The Shed Duopoly Monopoly

Posted on : January 27, 2011

Shedeye has conducted analysis[1][2] on Australia’s Shed Distributors, and their link to wholesaler’s and manufacturers.  The results are surprising and show that while there is a good degree of competition in the distributor[3] and wholesaler[4] sector, the manufacturer [5]sector is exclusively tied to Bluescope as a source of their steel.

The graph below shows that Bluescope has dominance on the shed distribution chain and hence will have significant pricing power.   The “Unknown” comes from ambiguity in some of the manufacturer company reports as they source some of the Cold Rolled steel from Bluescope, however it is not clear how much they source from China or elsewhere, it could be the “Unknown” quantity falls to Bluescope.  As you can see there are few distributors that do not directly or indirectly source their products from Bluescope.

This graph shows that even in Roll Forming Bluescope has significant market dominance across the distributors of Australia.  This again shows that the competition is almost limited to a duopoly and the barrier to entry is very high due to the vertical integration of the supply chain and the high capital costs associated with this process.   Titan Sheds and Garages has made successful inroads into this arena, using its distributor network in QLD and NSW to successfully become a specialized shed roll former in their own right.

This looks much more promising from a competition point; however when you take a closer look into who actually owns the largest distributors, some layers of the onion start to unfold…..  Stramit owns both Fair Dinkum Sheds and Garage World, while Lysaght (Bluescope) owns Ranbuild.

This shows that the independents own just less than 50% of the distributor market and the two big players have slightly over 50%.

An extremely interesting market when you look at this.  Bluescope has vertical integration from the production of their Cold Rolled Steel, Roll Forming to distribution.  However, nestled in each stage of the supply chain they have a wholesaler division that is servicing other companies.  A very interesting and a very powerful pricing position indeed.  Micheal Porter would be proud of Bluescope for ticking off each one of his competitive advantage points!

There are quite a few things in Bluescopes favor regarding price rises and sheds

  • Sheds are still a multiple cheaper than the substitute products of brick and steel.
  • Steel is well suited to Australian climate
  • The supply chain with steel sheds is sophisticated and impressive
  • The simplicity of erection is hard to beat and results in quicker time to completion.

Does this indicate that sheds are more expensive than they need to be?  Are Steel price rises that are being passed onto the distributors reflected in the international steel prices and even iron ore spot prices?

Do you want more detailed analysis than this report provides?  Shedeye has a detailed report that gives state and geographical information on the shed distributor market in Australia.  Please contact support@shedeye.com.au to request this report.


[1] This report is based on the number of distributors and may not accurately reflect true steel volumes.  For example one distributor may be selling as much as 3 distributors by volume.  Comprehensive steel volume data is not available and is very difficult to ascertain accurately.  That said analyzing the links in the supply chain to distributors does give you a very good idea of market control and dominance.

[2] This applies only to custom designed sheds; prefab sheds such as Abasco and Spanbuilt are not included in the analysis.  Even though they do represent a good percentage of Shed sales in Australia.

[3] Distributors are the retail outfit of the Shed Wholesalers.

[4] The Wholesalers are the Brands or buying groups (Fairdinkum, Ranbuild, Garage World, Sidach, Titan) and they handle the sourcing of shed components, ordering from the manufacturer, the software and engineering.

[5] Manufacturers are defined as a company taking the raw Cold Rolled Steel product and Roll Forming it into a product.  Also commonly called Roll Formers.

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