How Bunnings crushed its competitors

Australia Broadcast Center

11-05-2025

Sam Hawley: Who doesn't love a trip to Bunnings? It's cheap, the staff are cheery, you can fulfil your DIY dreams and have a sausage sandwich on the way out. But what really lies behind the promise of lowest prices? Today, Four Corners reporter, Angus Grigg, on his investigation into the store's market dominance and what it means for customers and suppliers. I'm Sam Hawley on Gadigal land in Sydney. This is ABC News Daily. Angus, who doesn't love a Bunnings sausage sizzle on the weekend? And even if you don't partake in it, it's the smell.
Angus Grigg: Yes, absolutely. You know, it really is Australia's most famous sausage sizzle. And I guess, you know, on a sort of bigger note, it actually works very well with how Bunnings market itself. You know, you see this sort of smiling staff, very local, and also this sort of aisles of seemingly endless choice. So the sausage sizzle is a really integral part of how Bunnings sells itself and how people understand Bunnings.
Sam Hawley: OK, and when you're biting into that sandwich, though, during your next Bunnings visit, it might be worth just bearing in mind that it is a very well-crafted marketing tool. Thank you very much. What do you say to the customers?
Angus Grigg: Yeah, absolutely. I mean, it is pure marketing genius, really. And if you think about it, Bunnings is this giant corporate chain, right? Yet the sausage sizzle gives it this opportunity to market itself as hyper-local, to support local charities. So it is a really sort of brilliant bit of marketing that costs Bunnings very, very little. And one of the really interesting things about Bunnings is that they've been really consistent in their marketing. They're probably one of the few companies across Australia that stuck to the same colours, the same jingle, the same sort of style of ads, you know, for more than 20 years.
Sam Hawley: Yeah, that really all contributed to the strength of the brand. Now, it first opened its first warehouse in 1994, and it's just been an incredible story, hasn't it?
Angus Grigg: It is phenomenal. So Bunnings generates about 19 billion dollars in revenue each year. And just to put that into context, that is about five times more than its nearest competitor. But the really big thing and the thing that differentiates Bunnings is that it is super profitable. And we're talking profitable on global standards. So last year, it generated a profit margin of around 17%. Now, that is enormous on any scale. But just to give it some context, we talk about Coles and Woolworths, well, they generate a profit margin about half that. And you should also remember that the big two supermarkets have been criticised, particularly in the last year or so, for being among the most profitable supermarkets in the world. Well, Bunnings is twice as profitable as them.
Sam Hawley: Yeah, that's incredible. Yeah. And it's those enormous figures that has now really got people asking questions about Bunnings' market power.
Angus Grigg: Yeah. And this is one of the peculiar things about this story, is that there's actually no official or independent figures about Bunnings' market share. So actually, it's highly contested. And Bunnings comes up with this slightly implausible figure of 17% for its market share. And it does this by basically saying it competes against almost every retailer in the country. IbisWorld, which has done some research but acknowledges that it is a bit limited, it puts its market share at around 33%. When you talk to Bunnings' rivals, and we talk to quite a lot of them, they say the market share is probably double that. It's more like around 70%. One of the people we spoke to, John Dalson, who's a really interesting guy. He's 94 years old. He's been the chairman of Woolworths. He's a competition lawyer by training. But he also owns a chain of family hardware stores. And he says that Bunnings' market share is the equivalent of Coles and Woolworths combined.
John Dahlsen, Hardware retailer: The rest of the market, there's no one powerful enough to challenge them. To be brutal, I think they are a quasi-monopoly. They don't want to promote the fact that they've got a huge market share because that's very bad for their image.
Sam Hawley: I must admit, I can't really remember actually shopping at any other hardware stores for a really long time. I always go to Bunnings. So what happened to all the Mitre10s that used to be around back in the day?
