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Dean Fradgley and Fletcher Building’s Distribution NZ division are nothing if not still “moving at pace”.
To list some of the key items that have been ticked off or put in place over the last 18 months by the CEO and his team around PlaceMakers and Mico:
In this article we’ll be focusing in on the “new” JV model, gauging progress with Mico and its co-location of premises with PlaceMakers and how the bundling of brands and products may help PlaceMakers become a true one stop shop for the trade.
ABOUT THE NEW JV STRATEGY
Diving straight into meatier matters, despite ongoing scuttlebutt about the alleged demise of the Joint Venture structure, the PlaceMakers JV model, now with some 21 current JV Operators out of the total of 48-49 stores, is still firmly part of the plan for the future.
But there have been changes, including longer JV contracts, changes to the equity split, plus an injection of measurability and the placing of key metrics around the JVs and Operators and both JV and non-JV stores, not just to keeps tabs on underperformance but also show areas of opportunity.
He may have “slightly changed the model”, but Dean Fradgley notes he hasn’t yet lost a JV and proceeds to
reiterate the importance of the model, “particularly in regional New Zealand, where the JV Operator having skin in the game with people who run their own businesses is absolutely crucial.”
Of the current crop of JVs he goes so far as to say: “We are very proud of them; we don’t want them to get any older and we don’t want them to retire! We value our JV Operators; we don’t want them everywhere, but we do want them where it’s right for shareholder return and right for customer service.”
Moving away from the JV model with some Auckland sites for example (eg Cook Street) has proven beneficial, resulting in double digit growth: “We are starting to do the right things in Auckland which, even though it is theoretically a ‘rockstar economy’, it’s still pretty cut throat I think!”
Fradgley and team have spent a year-plus talking to JVs and Operators asking them what they thought was stopping them from being and performing better.
Questions like “Are we aligned strategically?” were asked. “The series of choices that we are making to tactically execute that strategy – are they right? Do our operators get them? Do they make sense? And are they adding value to the customer?
“If they are, then our customers are happier, our gross margin gets better, our sales get better, our EBIT gets better, our operating profit gets better and shareholder return goes up!”
All of which indicates that, if Dean Fradgley was to hire a band to entertain at his next national conference, it would probably be One Direction…
MAKING MICO PAY
The refreshing of the Mico offer and the completion of five co-located PlaceMakers/Mico stores to date has been highly effective.
Having just two years ago asked “can we afford to be in plumbing?”, Mico has “exceeded expectations” and Dean Fradgley even hints at the prospect of record earnings for his plumbing arm this year.
Some of this turnaround will be thanks to lower premises and personnel costs but the co-location plan is the clincher: “When you put the two businesses together you get 100,000 products that a customer can get off the shelf or order in one go,” he underlines.
Adding that there will be more co-located stores, Fradgley will be pleased to have broken the mould in this sector: “Historically, nobody has made any real money in plumbing even though it’s a good gross margin product.
“The costs are just too high for everybody, including our competitors, so there has to be ways of servicing that market better, giving the customer a better experience and everyone making a bit of money – am I right?”
If it’s going so well why not bite the bullet and co-locate all Mico branches? “Customer response has exceeded our expectations but the question is do we need to and what does the customer want in each locality?” he counters.
“We judge each on its merits. We should be doing things that are better for the customer and not just for us.”
BUNDLING THE BUSINESS
Co-locating Mico is just part of a broader plan around increasing and improving PlaceMakers’ offer to the trade at both ends of the scale.
There has also been a renewed network-wide commitment to raising the bar for kitchens in-store, a renewed paint offering and a new heating store-in-store offer (all of which can be seen in the new Taupo store).
Dean Fradgley: “If we want to grow our share of wallet, we have got to expand into areas that maybe we haven’t been historically all that good at, or we haven’t wanted to enter before.”
But, to take two steps back before looking ahead, the decision 18 months ago to adopt a national core range outlook, possibly for the first time in PlaceMakers’ history, has been an equally important step change.
“We started with the top 250 core lines and I think within two to three years we will have a thousand lines nationally, guaranteed in-stock.” It’s about adopting a “good, sensible, central policy while still empowering the local branches to serve their customers in the right way.”
Taking this train of thought further, you may have already noted moves towards the broader Fletcher Building stable consolidating its offer through PlaceMakers – take for example the Dimond Roofing supply-to-installation store solution in Christchurch.
Make no mistake, there will be more of this in future. Dean Fradgley confirms: “There is more innovation to come in New Zealand in terms of giving people bundled offers. From a builder’s point of view, how many businesses does he need to talk to to build a home? Too many!
“That’s the kind of thing that I think Fletcher Building can do and is starting to do better. We’re trying to make it easier for customers to do business with us because they should be out there building houses and not stuck in the store, right?”
TAUPO CO-LOCATION THE SHAPE OF THINGS TO COME?
PlaceMakers’ relocated Taupo branch on Crown Rd recently opened its doors. Its significance is that it’s the first purpose-built PlaceMakers/Mico co-location and also among the first to show off some of the new national standards around kitchens & bathrooms and heating.
Taupo is the fifth PlaceMakers/Mico co-location – the others are Whitianga, Kerikeri, Palmerston North and Wanaka – and the store was officially opened by John Key in the first week of May.
Gary Woodhouse, PlaceMakers’ General Manager Operations & Marketing says: “This is an opportunity to genuinely enhance [PlaceMakers’] plumbing and bathroom category under the specialist Mico banner – something customers have told us they want,” adding “It’s about making it easier for customers to do business with us.”
Sharing an impressive bathroom and kitchen showroom, PlaceMakers and Mico will nevertheless continue to operate their respective brands and product ranges with separate entries and dedicated trade areas for each.
Taupo is also significant for the space set aside to show off the broad new heating offer which will be rolled out around the country.