Bunnings is more than a gigantic hardware store. Its canyon-esque aisles whisper to you of self-reliance and ruggedness, if not quite suggesting a log cabin of your own construction then at least the sort of Barbecue a man can be proud of.
Once you’re over about 26 it seems to slowly turn into a refuge, a bit like Thoreau and his woods.There’s always a sausage sizzle out the front on weekends and it has become an Australian institution.
Nevermind that it is based on an American big-box retailing model, or that it has only been a national chain since 1994, after it bought out McEwans hardware, closed most of the outlets, then sold itself to mega conglomerate Wesfarmers.
The reason there are now around 280 Bunnings nationwide is that the store is so good. We don’t begrudge the many hours spent lost in its chasms and nooks. It’s like that because it is cheapest. Right?
A tentative Google suggests, um, well, :
There are three big tricks that Bunnings uses to reinforce the widely-held belief they are so cheap.
1. They often choose prices that to the first glance look odd. For example, they sell hammers for $8.45, $37.97, and $62. Apparently the theory is a range of irregular and specific numbers make customers think the price has been ratcheted down as low as it possibly can be.
Rather than having all the prices in the format $X9.99, the prices imply Bunnings takes the trouble to price everything at its minimum.
2. Using people from the stores in the ads. (I thought they might be actors but the internet says no. There are 33,000 staff so I guess some must be able to pass a screen test).
The point is, this is signalling. Bunnings has ads on during high-rating shows – they are not stinting on their marketing budget.
But if they deploy great cinematography and a highly polished vibe, like you might see in a car ad, it creates the impression they are wasting money on ads. Instead the ads look cheap and cheerful. The same motivation is behind The Good Guys using their staff in ads even though they too are a heavy-hitting national chain. (Baker’s Delight use their staff in ads to signal something else – that the bread is made by real people, not a factory.)
The signalling effect even flows through to the way stores are designed. Here’s Cotsco founder Jim Sinegal talking about his store’s budget vibe.
3. “Lowest Prices guaranteed” / “Lowest Prices are just the beginning.”
This slogan seems to have moved away from using the word “guarantee” recently. But the claim is still a strong one. The only way Bunnings can get away with it is their price-beat guarantee: “Find a lower advertised price and we’ll beat it by 10 per cent.”
That is an extremely clever business plan. While anyone might think they could mock up an ad that offers something very cheaply and trick Bunnings into giving them a deal, the reality is the store would happily accept being tricked to get the benefits of such an offer. They would probably rather more people took them up on the price-beat guarantee.
Let me explain:
The effect of the price-beating offer is to permit price discrimination. They can sell things at a higher price to people that don’t bother shopping around, and at a lower price to those that care about price. That means they charge different prices to different types of people, just like a hotel or airline does, maximising yield.
But the real killer of a price guarantee is the way it discourages other chains from discounting and promoting. If I run Think Engine Hardware, why would I put an ad in the paper telling everyone Cordless Drills – Now 30 per cent Off!? I know customers can and will still go to Bunnings. Offering to beat advertised prices is very close to being anti-competitive behaviour, as it can cause all firms to raise prices.
From the great knowledge fount:
“While a store with price matching guarantees has no fear of losing customers to rivals’ price cuts, it has every incentive to raise its own price to charge a higher price to its loyal customers. It is an anti-competitive tactic that warns competitors not to attempt to steal market share by undercutting prices.”
So, Bunnings is like any other retail operation, playing clever psychological games to disguise healthy mark-ups.
It had earnings of $900 million on revenue of $7.7 billion last year, and contributed 26 per cent of Wesfarmers earnings before tax, etc. Wesfarmers is currently working on “conversion of the property pipeline into trading locations at a higher rate than historically achieved” in order to help Bunnings contribute even more to its annual profits, which were, last year $2.2 billion.
Thomas the Think Engine 
Interesting article. I’m a bit of a Bunnings addict, they have for the most part destroyed the alternatives. Unfortunately I have found out the hard way that a lot of what they sell is completely useless crap and although some products are cheap (so chewp you have to wonder how it’s possible for anyone to make a profit making it) a lot of the products are surprisingly expensive.
I think Bunnings makes a lot of money off things like screws, fixtures and other tertiary products, in the same way JB Hifi probably makes more profit selling HDMI cables, mounts and adapters than TV’s and Blue-ray players. How can two HDMI cables equal the price of a blue-ray player?
Still, DIY as tragic and expensive as it is, it’s still often cheaper than getting any qualified tradesmen do something for you.
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Bunnings price matches catalogue specials from other stores as the catalogues come out. They also have quite a few store brands (though you wouldn’t necessarily know it) and exclusive brands ie Ozito and Ryobi are both exclusive and jumbuck is store brand. That said, even if the product is own brand, they will still price match a substantially similar item from a competitor.
