Looking at Entrepreneurship within a brand from a cooperative perspective. Is a coperative brand driven top down from the executive or bottom up from store owners?

1. Entrepreneurship
within a brand
Growing a family business

2. Introduction
 Questions are welcome at any time
 Who am I?
 Greg Bold
 Company Director
 MBA ex Waikato University
 30 years in a family owned business

3. Background
 What is Mitre 10?
 Co-operative
 The stores own Mitre 10 (NZ)
 Several formats
 Solutions
 Home & Trade
 Mega
 About 130 stores
 Some owners have multiple stores

4. Strengths and Weaknesses
 Mitre 10’s biggest strength is also its
biggest weakness!
 Store owners and operators
 Some very good entrepreneurial operators
 Some not so good!
 Inconsistent brand offering
 Inconsistent pricing
 Inconsistent product offering

5. The Bold group
 Tauranga Mitre 10 Mega
 Katikati Solutions
 Waihi Home and Trade
 Pre-nail & precut factory
 Truss manufacture

6. History
 Purchased Mann Hardware 1978
 Joined Mitre 10 1980

7. History
 Original store based in the CBD
 500m2
 Last refurbished in the mid 60’s due to a fire
 18 staff
 Turnover < $1M
 Moved to 1000m2 1999
 Turnover $3.2M

8. History
 Purchased Waihi Mitre 10 1992
 80% Trade focus
 Business was in receivership
 Manufacturing capability
 Access to timber and building materials
 Relocated to new site 2004
 Retail increased 150%

9. History
 1993
 Established trade outlet on separate site in
Tauranga
 Utilised buying access from Waihi
 Greenfield start
 Main competitors Carters and Placemakers

10. History
 Decision made 2002 to develop new format
store (MEGA)
 5500m2 Retail
 1900m2 Gardener
 1850m2 Drive through
 2750 m2 Yard area
 The existing store at the time only half filled
the planned Garden offer
 130 staff

11. WHY
 New competitor arriving
 Current store was over trading
 New ranges could not be displayed
 Industry growth
 Desire for one location
 Proof of decision
 Solutions store remained trading
 We expected a 30% drop in sales
 We ended up with only 30% of the sales

12. WHY NOT?
 Shareholders / Directors mid 60’s
 Risk attached
 Does a family business have the skills?
 Funding
 Stress

13. Decision process
 Exit or expand
 Mitre 10 NZ support
 Management knowledge
 Retail expertise
 Site
 Funding

14. Governance
 Initially JV board
 2 representatives from Mitre 10
 Later
 Family trust trustees
 Accountant
 Lawyer
 4 Family members
 Developing external board members
 Structure of business altered
 Fluid management structure

15. Next steps
 Board
 Skill levels
 Members
 Evaluate the next generation!
 How does the business grow
 How is the business funded

16. The Retail industry
 Major corporate competitors
 The Warehouse
 Bunnings
 Category killers
 Occasional forays by Carters and Placemakers
 All chasing the same disposable income
dollar!
 Small market
 Low margins
 Increased competition

17. The Retail Industry
 NZ based suppliers
 Difficult to get exclusives
 Pricing and marketing structure
 Offshore suppliers
 Small and fragmented market
 Specific standards
 Plumbing sizes
 Electrical requirements
 High UV
 NZ is smaller than Sydney!

18. The Retail Industry
 Logistics
 NZ Laws
 Consumer Guarantees act
 Fair trading act
 Sale of goods act
 Socio-economic issues
 The Media
 Predictions become reality
 NZ OWNED AND OPERATED
 SO WHAT!

19. The Retail Industry
 How do we compete
 Face of a corporate
 Heart of a co-operative
 Combined buying and marketing
 Entrepreneurial buying
 Static Action Dusters.....
 Direct imports ex US
 Direct imports ex China
 Store led initiatives
 Stores money
 Mitre 10 led initiatives

20. The Retail Industry
 Before entering:
 Porters 5 forces
 Barriers to entry
 Cost of inventory
 Setup costs
 Competitors
 Major corporates
 Not just direct competitors
 Survival rate of niche players
 Consumers
 What do they expect
 Set shopping habits

21. The Retail Industry
 Suppliers
 Specific supply agreements
 Purchasing power
 Substitutes
 Online shopping
 DIFM market
 Having the funding is not the reason to enter a
market!
 There may be a gap in the market, but is there a
market in the gap!

22. Suppliers
 Industry life-blood
 Sustainability
 Support available
 Exclusive supply line
 Market support
 Product development
 Risk attached
 Deal life-cycles
 Performance measures
 Bonuses
 Penalties

23. Customers
 Think both internal and external
 Inwards Goods customers are the retail
departments
 Debtors
 Cash only
 Trade terms
 How far do you let them go?
 Risk assesment
 Customers
 Walk in?
 CRM
 Representation

24. Customers
 Sustainability
 What if:
 You lost your main client
 To a competitor
 Bankruptcy
 Closure
 Economic factors
 How susceptible is your business to effects on disposable
income
 Market Factors
 Where in the life-cycle is your market
 DIY vs DIFM
 Palmers GardenWorld

25. Family Businesses
 Sustainability
 Succession planning
 Growth funding
 Matriarch / Patriarch
 The decision process
 Family history
 Internal conflict
 Marriage breakup

26. Franchise vs Co-operative
 Franchise
 Tight controls on presentation and offering
 Limited entrepreneurial development
 Easier marketing
 Consistent offering
 Customers know what to expect
 Think McDonalds
 Tends to be a push model
 Where is the money?

27. Franchise vs Co-operative
 Co-operative
 Moves faster to market
 Flexible to regional needs
 Allows owner/operators to develop higher levels of
market penetration
 Bulk buy and supplier deals can be more difficult to
achieve targets
 Tends to be a pull model
 Greater critical mass
 Politics

28. Closing thoughts
 The franchisor has the power
 Co-operatives are a house of cards
 Exit strategies
 Planned well in advance
 Developed “What-if”
 Managed exits – Management buy-outs
 Strategic plans
 How will growth impact cash-flow
 What level of debtor exposure can you sustain
 Supply chain sustainability

29. Closing Thoughts
 Boundary Scanning
 New or existing competitors
 New or developing markets
 Expanding Categories
 Contracting Categories
 Substitutes
 Is Amazon just a bookstore?
 Population shifts
 Age
 Location
 Blue Ocean Strategies?

30. SO, what’s going on
The battle for market share in the $30 billion hardware
sector is heating up, with the Wesfarmers-owned
Bunnings investing $600 million. ...
The Australian September 29th 2010
After 15 years of stunning profit growth, Bunnings is
about to get its first real taste of competition as
Woolworths opens 150 big-box hardware stores over
the next five years, and Mitre 10, now 51 per cent-
owned by Metcash, sharpens its focus
The Sydney Morning Herald September 29 2010

31. Could we? – Should we?

32. And…..

33. THANK YOU
Questions?