Early adopters have the most to gain in the shift to specialist group retail franchising, writes Bob Beaumont of Beaumont Tiles.
There are fundamental shifts underway in Australia’s speciality retail markets that have nothing to do with the rise of digital commerce.
Home improvement and hardware is a battleground with one established big box retailer being joined by a second in a struggle for market dominance, just as what’s occurring in the US. In the middle are more than 500 independent stores and small chains in the specialist tile and bathroomware category.
The economic environment has been difficult for independents for several years now. They’re under enormous pressure as the hardware wars heat up and casualties are unavoidable.
Of course there are big advantages to being an independent. Big box retailers trying to be “all things to all people” can’t possibly specialise to the same degree.
Tile retail is, however, a relatively easy business to enter but a hard one to exit.
Many showrooms are established by a tiler, whose back and knees have given out and who’s looking for another 15 years of income. They use wholesaler contacts to assemble enough stock to get going, learning the retail game as they go along but secure in the knowledge that purchasers still want to touch and feel what they’re buying.
The trap for the unwary is that tiling is increasingly a fashion industry where consumer tastes change very fast. Many independents accrue stock that is obsolete or redundant after 12 months. Some would hold $500,000 in product that they’d be lucky to turn over twice in a year.
There is an alternative for those independents and privately-held groups when they’re caught at the cross roads of selling or getting out.
WHY FRANCHISING WORKS
The right franchising pathway can provide great capital growth directly related to the franchisees’ input and drive. My own company has grown to close to 100 stores nationally to become the biggest tiling and bathroom retailer in Australia and half our outlets are franchises.
There are two reasons the model is working for us.
- We have almost complete control of our supply chain. Its efficiencies include favourable terms of trade and tremendous buying power.
- Our systems eliminate the need to carry large amounts of stock or physically handle and arrange deliveries. Central distribution does that and our average franchise carries less than $50,000 of product. We move 60 semi-trailers of tiles through Australia retail channels every week. Dedicated group merchandisers and stylists keep our stores up with the latest market trends.
New franchisees can convert their stock to cash, significantly upgrade their store and own a business with a national brand that is saleable. They can establish an exit strategy, managing the business hands-on or having someone else do it for them.
Of course systems for planning, accounting, IT and HR are part of a successful franchise network. We also respect franchisees’ ability to be their own person while using tools designed to help grow their business’ capital value.
Brand name groups in speciality retail have the strength to compete and the marketing to compete and take it up to the competition. That momentum will grow.
*Bob Beaumont is managing director of Beaumont Tiles, Australia’s largest tile and bathroomware retailer.