There are only five things that a retailer can do well. They are range, price, service, location and shopping experience.
Bunnings runs with range, price and service. Under Wesfarmers, we can expect each business within Coles to more clearly define how they will attack their market.
Kmart may emulate CostCo, Target may move toward Myer, Officeworks may attempt broader reach and move into new sectors such as phone systems. I don’t really know, but I am sure that improved definition will bring greater clarity and a better attack on the market.
Coles has a highly centralised, and somewhat bureaucratic, command and control leadership model. Their decision-making suffers, being somewhat remote from the customer base. It also suffers because few are brave enough to risk the back stabbing that is part of the internal politics. The cultural change that Wesfarmers will drive will spill through to the retail strategy and its execution.
Decision-making will be devolved, pushing it closer to the customer. The new Coles will hear the voices of the team members who are closest to the market.
Suppliers will now find themselves in partnership with Coles. Unlike the current Coles, Bunnings does not view their supplier relationships as confrontational.
Citigroup retail analyst Craig was quoted saying profit improvement will come from Wesfarmers using its financial muscle to cut supplier costs. I think not. Bunnings’ relationships with suppliers are more about partnerships. An improved relationship will result in Coles getting earlier access to the best deals.
Coles has good sites, well spread across the country. I think this appealed to Wesfarmers. Commentators are saying that we can expect co-branded sites, but I doubt if this will occur. Bunnings tends to attract a fleet of fellow travellers who set up nearby to leverage the customer traffic generated by the big green box. They include Super Cheap Auto, Snooze and sometimes Officeworks. There is a divide between shopping centre based retailers, such as Coles, Kmart and Target, and the big boxes. This will continue.
Coles will become leaner. Bunnings understands low cost retailing. While their Melbourne head office (Bunnings, although always described as West Australian is really run from the suburb of Hawthorn) is hardly spartan, it is nothing like the edifice on the hill known as Battlestar Galactica.
I think we can expect Coles and Kmart in particular to become less blokey. Bunnings has long recognised that their business, that looks like a toyshop for grown men, is highly female driven. Women can expect a stronger voice at the new Coles.
Bunnings is not run by retail gods. It is not perfect, but one of the perfect things about them is that they freely admit they are flawed, and will always remain so. They respond to feedback positively, constantly addressing, rather than avoiding, the unpleasant.
If Wesfarmers can get Coles to enter a new phase of self-examination and a willingness to improve, they will do very well.
Rob Lake publishes Brandish – Retail Intelligence, a fortnightly newsletter about things retail.
DISCLOSURE: Anyone who has been paying attention will know that my company Orex has recruited hundreds of managers for Bunnings and that my wife owns a few Coles shares.