Massbuild, the do-it-yourself (DIY) division of Massmart, has been a good bet for the group, which eight years ago recognised a gap in the market and an opportunity to cash in on what has since become a R45 billion home improvement market.
Through the acquisition of several businesses since 2003 the division now includes 80 stores under three brand names – Builders Warehouse, Builders Express and Builders Trade Depot. Despite being Massmart’s smallest operation, it is making great strides.
In the six months to December 26 last year, Massbuild lifted sales 18.6 percent to R3.78bn and trading profit before tax grew 36 percent to R209.8 million, outstripping gains made by the group’s other divisions.
Massbuild chief executive Llewellyn Walters recently said that the business’s success was driven by getting efficiencies right, cutting operating costs and by growing investment.
Massbuild is expected to gain further traction with the backing of Walmart, which received permission last week to buy a 51 percent stake in Massmart.
Bryan Roberts, the director of retail insights at Kantar Retail, said Massbuild had huge potential. He said Walmart had indicated that Massmart’s building division was a capability that it wanted to learn from and apply to other markets.
Walters said building supplies and DIY had previously been considered cyclical, but since 2008 Massbuild had been growing at double digits and during the financial downturn increased market share.
Massbuild is the largest business in the category with an estimated 13 percent market share. Based on 2009 data Massmart’s DIY sales through all its brands, including Game and Makro, gave it a 16.5 percent market share, compared with rival Cashbuild’s 12 percent and Illiad’s 9.4 percent share.
Builders Express director André Steyn said the business was driven by “home improvement”. He added that part of Massbuild’s success was the design and location of stores, which made them appealing to women as well as men.
“The gender crossover is very important,” Walters said, adding that an equal number of men and women shopped at Massbuild stores.
Building depots and hardware stores have historically been located in areas of urban decay. Massbuild locates its stores in areas that are regarded as safe and the store design is light and airy, which makes women feel comfortable to shop there.
Wide aisles, uncluttered shelves with good stock descriptions and panels identifying what the products should be used for has encouraged novice DIY enthusiasts.
Underpinning growth in store expansion, Steyn said: “We have opened stores faster than competitors.”
Walters said Massbuild’s biggest threat was finding new sites and qualified staff.
Elsewhere in Africa Massbuild acquired Kangela in Mozambique, which has 13 stores countrywide. A Builders Warehouse store has been opened in Botswana while a second site for a Builders Trade Depot has been secured.
Sites have also been located in Zambia, while plans to buy a business in Namibia were stymied by ownership requirements there that are contrary to Massmart’s plans for an employee scheme.
Other countries the group is considering include Angola and Nigeria. - Business Report