Battle of the Hardwares: Is the Barbadian Consumer Winning?

It is said that competition is always a good thing in any economy.  However, we hesitate to say “always”, because there are some cases where competition may not be so good for the development of indigenous industries.  In those cases, some level of protectionism might have to be employed, at least for a time.   

Building is a big undertaking in Barbados so the level of competition in hardware and lumber sector is definitely a good thing. Why? Mostly because of the unending complaints about prices in that sector.  

So, the entry of a new major hardware store into the Barbadian economy should be an advantage, especially to the building consumer. Right? Think again.

The entry of Kooyman Hardware to the Barbados market has brought a measure of competition to the hardware sector but whether that has resulted in a drop in prices for the construction industry is another matter. 

Those who have more than a passing acquaintance with marketing, know that companies compete on a number of different bases, not just price.  Quality, product variety, delivery and general customer service are just some of the bases on which companies can compete. 

However, the starting point in doing an analysis of competition is to look at the market structure or the overall nature of the industry being examined.  Classic microeconomics divides markets into four main types: monopolies, pure competition, monopolistic competition and oligopolies. 

The hardware sector in Barbados is essentially an oligopoly. An oligopoly is a type of market structure in which a small number of firms control the market. The classic characteristics of an oligopoly are as follows:

A number of small indigenous hardware stores have opened their doors in recent years, but the lion’s share of the market has been held by the Big Four: Carter’s Hardware Stores, H&B Hardware, Marshall Trading and Blades & Williams. 

Kooyman, a recent entry to Barbados market, officially opened its doors in Barbados on February 22, 2020.  Unlike the four older incumbents, Kooyman is a regional hardware having branches in Aruba, Bonaire, Curaçao and St. Maarten and boasts over 750 employees. 

Since Kooyman’s entry, some of the incumbents have been seeking to deal with the new competition.  One store in particular, Carter’s General Stores, regarded as the leader in the sector, has been working to counter this new competitor in the market.  

Two of the major changes it has made or is in the process of making to counter the new competition, is to offer longer opening hours and the upgrading of some of its stores to have a more lifestyle orientation. Both are responses to Kooyman’s positioning at its single site megastore at Vauxhall, Christ Church. 

Lifestyle marketing has become a theme of hardware stores ever since the former DaCosta Manning introduced lifestyle branding to its retail stores. Now, most hardware stores will sport a lifestyle section offering stylish patio furniture as well as designer kitchen and bathroom items with prices to boot!

It is questionable whether the economists’ theoretical market structures adequately apply to the hardware sector here or elsewhere. In our view, the hardware sector here is slowly transforming from an oligopoly to monopolistic competition.

We say this because of the increasing number of smaller hardware stores that have opened in the market in the last ten years or so.  Given their smaller size, most do not offer a full line of products, especially for the construction industry.  However, they often offer better prices and greater convenience. An example is Home Improvement located at Green Hill, St. Michael.   

In monopolistic competition, there are many companies (as opposed to a few) that offer products that are similar but not identical. Economic theory holds that firms in monopolistic competition differentiate their “similar products” through distinct marketing strategies, brand names, different quality offerings as well as service offerings.

This alternative view of the hardware sector helps us understand the not-so-subtle tussle between Kooyman and its main competitors. For example, Carter’s and H&B offer the traditional ¾ inch (0.75 inch) “formply” (form plywood or boxing plywood) at $72.99 and $75.00 respectively whereas Kooyman offers an 18mm (0.71 inch) formply at $69.99. 

In addition, Kooyman offers birch film-faced formply which its website describes as follows:

Film-faced plywood is a strong exterior plywood used in building and construction projects. Its surface has a film coating which gives the plywood a higher resistance to moisture, abrasion, and fungal attacks compared to ordinary plywood. The plywood is very useful for concrete forming with a smooth finish.

Incidentally, earlier in the year, the price of ¾ inch formply hovered around $70.00 across most vendors. What has caused the change? Well for one, this is a feature of both oligopolistic and monopolistic competition industries or markets: different players can lower or raise prices to achieve short term sales without starting a price war.

Naturally, price differences may also be due to the cost of new stock. However, given the dynamics of supply of major items, especially bulky items, hardware stores do not make major purchases that often.

That being said, freight at H&B as well as Carter’s is “free” which only serves to heighten the competition. Additionally, the shopping ambience at Kooyman and their long opening hours: 7.00 am to 7.00 pm weekdays and Sundays 9.00am to 2.00 pm, provide a higher level of customer convenience.

As the hardware market grows, consumers have access to a greater choice of offerings. But overall, is the Barbadian consumer winning, especially on price?  Fundamentally, that is a complex perception problem and therefore, only a survey of consumers could answer that definitively. In the meantime, tell us what you think in the comments section.