Moneyweb
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4 minute read
9 Oct 2018
8:44 am

Look out Builders, the French are here!

Moneyweb

Leroy Merlin is unlike anything we’ve seen in South Africa.

Leroy Merlin at Greenstone in Johannesburg – the first South African store from French group Adeo, the third-largest DIY retailer in the world. Picture: Moneyweb

One wouldn’t imagine that executives at Massmart’s Massbuild unit are losing any sleep over a single new store opened by one of the world’s largest DIY chains. After all, Massbuild – comprising Builders Warehouse, Builders Express, Builders Trade Depot, and Builders Superstore – has over 100 in South Africa.

But the 17 000m2 Leroy Merlin store at Stoneridge in the Greenstone area, east of Johannesburg, should force Massbuild to take notice. Leroy Merlin is the first store from the French Adeo group, which is the third-largest DIY retailer in the world and number one in France, Italy, Spain, Portugal and Russia.

Its entry into the market has been careful and deliberate. For months, it’s been operating a far smaller pop-up store in the adjacent Stoneridge Centre called ‘Campus’. This outlet allowed it to gain insights from customers and suppliers, and helped it prepare its “Africa commercial plan”.

Leroy Merlin is unlike anything we’ve seen in the local market.

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Massmart may argue – correctly – that what it built Builders Warehouse into (after it acquired a chain of eight stores in 2003) is unlike anything the local market had seen before. But the chain has stagnated. There’s no visible innovation in the core business of DIY/home improvement retailing (the stores look almost exactly the same as they did a decade ago).

Leroy Merlin is true world-class retail, especially from a merchandising perspective – with products, brands, choice and assortment that we simply haven’t seen before. It’s big on flat-pack furniture (as well as more elaborate, larger kits for kitchens and bathrooms). And it competes incredibly well on price.

The store is premised on six pillars: construction, hardware, kitchen, bathroom, home décor and garden. Think Ikea crossed with Builders crossed with Mr Price Home crossed with (particularly the ‘coolness’ of) Typo.

It displays its products incredibly well, and provides simple guides to shoppers to help them make the correct buying decision. For tiling, for instance, it suggests shoppers take into account the foot traffic of the area to be tiled, the size of the tiles and the spacing one would like between tiles when making a product decision.

The store is big on colour, with a particularly striking wall of bright toilet seats (surely not everyone’s taste!).

Where Leroy Merlin really excels is in the displays of its products in context within spaces you’d have at home. Much of its flat-pack furniture, some tiles, as well as some lighting is displayed in spaces where the products belong.

The workshops it hosts to teach various DIY skills (at R50 a pop) are surely going to become popular. These are either simple how-to’s (like painting a wall or wiring a plug), or guides on building specific things (like a shelf or a kid’s teepee).

Other innovations include a drive-through building material yard as well as a ‘click and collect’ service where online orders can be picked up at the store within two hours. Free Wi-Fi is hardly a differentiator, considering that most stores offer it these days (Builders has been rolling this out in its portfolio).

Leroy Merlin is a destination store. It was buzzing on Saturday afternoon and shoppers had travelled from all over the province to visit it, as they have been since its opening at the end of September.

What should give Massbuild pause for thought is that Adeo is opening Leroy Merlin stores practically adjacent to Builders outlets. This first store in Greenstone is 250 metres away from a Builders Express.

Adeo says two other Leroy Merlin sites are under construction and will open next year, while a fourth store will open in early 2020. These are all in Gauteng.

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For now, we know that one of these sites is adjacent to Fourways Mall (also a 17 000m2 store, and part of that complex’s redevelopment). This will be 800 metres from the Builders Express at Cedar Square, and 900 metres from the Builders Warehouse in Fourways.

Another, at Little Falls in Roodepoort, will be under 5 km from the Builders Warehouse in Strubens Valley.

Four stores can hardly compare to the 100-plus footprint of Builders, which (as a division) will generate revenue of R13 billion this year. But you can be sure Adeo is not going to stop at four stores. In Brazil, it has 41 stores. In Russia, 75. Romania has 16.

The problem for Massbuild, for now, is that Leroy Merlin will chip away at sales, especially in certain segments. It may result in some store footprint ‘optimisation’ from Massbuild.

And it will surely force Builders to actually compete on range, price and experience.

That means consumers win.

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