A virtually unknown retail chain POCO is reportedly looking at buying up Masters stores and turning them into Poco stores, selling everything from furniture, kitchens, homewares and flooring to appliances and DIY products such as paint, tools and wallpaper.

The brand will compete against the likes of Harvey Norman Holdings Ltd (ASX: HVN), JB Hi-Fi Limited (ASX: JBH) and potentially The Good Guys.

The global retailer behind Poco, Steinhoff International, also owns Freedom Furniture and franchised bedding chain Snooze. There are currently 2 Poco stores in Australia but ChannelNews reports that the company is planning to increase that to over 45 within 2 years.

Poco has been looking closely at purchasing The Good Guys, but may have decided to go it alone if it can pick up Masters stores from Woolworths Limited (ASX: WOW) at a good price. ChannelNews reports that the group has been in discussions with Woolworths of turning select Masters stores into Poco stores.

Harvey Norman is also reportedly keen on buying several Masters stores from Woolworths. The supermarket retailer flagged its exit from the Home Hardware sector earlier this year, and is selling off its Masters warehouse stores as well as its Home Timber & Hardware wholesale distribution business.

Some sources suggest that Steinhoff has been using The Good Guys sale process as a means to garner intelligence on the Australian appliances market, before advancing its strategy.

However, Harvey Norman chairman Gerry Harvey has dismissed the idea that Poco would be a competitor. “I don’t think Harvey Norman would see it as opposition – it’s a different sort of store altogether,” Mr Harvey has told Fairfax Media.

Furniture retailer Fantastic Holdings Limited (ASX: FAN) might see Poco as a much bigger threat to its business – given the discount/budget nature of their two offerings.

Foolish takeaway

It’s probably overly simplistic to assume that Poco can produce similar results in the homewares market as Aldi has done in the supermarkets sector over the past 15 years. As such, it’s unlikely to be a major threat to JB Hi-Fi, Harvey Norman and possibly The Good Guys.

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Motley Fool writer/analyst Mike King owns shares in Woolworths. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.