Entrepreneurship within a brand

Growing a family business

Introduction Questions are welcome at any time Who am I?

Greg Bold Company Director MBA ex Waikato University 30 years in a family owned business

Background What is Mitre 10?

Co-operative The stores own Mitre 10 (NZ) Several formats

Solutions Home & Trade Mega

About 130 stores Some owners have multiple stores

Strengths and Weaknesses Mitre 10’s biggest strength is also its

biggest weakness! Store owners and operators Some very good entrepreneurial operators Some not so good! Inconsistent brand offering Inconsistent pricing Inconsistent product offering

The Bold group Tauranga Mitre 10 Mega Katikati Solutions Waihi Home and Trade

Pre-nail & precut factory Truss manufacture

History Purchased Mann Hardware 1978

Joined Mitre 10 1980

History Original store based in the CBD 500m2 Last refurbished in the mid 60’s due to a fire 18 staff Turnover < $1M Moved to 1000m2 1999 Turnover $3.2M

History Purchased Waihi Mitre 10 1992 80% Trade focus Business was in receivership Manufacturing capability Access to timber and building materials Relocated to new site 2004 Retail increased 150%

History 1993 Established trade outlet on separate site in

Tauranga Utilised buying access from Waihi Greenfield start Main competitors Carters and Placemakers

History Decision made 2002 to develop new format store

(MEGA) 5500m2 Retail 1900m2 Gardener 1850m2 Drive through 2750 m2 Yard area

The existing store at the time only half filled the planned Garden offer

130 staff

WHY New competitor arriving Current store was over trading New ranges could not be displayed Industry growth Desire for one location

Proof of decision Solutions store remained trading We expected a 30% drop in sales We ended up with only 30% of the sales

WHY NOT? Shareholders / Directors mid 60’s Risk attached Does a family business have the skills? Funding Stress

Decision process Exit or expand Mitre 10 NZ support Management knowledge Retail expertise Site Funding

Governance Initially JV board 2 representatives from Mitre 10 Later

Family trust trustees Accountant Lawyer

4 Family members

Developing external board members Structure of business altered Fluid management structure

Next steps

Board Skill levels Members

Evaluate the next generation!

How does the business grow

How is the business funded

The Retail industry

Major corporate competitors The Warehouse Bunnings Category killers Occasional forays by Carters and Placemakers

All chasing the same disposable income dollar!

Small market Low margins Increased competition

The Retail Industry NZ based suppliers

Difficult to get exclusives Pricing and marketing structure

Offshore suppliers Small and fragmented market Specific standards

Plumbing sizes Electrical requirements High UV

NZ is smaller than Sydney!

The Retail Industry Logistics NZ Laws

Consumer Guarantees act Fair trading act Sale of goods act

Socio-economic issues The Media

Predictions become reality

NZ OWNED AND OPERATED SO WHAT!

The Retail Industry How do we compete

Face of a corporate Heart of a co-operative Combined buying and marketing Entrepreneurial buying

Static Action Dusters..... Direct imports ex US Direct imports ex China

Store led initiatives Stores money Mitre 10 led initiatives

The Retail Industry Before entering: Porters 5 forces

Barriers to entry Cost of inventory Setup costs

Competitors Major corporates Not just direct competitors Survival rate of niche players

Consumers What do they expect Set shopping habits

The Retail Industry Suppliers

Specific supply agreements Purchasing power

Substitutes Online shopping DIFM market

Having the funding is not the reason to enter a market!

There may be a gap in the market, but is there a market in the gap!

Suppliers Industry life-blood Sustainability Support available

Exclusive supply line Market support Product development Risk attached Deal life-cycles Performance measures

Bonuses Penalties

Customers Think both internal and external

Inwards Goods customers are the retail departments Debtors

Cash only Trade terms How far do you let them go? Risk assesment

Customers Walk in? CRM Representation

Customers Sustainability

What if: You lost your main client

To a competitor Bankruptcy Closure

Economic factors How susceptible is your business to effects on disposable income

Market Factors Where in the life-cycle is your market DIY vs DIFM

Palmers GardenWorld

Family Businesses Sustainability

Succession planning Growth funding

Matriarch / Patriarch The decision process Family history Internal conflict Marriage breakup

Franchise vs Co-operative Franchise

Tight controls on presentation and offering Limited entrepreneurial development Easier marketing Consistent offering

Customers know what to expect Think McDonalds

Tends to be a push model Where is the money?

Franchise vs Co-operative Co-operative

Moves faster to market Flexible to regional needs Allows owner/operators to develop higher levels of

market penetration Bulk buy and supplier deals can be more difficult to

achieve targets Tends to be a pull model Greater critical mass Politics

Closing thoughts The franchisor has the power Co-operatives are a house of cards Exit strategies

Planned well in advance Developed “What-if” Managed exits – Management buy-outs

Strategic plans How will growth impact cash-flow What level of debtor exposure can you sustain Supply chain sustainability

Closing Thoughts Boundary Scanning

New or existing competitors New or developing markets Expanding Categories Contracting Categories Substitutes

Is Amazon just a bookstore? Population shifts

Age Location

Blue Ocean Strategies?

SO, what’s going on

The battle for market share in the $30 billion hardware sector is heating up, with the Wesfarmers-owned Bunnings investing $600 million. ...

The Australian September 29th 2010

After 15 years of stunning profit growth, Bunnings is about to get its first real taste of competition as Woolworths opens 150 big-box hardware stores over the next five years, and Mitre 10, now 51 per cent-owned by Metcash, sharpens its focus

The Sydney Morning Herald September 29 2010

Could we? – Should we?

And…..

THANK YOU

Questions?