Pretty soon, there may be no Homebase at all
My track record as a DIY-er is not all that great, but I’m thinking I could have done a lot less of a botched job than Australian company Wesfarmers did when they acquired UK DIY retail chain Homebase back in 2016.
The analysts’ views could not have been more damning with GlobalData’s retail analyst, Patrick O’Brien referring to it as “undoubtedly the most disastrous retail acquisition in the UK ever. I can’t think of a worse one that has made these kinds of losses so quickly.
According to reports in the Guardian, up to 40 UK stores could close with a possibility that the parent company could exit the UK altogether as Wesfarmers recovers from a £454m write-down due to the acquisition.
My use of the term “botched job” is not a management consultant’s know all “post-disaster” arrogance but the term used by Rob Scott, Wesfarmers’ managing director, who stated the problems with Homebase were largely of their own making – a slightly diplomatic way of saying “we just shot ourselves in the foot with a gun we already knew was loaded. The number one – and probably most critical – mistake was to remove the entire management team plus 160 middle managers as soon as the takeover was concluded.
If you want big change, do it fast but beware of the risks
There’s a school of thought that suggests that if you are going to implement big change then do it quickly and do it early. The catch of course is that these have to be sensible changes and if you haven’t assessed the strategic landscape effectively then hitting fast and quick can make the acquirers look like drunken rhinos in an overpacked china shop.
Moving fast was not the mistake. Streamlining is an obvious first move but arguably they went too far. Including the people who effectively ensure at least short term smooth running – the middle managers – in the first tranche shake-up was too great a risk. All the knowledge about what worked in the stores and what did not – gathered over years of trial and error also walked out of the door at the same time.
Don’t change what’s already working
Homebase had already achieved some success attracting more female shoppers with an emphasis on top-end soft furnishings from Laura Ashley and Habitat which created a differentiator over other brands. Based on the experience of their Bunnings chain in Australia, however, Wesfarmers decided that a different approach was needed and opted for a purer DIY warehouse, providing customers with a no-frills (or chintz) experience.
Judging from customer feedback and our own research the previous approach seemed to be working. And, subjectively, our experience of the post-acquisition Homebase has not been that great – product facing is poor, and it seems harder to find what you want with too many options and price-points in some categories.
The lesson here is don’t change what’s already working and expect feedback from customer segments in one country to be replicated in another without sufficient research. History has shown time and time again that this approach does not work.
Ignore middle managers at your peril
Middle managers get a bad rap: the term suggests a lack of ambition and a degree of mediocrity, so they’re a target for easy downsizing. But middle managers hold a lot of knowledge about what works and what doesn’t and, whilst you can argue that companies would be more effective if they codified and shared that knowledge better, it seems a rather crude piece of change management to cut it out just like that.
Home or away?
Homebase’s problems are challenging – a £1bn rent obligation prevents Wesfarmers from walking away completely. The UK retail market is depressed, and the outlook remains uncertain for the short to medium term. The new Homebase have clearly not listened enough to their customers (or their voices in the company). They might want to think more about what their customers – male and female – want from their outlets before wielding the axe further.
Mistakes may have been made and recovery will be tough, with a degree of downsizing appearing all but inevitable. But in a crowded market, customers will shop around and loyalties can change. Homebase has every chance of recovery if a customer first philosophy is adopted and aligned to every aspect of the organisation. Time will tell whether the new owners have learned from their mistakes.