Another nail driven into hardware competiton: Danks snaps up independent supplier amid industry consolidation

The Australian hardware market has continued its consolidation, with the Woolworths-owned Danks snapping up a majority stake in specialised and family-owned hardware supplier Hardings Hardware.

The acquisition comes as the three major players in the hardware space – Woolworths, Wesfarmers and Metcash – continue to search for bolt-on businesses to help grow their market power.

David Gordon, partner at consultancy group Bentleys, says with the Bunnings-Masters rivalry so new, it makes sense the businesses are just seeking to expand their footprint.

“The hardware business is essentially run by those three, so there’s a need there to acquire as much share as they can.”

Gordon points out recent Woolworths financial results which show the business is losing tens of millions on the Masters chain every year, with Masters not expected to turn a profit for another four years.

In a statement, Danks – which is a hardware supplier to retail chains Home Timber and Hardware, Thrifty-Link and PlantsPlus – said it will take a 60% stake in Hardings Hardware, with six sites to be bought across three states. The locations will be rebranded as Danks locations.

Mark Burrowes, general manager of the Home Timber and Hardware Group, said the specialist company was “an ideal fit”.

“Hardings are a successful family-owned business with a 50-year reputation in the trade sector. We’re pleased to have an opportunity to build on the combined strengths of Hardings and Danks in continuing to service the needs of trade customers,” he said in the statement.

Burrowes and Hardings were both contacted by SmartCompany this morning but were not available for comment prior to publication.

In a statement, however, owner Robert Harding said the deal allowed the company to grow “for the benefit of our customers, staff and suppliers”.

“I am particularly excited with the opportunity for staff to become part of a much larger organisation exhibiting such strong growth.”

The Danks business model works by combining company owned and independent stores. The Harding stores will be rebranded as company-owned locations.

But the acquisition serves as more evidence the hardware sector is contracting. As both Bunnings and Woolworths, along with Metcash, seek out market dominance, they are more likely to snap up smaller stores in regional or suburban areas.

A recent IBISWorld report noted the competition would “further displace independent hardware stores”.

While the industry is seeing solid growth, with an annual growth rate of 3.5% expected between 2013 and 2018, the report warns the expansion “will come at a cost to smaller players”.

“Smaller independent hardware stores [are] likely to be pushed out of the industry. Consequently, the number of enterprises in the industry is expected to fall.”

The Australian Competition and Consumer Commission is alert to concerns around consolidation and blocked the acquisition of some hardware stores by Woolworths last year.