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I too have spent a fair proportion of my income at the big green shed. One thing I’ve noticed, is most of the higher cost items (think, Mowers, Pressure Washers, Power tools, etc) are actually “exclusive” to Bunnings.
I used quote-marks around the term “exclusive”, because the only thing exclusive seems to be the model number. I assume this stops customers being able to price match, or even directly compare prices with other retailers.
The most telling thing about Bunnings, is that the place seems to be totally devoid of real tradespeople. I assume that tradespeople have found better places to shop, and leave the Osito drills for rest of the population.
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Bunnings is too successful, if you need to get something done its a shit fight in the carpark & exhaustion by the time you get home, shop local and pay $2 for convenience
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You forgot to add that their “beat it by 10%” guarantee is only 10% of the difference. This usually only amounts to around 20 cents but makes people think they are getting the best deal around.
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I was once in a way involved with JB Hifi shop fit outs.
They deliberately make their stores “messy” and “crowded” with tatty hand written signage.
The sales psychology is that it gives the impression of them being cheap.
Same way Michael Moore can afford nice clothes but dresses like a slob.
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To Neiltheseal85,
You are totally incorrect, Their bet it by 10% is off the total price. If you can buy a drill at a store for $150 and Bunnings sells it for $151 you will get $15 taken from the price meaning you buy the product from Bunnings for just $136. Don’t know where you got your theory from but it’s incorrect.
Bunnings also has dedicated people in each store as well as at a state and national level who spend their days trawling catalogues, papers and anything else they can lowering prices to ensure it IS the lowest price, sometimes they miss some and that’s where you win with the 10% off.
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And just a final note to add. The cheap looking black and white matt paper catalogues.. Actually cost twice the price of a high gloss colour one but it keeps the theme going!
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And I bet the cheapo animation for their TV ads required millions of dollars worth of coke-addled advertising geniuses.
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Nonsense!
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And they’ve never changed that ad tune, never mind the format, since we came to Australia in 1996! And those pictures that look like something from a 1902 trade catalogue – they must pay someone to do them for every single item, and I bet it would be cheaper to photograph the things!
Having said all that, I have been an extremely budget-conscious bargain-shopper all my life, but there is something comforting about Bunnings, even though I’ve always been perfectly aware that they’re not the cheapest. The feeling of space and airiness is strangely attractive.
And I will give them something else – I’ve always been impressed at how helpful and knowledgeable the staff is, at least in my local outlet. You would think they wouldn’t be and it would just be random working in the aisles, but in my experience they really do hire people who know a bit about the trades! I’ve always wondered how well they pay and look after their staff, because you’d think it would be hard to attract such clued-in people, or perhaps they’re just trained extremely well for what they’re selling.
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bunnings pay $50 to get each item “drawn” in black and whit
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they also spend over 100Million a year telling you they have the lowest prices
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Curious thing happened to me. I went to Bunnings to buy the bloke in the house a Karcher. The suitable model was unavailable at Bunnings. The Bunnings bloke said go and find this (other) Karcher model – it’s identical; albeit with a different model number. Left me with the impression that Bunnings has its suppliers affix a “Bunnings-only” model number so no-one can claim the 10% discount thingy on offer. I still wonder about it.
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You could still have pushed for a price beat. They’d rather you bought from them than say SuperCheap.
Mind you, the first company to use this trick was Myers… even something as subtle as slightly different buttons or a slightly different colour name
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I have lost count of the number of times I have found identical things at Bunnings way way cheaper than Mitre 10 (the only other supplier within coo-ee). I only go to the closer Mitre 10 if it’s a low cost item (e.g. a screw or some such) and / or I’m stretched for time.
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Yeah my rseaerch has shown they are most often cheaper than Masters too – although often by only 1 cent, which tells me they are setting prices by reference to Masters, not in reference to the lowest possible price they could manage. Their margins are quite healthy: ~11%.
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Why should I shop at any other hardware store when I can go to Bunnings and pay twice the price?!
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I’ve spend a lot at Bunnings and I know I’ve saved a lot, buying a standard line like Dulux paint, about 15% dearer at my local Mitre10 (and that’s a big Mitre10 used by a lot of tradies).
I buy bulk detergents and so on there and save a lot compared to small quantities in the supermarkets (BigW also have some bulk lines like this that are good value). A $3.60 house broom as a good as a $12 one from Woolies.
Power points, light switches, taps, screws, etc etc far cheaper than Mitre10. All good national brands.
But not everything is cheap or great, better floor tiles at good prices from Tile Mega Mart, though their customer service is woeful.
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Bunnings’ strength isn’t it’s prices, it’s the range.
