Inside Retail Weekly: How has the past financial year been at Sydney Tools?
Elvis Bey: At the turn of the new year, everything was really slow – retail, trade and construction. People in the normal everyday building game weren’t spending money. They were all very reserved. Obviously with the banking royal commission and the election, consumer confidence was down. But we saw huge uplifts straight after the elections, and we were thankful. Consumers were worried about the market, what was going to happen and whether it was going to be stable. Now they’ve got certainty, the future is a lot clearer and the interest rate cuts are a good thing.
The consumer confidence is there now and we’re finding a lot of our customers are happy to spend the extra dollars to buy better tools. During a quiet period, people usually make needs-based purchases, but we’ve found that the number of items on invoices has expanded, the price of tools are on the high end and people aren’t buying cheap tools anymore. The market has definitely changed, since probably April.
In this kind of market, a lot of businesses have shrunk, but we grew double-digits and we’re growing fast. We’re expanding. The industrial and trade market is growing.
We’re going to keep rolling out our stores. We’re on a big national expansion plan and we just opened a new store in Tuggerah in New South Wales. We’re also looking at new sites in Queensland and Melbourne.
IRW: Up until recently, Sydney Tools’ stores have been on the eastern seaboard, but now you’re looking towards the west. Why is now the time for expansion?
EB: We want to offer consumer choice. We’ve had huge success in Sydney which has been a stronger market. We’ve been fortunate – Sydney has always had huge consumer choice, but in markets like Western Australia, South Australia and Queensland, the consumer is now able to come to us and not see just five drills on the shelf, but 100. They haven’t seen a range like ours this big and they love it. We’ve been on an expansion plan for four years and we’ve been steadily growing. Every store we’ve had has been successful.
If you’re successful in Sydney, you’ll be successful elsewhere in the country and any retailer will tell you that. Sydney is the hardest market because there are so many competitors in the marketplace.
IRW: Because you are called Sydney Tools, have there been any difficulties when you’ve gone interstate?
EB: That was a question that came up, whether we should change our name, but we stuck by our guns and it’s been well-accepted in Melbourne, Quenlsand and Canberra so far. People love shopping with us.
When we went to Melbourne and opened our first store, we had three carparks full of customers – three lots of people doing traffic control. Everybody wanted to meet us. It happens at almost all our store openings – there’s a huge brand following.
IRW: The housing market in Sydney and Melbourne has had its ups and downs. How has it affected your business?
EB: It’s had some impact. In Sydney and Melbourne, the market has turned since April. The interest rate helped the market along. The housing market will never stop. People will always buy houses, they’re just buying them cheaper now. There are two ways to look at it – you can be pessimistic and say prices are down, or you can say that there’s a chance for people to renovate and to fix their homes themselves.
Our industry is made up of maintenance work and people doing extensions. The housing market doesn’t revolve around apartments and units. It’s part of the market, but a lot of our customers are tradesmen, who have four or five guys working for them, like a carpenter or plumber doing maintenance work or renovations. We service some of the guys who do high rises, but the majority of our business comes from those trade customers.
IRW: What would you say that those trade customers expect from a retail experience?
EB: They expect us to have product on the floor and the best brands at the best prices – they don’t want to buy cheaper products, they want premium, like Milwaukee, Festool, DeWalt and Makita. The low-end products don’t sell for us – it’s the high-end stuff that does. Our customers shop smart and they buy the best. Sydney Tools has always been a business where you can walk in and ask for a discount and most times, we’ll offer it or we’ll come up with a deal for the customer.
IRW: How would you describe the trade retail competitive landscape? There are quite a few players in the market.
EB: Bunnings does trade and they’re a successful model, but we’re very different. Bunnings doesn’t carry 80 per cent of our stock, our trade product is specialised and unique. We cater for the plumbers and electricians and the tools they use every day.
For example, the NBN rollout has seen a huge influx of customers come to our stores specifically for it. There aren’t too many retailers that cater to that.
IRW: What are some of the challenges that you guys have faced lately?
EB: From an expansion point of view, it’s finding retail locations that are suitable. We’re a large-format retailer. There are a lot of small 700 sqm stores, but ours need to be 1500-2000 sqm and finding those locations is hard.
It’s difficult because you want to be in a trade hub, where you’ll generally find all your major retailers like your Kennard’s Hire, plumbing suppliers, electrical wholesalers, timber yards. That’s probably why when it comes to commercial property, the retail market is up. There’s just not enough commercial property out there.
IRW: How is catering to a trade customer different to other consumers?
EB: Our consumer demands a lot from us. They want product knowledge and they do their own research online, which everybody does these days, it doesn’t matter what they’re buying. They expect our staff to be familiar with all the products from all the major brands and give comparisons and recommendations – why a product is or isn’t the best for a particular reason.
The major difference is you need to give the right advice. We’re not just a checkout store, if someone wants to come in, they need to talk to someone who knows about generators, drills or compressors or NBN programs and we need to have those answers.
We definitely spend a lot of time in educating our staff in different training programs.
IRW: Most retailers are focusing on their e-commerce strategy these days, but I heard that 94 per cent of your customer base still want to come in-store.
EB: A tradesperson likes to talk to someone so he can buy the best product, learn why it’s better and get in touch with it.
For example, people don’t buy petrol garden gear anymore, they don’t buy electric power tools, it’s all about cordless. That market is growing every day, especially with the battery technology. In the last 12 months, the battery technology has almost doubled in capacity for drills and whipper-snippers. That market is changing every day. It’s like buying a new laptop or phone – almost every six months, you need something better, stronger and faster that’s new in the marketplace.
IRW: I can imagine that you’d have a lot of repeat customers among the tradies, so those relationships are really important for your staff to cultivate.
EB: Building customer relationships within our store is very important for our business. Bob the carpenter wants to come in and buy tools from Peter the salesman. He’s bought from him before, he’s sold him the right tools, he’s familiar with him and trusts him, so he spends his money with him. We’re always dealing with different personalities. A tradie wants to walk into our store and give the salesman a go about the soccer, have a chitchat, test the salesman to see how good he is [with the product], then buy his tools.
IRW: Sydney Tools is a family-run business, which you launched in 2001. What’s it like working with your brother Jason?EB: Being in a family owned business is like winning the lottery. There are a lot of things you disagree with other family members, but Jason and I have mastered that. He runs the retail side of the business and I’m more hands-on in the operations side of the business. I wouldn’t have it any other way. I enjoy work because I’m able to chat with him and have a yarn about different strategies.