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Busy times. High demand. Lots of new products. In a nutshell, that’s how the market for power & hand tools has been for the last 12 months for the majority of suppliers in the category.
Although there is a sense of anticipation of demand that’s yet to come around the market, most suppliers have sustained sales levels, with many showing signs of growth in the early stages of this year.
SNA E’s Managing Director Neil Pinkerton has looked to build on the strong year the company had in 2014, particularly with its Bahco brand.
“We had sensational growth last year, double digit growth, although we feel it has been a little soft in the first quarter this year. Having said that, we have had the same numbers as last year. So we have held the growth from last year but haven’t grown again, which is fine.”
Over at Stanley Black & Decker, Commercial Manager Nick Armiger says that the company has experienced a strong year so far, with “exceptional growth”. Being an American corporate, Stanley Black & Decker operates on a January to December year so deals in quarters.
“Q1 has been really good to us, especially our retail customers – they had a really strong January off the back of some good purchases in December. But we are still seeing significant growth across most of our key SBUs. We have had a very strong first quarter and there is a lot more innovation coming through all of our ranges.”
Looking at things from a more DIY-focused perspective, Steelfort’s National Sales & Marketing Manager Gavin Lowndes says that the market has been quite buoyant. What’s been motivating the market? Lowndes feels that retail promotions have been behind the growth in the higher end DIY area of the market.
“There are a lot of kits being offered – 2-piece, 3-piece kits or a power tool with a lot of accessories or value add-ons – and I think that’s really driving the market and making people really say, ‘yeah I’ll grab that’. It is something that grabs the consumer’s interest. We have had a number of successes recently both in the higher end DIY and in that mid-range as well with private label. It’s very much about having that deal, a promo kit or accessory pack.”
JUST HAVE A LITTLE PATIENCE
With so many building consents being granted surely this means a period of unprecedented success for players across the board? Isn’t business booming? Not so, by several accounts.
The issue it seems is that there are elements of hyperbole when it comes to the performance of the building sector. It has been covered regularly in these pages that there is an apparent lag between consents being granted and actual ground breaking.
So, while all of the players spoken to for this piece have had good growth so far this year, it could be better.
Senco Brands’ General Manager Mark Glidden feels there is certainly a bit of a waiting game going on in anticipation of the market really ramping up.
“We are finding that what is being reported in the media is true that there is a lot of red tape and bureaucracy that builders and developers are having to overcome. While we have nice growth it probably could be greater.
“People think we are busy but, at the same time, we need to understand that while we are building houses – and it may have increased slightly in the last month – we are only building or permitting as many houses as we were in 2007 which was 30% less than the peak in 2004. So yes we are busier than we had been in the recession but we are not as busy as we have been.”
Over at SNA E, Neil Pinkerton indicates that the market is somewhat confusing at times: “You would think with all the activity going on in Auckland and Christchurch that it would be buoyant again this year and I guess it is – but the market doesn’t seem to have grown much over the last year.”
Still, he adds, “We expect to see some growth again this year. Once things actually get going in Auckland I think everyone will see some benefits.”
Accent Tools’ Andrew Way puts into the pot that, although it can be difficult to gauge future market growth in power & hand tools – because the products are so far removed from the consent process – he believes there is a good mix of supply and demand coming through.
“Yes power tools go up when there is building work, but the time lags to such a degree that it would be difficult for me to comment with any real great accuracy about the direct correlation between building consents and the sales of power and hand tools – other than that the market has lifted and that overall imports for power tools over the last 12 months are up 6% on the previous year. So there is growth but you wouldn’t say it directly correlates with the increased number of consents.”
A BIGGER PICTURE ISSUE?
So while suppliers are seeing good growth and anticipating more, there is certainly a sentiment around the place of “wait and see” before things can get booming again as a knock-on effect of the growth in building consents.
Mark Glidden at Senco for one feels there are issues with the entire house construction industry, be it new or existing houses.
“We are just not building new houses fast enough and that is why existing houses are going up so fast in price. We need to build more houses, and the only way to build new houses is to build them out and away from the city. But the problem with that is that people don’t want to live away from the city.”
Agreeing with Mark Glidden about the issue is Neil Pinkerton at SNA E: “While there are a lot of promises and consents being granted but it doesn’t seem to be coming through in the number of houses actually being built.”
BUT WHO IS GOING TO DO THE WORK?
Another issue that has been spoken about several times in this magazine is the potential skills shortage that the building industry seems to be facing. While there are record numbers of apprentices, there is still a lack of workers.
Is this another factor behind the lack of building work actually happening? Stanley Black & Decker’s Nick Armiger has noticed an increase in the number of international workers coming to these shores as a result.
“You are seeing more workers from other countries coming in as a result of the ‘gold rush’. We are seeing more from the UK and Ireland coming over, which is good because they bring a lot of specific skills over with them. It’s interesting in that guys are specialists in those regions whereas you have guys here that are working from the start to finish and are involved with the entire process.”
Concurring with what has been said about the lack of workers is Accent Tools’ Andrew Way. He feels that the two main factors behind this “waiting game” are cash flow and a lack of workers.
