Bunnings has been accused of squeezing its suppliers and using its market power to block competitors from trading in close proximity, stifling competition and disadvantaging smaller retailers, according to an investigation by ABC’s Four Corners.
Australia’s largest hardware retailer – which opened its first warehouse in 1994 – dominates the market with 310 stores across the country, reportedly pulling in almost $19 billion in revenue last year.
Owned by Wesfarmers, Bunnings allegedly implemented exclusivity clauses in lease agreements to prevent similar retailers from opening stores in retail precincts where it has a strong presence.
Four Corners claims to have seen emails relating to these clauses, which have been found in a number of locations across Australia, including the NSW Central Coast, the Gold Coast and Melbourne.
Despite the Australian Competition and Consumer Commission (ACCC) phasing out such practices in the supermarket sector in 2010, Bunnings is not subject to the same rules as Coles and Woolworths, with rivals believing its market power is larger than both combined.
According to the ABC, new competition laws will come into effect next year, allowing the ACCC to have greater control over shop purchases plus land and lease agreements.
Treasurer Jim Chalmers has also recently acknowledged public concern, saying that although the Federal Government’s primary focus is supermarkets, it has given the ACCC the “resources that they need and the ability to recommend a broader focus, if that’s warranted.”
David Woodman, who owns a Mitre 10 store in Jimboomba, south of Brisbane, told the ABC that Bunnings purchased a vacant block next to his store in 2019, with plans to build a warehouse eight times larger than his shop – despite three other Bunnings stores existing within a 30-kilometre radius.
Woodman said he believes Bunnings is intentionally trying to put him out of business and is pursuing legal action for “misuse of market power.”
“We’d expect to lose sales to the point where business will ultimately become unprofitable…we can’t sustain that, so we’d probably end up shutting the store,” he adds.
“I am concerned that if Bunnings continues with its current conduct, many Australians will have no choice but to buy their hardware from Bunnings and nowhere else.”
Suppliers have also spoken out about their experiences with Bunnings and how they have felt “the squeeze”.
Regional Queenslanders, George and Katherine Mingin, supplied composting worms to Bunnings over a period of eight years, reaching $1.3 million in annual sales at their peak.
However, rising costs during COVID pushed them into significant debt, meaning they were losing money on every sale. When they requested a price increase, Bunnings responded by putting their contract out to tender, prioritising its own profit margins while selling with a 66 percent markup.
The Mingins, who also had to pay multiple rebates, eventually lost the contract and over 75 percent of their business, later receiving a final $5,000 rebate bill.
Bunnings declined to comment on individual suppliers but said it conducts itself with “integrity, honesty and respect” dealing “fairly and ethically” with suppliers.
In a response to Four Corners, the retail giant has also defended its stores, stating that new store openings aim to “enhance competition” while providing employment opportunities.
“Every day we work hard to earn the trust of our customers, suppliers and communities through a genuine commitment to value, service and fairness, and we don’t take that trust for granted,” said Bunnings Managing Director, Mike Schneider.
“We’re proud to work with around 2,000 suppliers, over 1,500 of which are based across Australia and New Zealand, and we are always striving to build long-term, collaborative relationships that are good for everyone involved.
“We are also a human organisation and recognise that from time to time we don’t always get it right, however when we make a mistake we work hard to put it right as soon as we are made aware.”
Analysts have responded to the Four Corners investigation, suggesting Bunnings profit margins are not excessive when compared to international peers such as US-based Home Depot and Lowe’s.
Jefferies analyst Michael Simotas told the Australian Financial Review that Bunnings’ margins didn’t expand as much as offshore peers during COVID, suggesting operating leverage was reinvested.
“This strengthened its customer value proposition and set the business up well for the post-COVID demand slowdown,” he said.
J.P. Morgan analyst Bryan Raymond told the publication that it is “disingenuous” to compare Bunnings to the profitability of Australia’s big supermarkets, given the hardware group’s slower moving goods.
“Supermarkets generate sales per square metre of over $20,000 versus Bunnings at less than $5000 per square metre,” he said.
