DFB FGXR6]

Interesting assessment of how Bunnings has impacted how we shop and how that effects the competition, and not necessarily in a positive way.



Having worked for a small family business for over 20-years, the retail landscape has changed massively over that time. Back then, there were seven different retail garden centers running in my area, eight if you count Mitre10. That number is now three, soon to be two.

Now, competition is healthy as it spurs each company in the mix to strive for success, which in turn gives consumers more choice. But certain competition has ran many, many small businesses into the ground via unfair tactics. And I'm not just talking about having a higher purchase power, rather its the result of Bunnings dictating what price they will pay for their stock, rather than the supplier charging what they need to manufacture (or grow) a product and then make money doing so.

On the plant side of the business, Bunning's would sign up wholesale growers under reasonable terms. Growers would then invest heavily into their stock output so as to provide sufficient volume to a national chain store. As time went on, Bunning's would then start dictating what they will pay in a take it or leave it proposition. With so much business tied up in a live product, a grower has little to no choice but to agree to the price, or risk going out of business. In some cases, these growers were locked into only supplying Bunning's and not allowed to sell to other retailers.

And even with those price squeezes, the green life/nursery department of Bunning's has run at a loss for a very, very long time. In other words, they use the nursery as a loss leader, the rest of the store making up the shortfall. A small business simply cannot compete against Bunnings on price, nor can they have other sides of their business pick up the slack. As a result, independent businesses shut down, or charge what's needed and then appear as if they are price gauging. It also doesn't help when Bunning's offer a 12-month warranty on plants in a no questions asked way. So a customer basically gets free plants when they neglect or show proper care.

I would often have customers tell me that they stopped buying plants at Bunning's because "they just die". To get those cheaper prices, wholesalers need to grow each plant as quick as possible. While the plant looks nice sitting in the pot, the root system hasn't kept up to the above ground material. So, when the plant is taken out of the pot, the potting mix falls from root system, which in turn makes it extremely vulnerable if not treated correctly and then "just dies". This situation is not apparent to most consumers, all they see is the huge price difference but don't understand how that price was made possible, then they get a free plant when things go wrong.

So, Bunning's stormed into town, built up a network of suppliers, then squeezed the lemon dry to get the lowest possible price before selling those products at a loss, in effect running the established competition into the ground. And to cap all this off, they set up unrealistic consumer expectations to the point where its fueled massive entitlement.

But hey, "Lowest Prices Are Just The Beginning".