Angus Grigg: When you put it like that, it does really tell you how overwhelming or dominant the Bunnings' market position is. But what Bunnings did, and they were really smart about it, is that they had a corporatised model. And they were backed by the ASX listed West Farmers. And so they had the sort of financial firepower, if you like, to roll out a lot of stores. Whereas Mitre 10 was more of a sort of licensing franchise model, and it just couldn't really compete. Bunnings, first of all, it took over McEwen's hardware, and then in 2001, it moved on BBC hardware. And both of these deals were waved through by the ACCC without any great concerns. But Bunnings has just continued to expand very, very aggressively, really from about 2000 onwards.
Sam Hawley: Alright, so Angus, now we've got a very good idea of the power and scope of Bunnings. Let's just delve even deeper into how it actually got there. It's not just the sausage sizzle, of course.
Angus Grigg: Yes, indeed.
Sam Hawley: Now you spoke to David Woodman. Just tell me about his story.
Angus Grigg: Yeah, he's an interesting guy, actually. So he has a couple of Mitre 10 hardware stores around Mackay and all around the country. And he's got a very good idea of what he's and his family's really been in the business, you know, for a long time since 1935.
David Woodman, Mitre 10 business owner: Well, it's very well arranged. It's well priced. It's well stocked. We're competitive on pricing. But above all, we offer a really genuine service.
Angus Grigg: One of his stores is in Jimboomba, which is on the sort of outer suburbs of Brisbane. What's happened to him is that Bunnings have bought the block of land right next door to his Mitre 10 store, and they're planning to build a massive new Bunnings, which will be about 15,000 square metres. And that is about eight times bigger than his store.
David Woodman, Mitre 10 business owner: Look, just based on our past experience, it's not going to be good. We think that it'll affect our sales to the point where we'll end up losing profits. And being a small family business, we can't sustain that. So we'd probably end up shutting the store.
Angus Grigg: The sort of other interesting thing is here is that there's three Bunnings within about 25, 26 kilometre radius of Dave Woodman's Mitre 10, and there's about a dozen Bunnings stores in Greater Brisbane.
David Woodman, Mitre 10 business owner: "Does it feel predatory?" By definition. I think that's what it is. Certainly that's the way it feels anyway. Hardware is heading in exactly the same direction as the supermarkets, only worse because they've at least got two bloody dominant
Angus Grigg: players. And he says that, you know, Bunnings are opening next door to him with the view of shutting him down. Bunnings deny that and they actually say often when their stores open, it fosters competition, it gives consumers greater choice.
Sam Hawley: And David points out as well that it's not only his store that will suffer because Bunnings sells pretty much everything, doesn't it, Angus, including worms.
Angus Grigg: Yes. One of the things that you may be surprised to know that Bunnings sells worms and worm farms for compost. And so we went and visited some worm farmers, George and Katherine Mingis, just near Bundaberg in Queensland.
George Mingis, worm supplier: Do you want to come in and have a look in the worm shed? Sure. What we call the worm cave. Yeah. Wow. Okay.
Angus Grigg: You know, their story is quite an interesting one. And I should say they're one of the few suppliers that were willing to speak to us.
George Mingis, worm supplier: For many years, I'd tried to get into Bunnings, but it was very, very difficult. And then suddenly this opportunity arose and we thought, you beauty, you know, we're in. And at first it was great. It was fantastic.
Angus Grigg: So George and Katherine started supplying Bunnings with their worms about eight years ago, and they had a pretty good business. They were selling about $1.3 million worth of worms to Bunnings each year. They were making pretty solid margins. Like many businesses, COVID struck and their costs went up quite a lot.
George Mingis, worm supplier: So that pushed all wages up, packaging costs, transport costs went through the roof. So our margins eroded to literally nothing.
Angus Grigg: And so George and Catherine, umm'd and ahh'd, and with sort of great trepidation, actually asked Bunnings for a 10% price increase, even though really they needed about a 30% price increase. And then finally Bunnings said, actually, we're putting it out to tender. And they were told sometime later that they'd lost the contract. If Bunnings asked you to come back and start resupplying them, what would you say?
