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How online Bunnings sales could boost the Wesfarmers share price

The Wesfarmers Ltd (ASX: WES) share price has risen more than 1% in reaction to the news that Bunnings is going to utilise online sales to boost the business.

Bunnings is the jewel in Wesfarmers’ retail crown with much how much of the Wesfarmers total profit it generates each year. However, investors and management alike have recognised the threat posed by online competition such as Amazon.

To beef up its retail offering, Bunnings is going ahead with a national rollout of its click and collect service after a successful trial in Tasmania, according to a report in The Australian.

Bunnings has come up with its strategy by looking at early adopters and seeing what fellow hardware store businesses are doing overseas.

Managing Director of Bunnings Group Michael Schneider said “So I think we recognise that, for a whole variety of different reasons, we could have had an opportunity to be online with trans­actions a little bit earlier, but it’s the advantage of doing it now as we are leaning into some very contemporary technology platforms.

“We wanted to get the very best service for our customer, we didn’t want to have a great in-store Bunnings experience but a clunky website, which had to have that Bunnings feel to it.”

Just over two-thirds of products in the store could be available for click and collect for the next day if ordered before 4pm with staff picking the orders as they work.

Apparently the online orders in Tasmania have been, on average, larger than what is purchased by walk-in customers.

The click and collect strategy might be the most profitable way to attract online sales without damaging the profit margin too much, as delivery can be an expensive part of the process for businesses like supermarkets.

I certainly feel this was the right call by Wesfarmers management, as online sales are only going to grow over time. However, these top ASX shares could prove to be better picks than Wesfarmers today because of less competition.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. 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 Scott Phillips.

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