STATE OF THE NATION 2020: NOTHING AS CERTAIN AS UNCERTAINTY

By Steve Bohling April 09, 2020 Hard Talking - Industry interviews

A lot has surely happened during the couple of weeks since I started on our annual State of the Nation article. Having also this year polled a broad cross section of suppliers for their take on what’s ahead, what’s the outlook?

Just as we were preparing our annual poll of the DIY retailer and merchant leaders, COVID-19 raised its ugly, inconvenient head.

Things moved pretty quickly for our captains of industry, faced with making urgent provision for the introduction of Level 4 restrictions, and understandably leaving few with time to share their take on the hardware channel’s recent history, let alone its prospects for the next wee while.

However, Mitre 10 CEO, Chris Wilesmith, was quick off the mark with some answers to my questions, as follows:

 

Jacinda Ardern (16-03-2020): “The economic impact of the virus on New Zealand could be greater than the impact of the Global Financial Crisis”? Agree or disagree?

Actually this is already confirmed in terms of market valuations around the world, there has already seen more value destroyed than in the GFC.

However, as we know, being planned, calm and ready for what comes the other side as the world recovers will ensure our communities recover quickly.

The good news is that countries that react quickly, as China did, start to recover quickly as reported recently.

New Zealand has a number of amazing strengths to keep our communities safe, we are food rich producing significantly more than needed for New Zealanders and a water-locked remote country making it harder to bring the disease into our community.

 

What is your outlook for the market and for the business in the next 6-12 months?

Very clearly there is the impact that we are seeing in terms of confidence right now in our communities which will manifest in economic hardship for many.

Some sentiment reported by Yabble is as follows (COVID-19 Insights based on N = 750 nationally representative New Zealanders):

  • 32% of people are worried about job security.
  • 47% of people are worried about personal health impact but more (63%) are worried about the personal economic impact.
  • 54% think it will have a significantly bigger impact than the Global Financial Crisis.
  • 76% expect to spend less over the next 3 months.
  • 43% think it will last between 6-12 months.

 

What are the other key factors that will influence the success of your business during this period?

I think what is critical that we firstly remain calm take advice from expert authorities such as Government and ensure we have clear organisational plans to ensure we keep our stakeholders informed and safe.

What we must do is continue to be very focused on what happens after the pandemic is over to ensure we can support all our stakeholders going back to normal as soon as possible.

And so say all of us!

 

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WHAT DO SUPPLIERS THINK?

As well as attempting to survey the thoughts of the retail and merchant leaders, in the middle of last month, with the effects of COVID-19 continuing to develop elsewhere in the world and the virus at that point having touched New Zealand just lightly, I was keen to get a feel for the level of confidence from suppliers to our industry.

So, over 18-20 March, I surveyed some 250 hardware and building product and services suppliers to gauge their views on the immediate and possible medium and longer term prospects for the hardware channel.

I wasn’t ignoring the elephant in the room but didn’t ask specifically about the possible effects of COVID-19 on the marketplace – and although obviously things have since changed – the survey responses clearly take its potential effects into consideration.

 RIGHT HERE RIGHT NOW – You can check out how our supplier respondents felt in the graphics on these pages but, as you can see, almost 80% of respondents said that the market leading up to the 20th of March 2020 had been “business as usual”.

Still, although 13% were seeing growth, almost one in 10 said they were already “hurting”.

Comments for this period included:

“With the record start to the year with consents things do look bright albeit a little cautious.”

“Our sales are stronger than ever and it’s not panic buying yet … but that will come.”

“Essentially business as usual, but uncertainty around COVID-19, which could range from negative to neutral.”

“It has been going very well over the last year. I see a lot more uncertainty and a loss of confidence which we have to plan for.”

“As it’s evolving so quickly it is very difficult to know.”

“Houses are still being built, renovations are still been done so no change directly yet.”

“It’s business as usual, still seeing strong demand but people want reassurance around supply continuity and want to know the steps businesses are taking to keep supplying the market in a responsible manner.”

 LOOKING FURTHER OUT… – Looking further out, already faced with a developing situation and prospects for limitations being imposed on the market – albeit none as drastic as we have since seen – if there is a consensus shown by our survey respondents, it’s that the market would certainly deteriorate in the medium term (52%) but improve somewhat in the longer term (43.5%).

Around a third cited uncertainty for the next 6 months reducing to a quarter at 12 months, which ties in with those who believed the market would improve the further out they looked.

All good logical stuff but again, to remind you, these opinions were shared before Level 4 kicked in on 26 March and the hardware channel was reduced to fulfilling demand from “essential services” only.

Comments on prospects for the next 6 months included, from mild to extreme:

“It should remain stable unless the Coronavirus halts supply channels or a lockdown stalls sites” [which of course it now has].

“Our outlook is some hurt but likely not that greatly.”

“It’ll be business as usual, there may be a short term impact volume but it’s too early to properly understand the likely impact on customer confidence.”

“There’s a rush on cleaning products now, but once most households and businesses have them, things could get awfully quiet (“pipefill” is often much higher than “sustained consumption”).”

“The forecast recession seems inevitable, even if it’s not it’s a self-fulfilling prophecy.”

“The response to COVID-19 will affect the entire economy dramatically as we look beyond the next few weeks. Expect it to take at least a year to recover.”

 LOOKING EVEN FURTHER OUT…  – Addressing the longer term, the next 12 months, comments were significantly less certain about prospects for the industry:

“I think our industry’s prospects are relatively strong compared to other industries. It’s just the uncertainty of the virus’ effect on the wider community that makes a confident call impossible to make.”

“No idea, it all depends on how much the market's confidence is affected by this.”

“It’ll be business as usual, but with everyone being more cautious of spending.”

“The response to COVID-19 will affect the entire economy dramatically as we look beyond the next few weeks. Expect it to take at least a year to recover.”

“It’s going to hurt. A lot!”

 

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Of course, as I write, it’s also uncertain if we’re looking at just four weeks at Level 4 or longer!

If there is an extended period during which the channel continues to rely on demand purely from those “essential services” there may be further hurt.

There again, if restrictions on delivering non-essential online orders are lifted, that’s a totally different ballgame…

I’ll be trying to get a handle on where we’re going in the coming weeks, once things have settled down a little…

Famous last words?

 

To view a PDF of the complete feature as it appeared in NZ Hardware Journal magazine, click the download button at the bottom of this page.

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