It should not come as a surprise that Woolworths will close or aim to sell-off their Master Hardware business.
"The failure, I see, is a result of poor timing and poor strategic choices," Dr Mortimer said.
He said Woolworths had been riding a wave of financial success in its food and general merchandise businesses, when it decided to expand into the growing home improvements market.
“At the time Woolworths launched Masters, the hardware sector was dominated by Wesfarmers’ owned Bunnings, and to a lesser extent, Metcash owned, Mitre 10," he said.
“To attack a market leader, like Bunnings, is strategically risky, however, I suspect Woolworths forecasted revenues from its food and general merchandise divisions would support the new venture
until it turned a profit.”
He said the timing of the decision was also problematic.
"Wesfarmers had recruited new Coles MD, Ian McLeod and Kmart MD Guy Russo in 2008, who brought with them highly experienced teams and international retail experience.
“By 2011, both McLeod and Russo had begun to turn around Kmart and Coles by investing in stores, cutting costs, reducing prices and creating profit; which had an enormous negative effect on Woolworths and Big W.
“With Woolworths and Big W’s revenues and market share in decline, launching a new hardware business against a market leader was always going to a disaster.
“The timing has been unfortunately a perfect storm for Woolworths; Aldi’s aggressively market growth, price conscious shoppers, a re-invigorated major competitor in Coles and Kmart, has left Woolworths management running around fighting fires."
Dr Mortimer said Westfarmers could be expected to be seriously looking at acquiring some Masters' sites.
“However, due to contractual agreements in place with US partner Lowes Hardware, Woolworths will need to buy out Lowes’ 33 per cent ownership, estimated at $1 billion, before they can off load the failing business.”
Media contact: Rose Trapnell, QUT media team leader, 07 3138 2361 or 0407 585 901, rose.trapnell@qut.edu.au or media@qut.edu.au.
