Wesfarmers can give you an exact figure. Rounded off it is apparently close to $2 billion Aussie dollars.
That’s how much it has reportedly cost them to get out of the struggling Homebase home improvement business they bought in the UK just over two years ago. The Guardian newspaper reports that Homebase has been sold to the restructuring specialist Hilco, the owner of HMV, for £1 as Wesfarmers pulls the plug on its disastrous venture into the UK, putting thousands of jobs at risk.
Wesfarmers, which bought the business a little over two years ago, said it was offloading the entire 250-store Homebase chain, which has a workforce of just over 11,000. All 24 of the stores it rebranded to Bunnings are to become Homebase again once the deal completes at the end of June.
It was clearly wrong from the start. Yet due to the seemingly never ending success of their Bunnings hardware group in Australia and New Zealand they couldn’t see what was so obvious to many of us. Was this stupidity? No, they are not stupid people, anything but.
Yet they seem to have been blinded by their own success.
At the time of the Homebase purchase, they were fresh from crushing their opposition Down Under as explained in your February 2016 Terrific Tips newsletter and must have begun to see themselves as invincible. A modern day Roman Empire.
As I commented in the October 2016 Terrific Tips newsletter, Bunnings is a household name in Australia and New Zealand but in Britain apparently only about one in 10 people were aware that it is a hardware retailer.
According to Morgan Stanley Research, the same proportion thought it was either a town in New Zealand, a yoga position, a diet or a moderately infectious virus. It seems that this “moderately infectious virus” has now been eradicated in the UK.
As I reported in that article, “Retail analysts have questioned why Wesfarmers is rebranding the Homebase chain Bunnings, introducing a brand with no history in the competitive UK market. Bunnings CEO John Gilliam is adamant it's the right approach despite the 10,000 square metre difference between the average Homebase store in the UK and the big-box Bunnings warehouse outlets in Australia and New Zealand.
“British retail trade magazine, Retail Week described the Homebase takeover and rebranding as ‘either a stroke of genius or a rash arrogant manoeuvre’.”
Bunnings overconfidence and yes sheer arrogance were exemplified in their decision to sack the entire Homebase executive staff the week they took over. Wesfarmers managing director at the time, Richard Goyder, defended this decision claiming the plan had always involved taking a handful of people from Bunnings, “a world-class business” into Homebase which “frankly isn’t world-class at the moment.”
The one good thing coming out of this for small businesses is that it shows that complacency can creep in with even the biggest and the best. And they can be blinded to what is and what isn’t an opportunity by their arrogance.
So, go on David get your sling prepared and find a chink in your Goliath’s armour.