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The price guarantee is irrelevant because it only applies to the exact same product, and 90% of Bunnings products are unique to Bunnings. It’s an advertising slogan that gives a vague impression that they are cheap, but I’m skeptical that it has any hard real world effect.
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You’re right. They work very hard to make sure their product lines are unique and can’t be compared. I’ve done a lot of comparison shopping and it’s nearly impossible!
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I only go there to treat my wife to a hot coked meal .. The sausage sizzle smell gets me all the time
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Im a builder
At first i thought bunnings as a one stop shop was great / before hand i was going to one store for large timber sales / another for joinery timber / yet another for cement products and so on
but then i began to see them all close down
thats when i also noticed the massive drop in service that bunnings does not provide we tradies.
the previous stores staff would take your order and it would be delivered OR they would have staff to take you through the store assisting you every step of the way until your ute was loaded and you could be assured of a well organised system in which to earn a good living.
NOW bunnings has forced closures of smaller suppliers all over the country – meanwhile prices have skyrocketed
3 years ago i could buy “clear” silicon at bunnings for 2.60 – it was the cheapest tube you could buy / other brands were around 4-6 dollars.
That same tube is still the cheapest
Its 12 dollars
Thats hyper inflation
and the RBA along with the ACCC has done nothing to stop it
Tradies like myself now take hours to load up at bunnings with no help whatso ever
more over – they have been teaching ordinary citizens to build structures which need a licenced builder to construct and nodody has done a thing
bunnings is a fuck up and your blog about it is a one sided affair bent on paising nothing but the convenience.
it has also pushed building costs through the roof.
luckily for me there are still some timber merchants nearby – and all the builders use them
We all think bunnings is screwing us over intentionally.
The ACCC needs to step in
The RBA should have been taking notes on hyper inflationary pricing.
but the mums and dads love it
the best thing that could happen for us builders is – massive wind storms / floods / twisters etc that prompt the governments to insist on pergolas fencing / additions / renovations MUST ALL BE CARRIED OUT BY A LICENSED PERSON
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I agree with 99% of what you say here Ryan. Bunnings does appear to be engaging in predatory pricing in an effort to drive other suppliers out of the market. In addition to your comments about them encouraging DIY’ers to do things that really do require a licensed tradie, I would also add that they are selling a lot of equipment (e.g. large angle grinders) that is incredibly dangerous in the wrong hands with minimal oversight. Previously before the rise of cheap brands like Ozito they were less accessible, and the people working in suburban hardware stores would probably politely suggest that amateurs think twice before buying such equipment.
I think your criticism of the blog was a bit off though – his point was just that from a marketing/psychology perspective, their pricing etc is very clever. This shouldn’t imply that it is morally right.
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yes need more competition for bunnings
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I agree too. The problem is that big companies like bunnings have the buying power that small businesses don’t have, but if you put price over customer service & local suppliers, they end up being priced out of the market & closing down.
My local country IGA store is still doing well is a tiny town of around 2,000 residents because we support them. That goes for many scenarios
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Totally agree,
And substandard quality of most tools and consumables i.e. screws, bolts.
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I agree too. The problem is that big companies like bunnings have the buying power that small businesses don’t have, but if you put price over customer service & local suppliers, they end up being priced out of the market & closing down.
My local country IGA store is still doing well is a tiny town of around 2,000 residents because we support them. That goes for many scenarios
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My husband and I shop at Bunnings a lot, not because we really want to but because it’s about the only hardware store around. Our biggest complaint about it is the cheap, poor quality of so much of what it sells. Flimsy, poorly made, substandard quality goods – the junk from China. It’s so obvious as we know what is sold in hardwares in Canada, where there are higher standards for products. We see it every time we go overseas – we travel to Canada annually. Sadly Australians settle for crap and choose largely based on price. The hardware goods in Canada are priced almost the same as in Australia but clearly of higher quality, made more durable, with better materials and better manufacturing.
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Hi All
I am a everyday Bunnings using Tradey. I have noticed a definite price increase across the board at Bunnings in the last 2 years. I understand that the pandemic has caused a lot of price increase but i think it has got out of control.
This has forced me to shop around now and it has surprised me somewhat.
I am now buying all timber, steel, Hardies products, screws, nails, tiles, glue products elsewhere at a much cheaper price . Im disappointed as Bunnings is a one stop shop so it means a bit more running around but its defiantly paying of big time. So why dont i get them to price match ,because i dont think its ethical when clients come to me with another builders quote to price match it , also because the suppliers i use now are small family businesses who are very appreciative and go the extra mile to assist . There is plenty of them around.
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All big companies are hyper inflating prices and gouging customers. The absolute necessity to increase dividends to share holders every year and the greed of corporate director’s means, as always, THE RICH GET RICHER BY ROBBING FROM THE POOR.
Without the milions and millions of worker ants the rich would have “fuck all”
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