Wesfarmers Ltd (ASX: WES) plans to strengthen Bunnings’ market position further by going online nationwide.
Wesfarmers is a 100 year-old conglomerate which at various times has owned and operated some of Australia’s largest retail brands such as Kmart, Target and more. Today, its largest business is Bunnings Warehouse, the number-one DIY home improvement business.
Wesfarmers Expands Online
It was only a few days ago that the market learned Wesfarmers was shelling out $230 million on online retailer Catch Group, the conglomerate is planning further growth in the online space.
According to reporting in the Australian Financial Review, Bunnings will be rolling out its full online retail offering across Australia before Christmas, almost a year ahead of its September 2020 target.
Bunnings managing director Michael Schneider was quoted as saying, “We’ve been delighted with the progress and delighted with the customer reaction to our offer. We want to make sure our digital aspirations are not just about selling products online but using technology to make the business more efficient.”
Bunnings plans to also offer more services such as door and tap installations whilst also aiming to increase its trade & commercial sales. It may even make acquisitions to improve its market share of flooring, windows, bathrooms and kitchens.
The hardware business thinks there will be more activity in the renovation sector of the market over buying new homes. Trade activity continues to be strong.
Officeworks also plans to get in on the expansion action. The office supplies retailer has identified opportunieis with computer repair services, early education, smaller businesses and services like Geeks2U.
Officeworks managing director Sarah Hunter said: “These could expand our total addressable market to $41 billion, more than double our current addressable market.”
Is This A Good Move?
Clearly as time goes on there will be a higher proportion of retail sales will be done online. Bunnings and Officeworks have to build their businesses or else they could be overrun by online competition such as Amazon.
Whilst I’m pleased by the moves that Wesfarmers is making to grow its business recently, I think we must be careful about the price paid to buy shares. I think we could see a better entry price over the next year, even with the recent decline.
I’d rather think about buying the proven ASX businesses in the free report below instead.
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