How Bunnings makes its cunning 'lowest prices' claim
IT'S THE hardware store giant set for market dominance after rival Masters collapsed.
With its sausage sizzles, smiling staff and massive reach across Australia, Bunnings is what retail commentators call a "category killer".
But does it deliver on its brand promise of lowest prices guaranteed? That's a tricky one to answer.
For starters, many of the products sold in Bunnings warehouse stores are impossible to compare with those sold at rival retailers - even if they are made by the same manufacturer.
In what is dubbed "white labelling", popular brands like Mercator lighting and Scotch tape make slightly different products for Bunnings than those sold at other stores, making it hard to work out which is the cheapest - let alone take advantage of the big box giant's price match guarantee.
RETAILER IN HOT WATER
Now Bunnings' claim to having the lowest prices could cost it as much as $25 million ($NZ27 million), with its New Zealand operation embroiled in a legal battle with that country's competition watchdog.
The company is facing 45 charges of misleading customers with advertising campaigns that are strikingly similar to those found in Australia, including the ubiquitous slogan: "Lowest prices are just the beginning …"
In a case that will be watched carefully by the retail industry, Auckland District Court will hear the matter on March 7.
The Commerce Commission will allege that Bunnings misled shoppers by claiming the have the lowest prices, even though its products were not necessarily the cheapest on the market.
Each of the charges carries a maximum penalty of $NZ600,000.
Advertising claims made in New Zealand included: "Bunnings has the lowest price on everything you need"; "Everything is at the lowest price guaranteed"; and "We've got the widest range and the lowest prices."
Bunnings NZ general manager Jacqui Coombes said the company was "disappointed" with the regulator's decision to file charges, telling Fairfax that its policy was backed up by "behind the scenes" business processes and procedures.
The company has continued to advertise in the usual way while the matter is played out in court.
Meanwhile in the United Kingdom, where Bunnings is luring shoppers with tea and cakes instead of sausage sandwiches, the company had trouble trademarking its famous slogan.
The British Intellectual Property Office reportedly knocked back both "Lowest prices are just the beginning" and "Lowest prices everyday" on the grounds that they were too general.
WHAT'S IN A SLOGAN?
Associate Professor Barry Oliver from UQ Business School said Bunnings appeared to be treading a careful line between "desirability and deliverability" with its carefully-worded slogan.
"It's a multidimensional slogan," Assoc Prof Oliver explained, saying the trick for retail marketers was to describe the "complex reality" of pricing in a way that shoppers found credible.
By using words like "our policy is lowest prices and we're committed to it" in its terms and conditions, Bunnings achieved its marketing aim without being locked into a promise it couldn't keep.
"Like everything in life, the closer you look at the issue the more complicated it gets," Assoc Prof Oliver said.
"But you can't advertise 'lowest prices on 90 per cent of products', because it might actually be 97 per cent - and the consumer thinks 'maybe the two per cent I want aren't the lowest prices ... So what companies do is use asterisks or cautious phrasing to explain the slogan in more detail, what might be called the terms and conditions of the slogan."
He said so-called "white label" products were a response to the problem of "show rooming", where shoppers went to bricks-and-mortar stores to look at products, only to buy them cheaper online.
SHOPPERS 'HAVE BEEN MISLED'
But e-commerce entrepreneur Ruslan Kogan dismissed this reason for the tactic, saying today's shopper placed a higher value on convenience than a few dollars' price difference - and warned the practice risked alienating customers.
He said the strategy was known in the retail world as "cooking a SKU (stock taking unit)", and had been common practice for years.
"It's about getting a manufacturer to make a slightly different product for you, and as a result the customer can't say 'hey, are you going to price match this?' because the retailer can say 'that's not the same product, our product is different", Mr Kogan told news.com.au.
"It's a strategy that's been around for a long time, but it's unsustainable because people will realise they've been misled."
He said Australian shoppers were doing more online research before deciding what to buy, whether they purchased online or in-store.
"It's only going to take a few times for a customer to Google a product, read a couple of reviews and do their research, to say 'there's something fishy going on here'," Mr Kogan said.
"It can take decades to build the trust of a consumer and to build a brand, but a few of these negative experiences and you lose a customer forever."
Bunnings managing director, Michael Schneider, issued a statement to news.com.au.
"Our team members are trained and encouraged to apply our price guarantee whenever it's needed." he said.
"We encourage our team to use a common sense approach and err in favour of the customer when it comes to matching similar or same products. We aim to ensure customers understand our price policy and price guarantee through in-store explanations, online and through our advertising.
"We go to extensive lengths every day to genuinely deliver lowest prices to customers and we have comprehensive business processes and procedures operating behind the scenes to back this up."
The company said on its website it does not "pretend to be the lowest at every instant on everything, which is why we offer every customer a Price Guarantee.
"Where, if you find a competitor's lower price on the same stocked item, we'll beat it by 10 per cent."
The price match guarantee excluded trade quotes, stock liquidations and commercial quantities, the site said.
"Bunnings' price guarantee applies to any lower price on an item that is currently stocked and available from an online store, or in a physical store in Australia. It applies where the other retailer's final price, inclusive of delivery, taxes, fees and charges, is lower than our price on the day that the price guarantee is requested."