Bunnings’ Slimmer Margins Spark Power Debate

Bunnings is defending its business practices as scrutiny grows over its market dominance, even though its profit margins lag behind US competitors. While Bunnings posted an 11.9% earnings margin last year, major US retailers like Home Depot and Lowe’s delivered higher margins of 14.1% and 12.4% respectively, sparking questions about whether Bunnings’ business model truly prioritises consumers - or covertly benefits from its size.

The hardware chain is facing public and political pressure following a national TV exposé and a senate inquiry into large format retail chains. At the heart of the matter are claims that the brand uses its size to pressure suppliers and inflate consumer trust while pocketing robust profits. Established in Australian households thanks to its warehouse style stores and famous weekend sausage sizzles, Bunnings is also widely seen as a symbol of value and accessibility.

Despite the media backlash, analysts argue Bunnings hasn’t exploited its scale to the same degree as its global peers. While it leads the Australian DIY market, Bunnings didn’t expand its margins significantly during the COVID-19 boom. Instead, it chose to reinvest in pricing and service, reinforcing its consumer trust strategy. The retailer remains owned by Wesfarmers, Australia’s diversified retail giant, and contributed almost $19 billion in sales in the last year.

The bigger concern for regulators seems to be its scale, with 310 stores and 55,000 staff across Australia. The senate inquiry is investigating how such dominance affects competition, especially given that Bunnings also owns Beaumont Tiles and Tool Kit Depot. Though framed as a pricing champion, Bunnings’ strong market presence in a $110 billion sector raises questions about long-term impacts on suppliers and smaller competitors.

Still, industry insiders suggest the brand's popularity could help it weather negative attention. Unlike supermarkets hit by public anger over price inflation, Bunnings remains a trusted household name, even as competition laws are re-evaluated. But its ongoing expansion into categories like automotive goods, pet supplies and home cleaning could intensify regulatory focus in coming months.

Source: Australian Financial Review, Marketing Trends, Media Week