George Mingis, worm supplier: I'd give them the finger, literally. Not interested. This is one bridge that we're happy to burn.
Angus Grigg: Now we should also say here, there was a little bit of room. Bunnings was making a really good margin out of them. So they were selling their product, their standard product of a thousand worms to Bunnings for about $30 per packet. And Bunnings were selling it for just under $50. So they were making a 66% markup on their product.
Sam Hawley: And I guess when you're a consumer in Bunnings, you sort of think that everything's really, really good value. So you went and did a little test just to see if that's true.
Angus Grigg: Yeah, exactly. I mean, I think what we, the conclusion we really came to is that, yeah, Bunnings is cheap, but it should be far cheaper. We went and looked at 95 basic hardware items. We should say that it is an imperfect study, that it is a rough basket of goods. To our surprise, actually, we found that Bunnings was only 2.3% cheaper over this basket of goods than Mitre 10. It was 2.4% cheaper than Amazon, and it was 1.7% cheaper than Total Tools. So yes, it is moderately cheaper, but we're talking, you know, $1 or $2 for every $100. Now, just go back to what we were saying earlier, when you're a retailer that is making a return on invested capital of around 70% and you're making a profit margin of 19%, you should be so much cheaper than the competition.
Sam Hawley: And you also found, Angus, the price guarantee that they have on some items, well, it's not particularly useful.
Angus Grigg: It's a bit illusionary, I'd say, yes.
Bunnings advertisement: If you happen to find a cheaper price on a stock item, we'll beat it by 10%.
Angus Grigg: Bunnings often attaches these 10% price guarantee signs to its home brand products. Now, the problem is that with home brand products, they are made exclusively for Bunnings. So therefore, you can't find a stocked item cheaper because literally that stocked item does not exist in another store. And look, I should say that Bunnings says that it does price match on similar items, but Choice, the consumer organisation, says, you know, they need to be more transparent on this and that they shouldn't put this price match guarantee on their house brand products.
Sam Hawley: Well, Angus, the government went through the election campaign promising to crack down on companies abusing their market power.
Anthony Albanese, Prime Minister: We will make price gouging by Australian supermarkets illegal. Price gouging is when supermarkets are taking the piss.
Sam Hawley: But what about Bunnings?
Angus Grigg: Yeah, this is the really interesting thing about this story. Despite Bunnings' enormous market power, there's very, very little scrutiny. And so there is a bit of pressure on the government to actually do something. So, you know, Jim Chalmers is hedging his bets a bit here. But, you know, one of the things that he could do is to have a sort of independent investigation by the ACCC to look at firstly and establish what is Bunnings' market position, what is its market power. The other thing that there is a bit of a push for is to put in a compulsory code of conduct for Bunnings and how it treats its suppliers. And I think that actually would be a very good step forward to give the suppliers some power and make it a more even relationship with Bunnings.
Sam Hawley: All right. So, Angus, what's your advice for consumers then? The thing is we know people like Bunnings, the convenience of it, that everything's there in one place.
Angus Grigg: Well, absolutely. Look, Bunnings, you know, really is a brilliant business model. And really, it's not really so much for consumers. It's more of a competition issue and an issue for the government about what sort of an economy we want. And what we know is that if we don't have competition, consumers lose out through higher prices. But it's very difficult to see how they reign in the power of Bunnings. Yeah, I'm not sure there's a great deal the government can do other than sort of crimp their expansion a bit around the edges and maybe look at some of their pricing policies.
Sam Hawley: Angus Grigg is an investigative reporter. You can watch his Four Corners story on ABC TV tonight at 8.30 or catch it on iView. This episode was produced by Sydney Pead and Adair Sheppard. Audio production by Sam Dunn. Our supervising producer is David Coady. I'm Sam Hawley. To get in touch with the team, please email us at [e-mail]. Thanks for listening.