“You hear a more positive spin about record numbers of apprentices being signed up so we are heading in the right direction. I just think people need to appreciate things take time, you don’t become an expert overnight and there is only a certain number of people that are lining up for those jobs and you even look at the number of construction companies that folded, even in the boom times, and it all comes back to cash flow.”
Andrew Way also says it’s all well and good having consents approved but, if the cash doesn’t flow, it doesn’t get built, particularly if the workers aren’t there.
LET’S START ‘EM YOUNG
Taking into account what people have said above, there are certainly a greater number of younger workers emerging in the category. With technological advances, there is more scope for suppliers and retailers to educate these young workers.
Educating the younger members of the work force is a major factor that suppliers are continuing to try find ways to help retailers, as Andrew Way explains: “We train and interact with our dealers as often as possible and at the same time we are training direct with the end user through the internet and how-to videos.”
“Those kinds of tools are very useful because you have this generation of workers who are tech-savvy and have been raised with these technologies. They are helpful not only because that’s how a large section of the population wants to learn but it also means we can get the message to a wider population, in an accurate way.”
Steelfort’s Gavin Lowndes says the company is being as proactive as it can to help its retail partners when it comes to delivering the right information to consumers. While a focus is on these younger workers, the general idea of education will always be pushed on a face-to-face basis in store as well as online.
“We are really driving it out through the retailers so all of our sales staff dedicate a reasonable portion of their time training with stores.”
PARALLEL IMPORTS ON THE WANE?
Always a concern in the market for power & hand tools is parallel importing. It may be on the wane somewhat, but we do get the impression that it will always be a feature of the market.
All of the suppliers spoken to for this piece unanimously agree that the lack of warranty and available parts as strong points of difference against these parallel importers.
Working closely with Hitachi, Accent Tools’ Andrew Way has ensured that the company is presenting a different and better offer than any parallel importers can. Whilst admitting it certainly is still a concern, Andrew Way says the situation has improved in recent years.
“Increasingly, the parallel importers are only getting their hands on older models and they are certainly behind the eight ball on newer models, the latest and greatest models. There have been products of mine parallel imported with a hiss and a roar and then the importers find that it is too hard to keep supporting the market from a servicing and a maintenance point of view and they have left their customers high and dry.”
While Senco’s fastener offerings are not affected too much by parallel importers, Mark Glidden is aware of the implications for general tool companies.
“This is a danger for the general tool guys because they dumb down their offering and make things so cheap that they can be a disposable item that are used once and thrown away. But then if a tool is being used in a heavy trade situation it won’t last five minutes. So a buyer can be fooled into buying a cheap tool and it won’t last five minutes.”
Also having suffered with the issue, describing it as a thorn in his side, is Stanley Black & Decker’s Nick Armiger, who isn’t alone in hoping that the NZ Dollar’s exchange rate will impact strongly – and negatively – on parallel importers.
But Armiger’s bottom line is that “There is very little we can do other than communicate to people about warranty in regards to products brought in from overseas and the certifications of those items.”
So, while things are going well for the majority of power & hand tool suppliers, there is a sense that things will only go from strength to strength once the building work really kicks in. While there are still ongoing concerns around parallel importing, the feeling around the sector is one of optimism and positivity.
DODGY IMPORTED TOOLS JUST ONE INDICATOR OF WIDER PRODUCT CONFORMITY CONCERNS
Enforcement of building standards as they apply to the supply chain is a significant issue in the hardware sector and broader construction industry as the country opens up more and more to a range of global materials and products.
The Kiwi market is open to all comers under the proviso that they meet New Zealand Standards. But the increasing flow of imported tools, materials and other products is throwing up issues of enforcement of conformance with these Standards.
Bruce Kohn, Chief Executive at the Building Industry Federation, says the issue is very much alive because of disclosures reported recently in the NZ Hardware Journal that MBIE officials believe substitution of up to 40% of specified product is taking place in construction.
“Currently enforcement officials are working through at least three complaints of products and materials coming to market which are claimed to be not up to prescribed standards. That these complaints may be the tip of a much greater problem is a matter of concern.”
Kohn says that, while Government regulators are willing to accept “look alike” products of mainstream brands selling at lower prices and view parallel importing as in order, the requirement that the “look alikes” comply with Kiwi Standards and with safety rules remains in place.
IF WE REPORT IT, WILL SOMETHING HAPPEN?
Then there is the ongoing question of whether overseas power tools brought in from overseas comply with local Standards and safety regulations when components and related parts are changed in a bid to make them acceptable for New Zealand use?
“In other sections of the industry, questions arise about observance of standards for steel, wood, paint and plumbing products, in the latter case notably PVC pipes emanating from a Chinese supplier,” says Bruce Kohn.
“Enforcement of both the Fair Trading and Consumer Guarantees Acts depends to a large extent on receipt of complaints from within industry and from consumers. But, as builders under the Building Act have now to warrant to new build owners the performance of a new house, the compliance of materials and products with the Standards regime becomes even more critical than before.”
Plus, adds Kohn, while both builders and their suppliers need to be sure that the products, materials and tools they deal with are compliant with Standards, they also need to know that the Standards will be enforced.
“If enforcement is perceived as lax, the temptation of users to opt for substitution at lower price levels and potentially questionable in regard to standards will be stronger,” underlines Bruce Kohn.