Woolworths is set to target the appliance business of stores like The Good Guys, Harvey Norman, Bing Lee and Winnings when they launch their new hardware chain in Australia in partnership with US appliance retailer Lowes.
The Company who plan to launch 150 hardware stores across Australia during the next five years believe that they can convince consumers to buy their appliances at a hardware store as opposed to via a mass retail store.
Several Appliance vendors that ChannelNews has spoken to have already been approached to supply the Woolworths hardware chain however some vendors including the likes of Fisher & Paykel have already said that they will not supply Woolworths.
Among the brands that will supply Woolworths is Samsung, LG, Electrolux and several Asian brands.
|Interactive presentation in the appliance section of a Lowe’s store in the USA.
Woolworth’s management believe that by partnering with US retail chain Lowe’s, who are a leader in appliance sales in the USA that they can grow their appliance business in Australia. They will also sell kitchens off the plan with consumers given the opportunity to choose a flat plan configuration for either a new home or retrofit of an existing kitchen.
Peter Russell, National Marketing Manager, Fisher & Paykel said “The introduction of a Woolworth’s hardware chain into Australia will change the dynamics of the appliance business in Australia and the mass retailers could come under threat.”
“Appliance volumes are not growing and margins are falling and if Woolworths are to be successful the volume they are chasing has got to come from somewhere and the logical conclusion is the mass retailers”.
Russell said that at this stage Fisher & Paykel will not supply Woolworths.
“I believe that Woolworth’s are looking to chase the bottom end mass market and this is not where our brand is positioned”.
A major Korean manufacturer who at this stage did not want to be named said “We will supply Woolworths as they are a household brand who is set to tip a significant amount of money into marketing their hardware chain”.
“In the US consumers buy from the likes of Lowe’s and we see no reason why this cannot happen in Australia particularly if Woolworths offer sharp pricing to attract consumers. If they are successful at selling appliances it will hurt the mass retailers like the Good Guys and Harvey Norman”.
A report commissioned by Woolworth’s reveals that a store similar to one planned for Geelong in Victoria could generate $30 million a year in sales from a standard hardware outlet with this rising to over $50M for larger outlets.
The sales target is based on plans to offer customers a mix of hardware, as well as whitegoods such as washing machines and cooking appliances.
The report prepared by consulting firm Urbis claims that the launch of a Woolworths hardware chain could result in a competitor losing between 12 and 16.5% market share depending on which category they compete in.