"The disastrous rollout of Masters has been the greatest own goal in recent Australian business history," according to retail analyst Rob Lake.

Woolworths and its US joint venture partner, Lowe's, have invested nearly $3 billion in the hardware chain since 2009, with no returns so far.

In fact, accumulated losses now top $500 million.

Of the $43 billion home improvement market, Bunnings has captured around 18 per cent, compared to Masters' 2 per cent.

The date it expects to break even has been pushed back — it is likely to be 2019 until Masters is in the black.

Woolworths has now announced it will offload Masters, unravelling a strategy to enter home improvement.

Here is what went wrong.

1. Poorly thought-out strategy

Woolworths' entry into big-box hardware has been dubbed Project Oxygen — aiming to suck the oxygen out of main rival Wesfarmers' crown jewel, Bunnings, while distracting it from turning around the newly purchased Coles supermarket chain.

"One thing Woolworths failed to understand was that Wesfarmers allows each business to operate as a silo," Mr Lake said.

"About the only time all the businesses come together is to annually negotiate their huge media spend."

Quantitative analyst Sam Ferraro said the strategy had actually had the opposite effect and just distracted Woolworths from its own business.

"The expansion into home improvement has clearly pulled down the profitability of the broader group and has distracted your [and other senior executives'] attention from Woolworths' core supermarkets business, which has probably contributed to the marked slowdown in sales growth from that segment in the past year," he said.

In terms of earnings growth, Coles has outperformed Woolworths for the past 25 quarters.

2. Wrong locations

Wesfarmers has had the jump on Woolworths for the best big-box locations, and Bunnings managing director John Gillam even goes so far as to call the company a property developer.

"The GFC, tough for some people but brilliant for us. We were able to buy property like we'd never bought property before. And we did, we got great support from our parent company," he said.

Bunnings has successfully developed a strong organisational culture where workers feel empowered, Rob Lake says. ( AAP: Dan Himbrechts )

According to Bunnings' website, as of June last year it had 236 warehouses, 65 smaller format stores and 33 trade centres, with plans to open 20 stores a year for the next two years.

Masters has 62 stores and has slowed down its ambitious plans to roll out 150 stores in five years.

"The quick pace of rollout gives Masters a presence in markets across Australia — we benefited from that — particularly in Victoria we opened lots of stores but there's no doubt we've cannibalised ourselves," said Matt Tyson, the British hardware veteran charged with turning around Masters' loss as managing director of Woolworths' Home Improvement division.

Mr Lake said: "A retailer can choose quality sites, good value sites, or do it fast — but no one can do all three at once."

"In pursuit of their rapid rollout, Masters has chosen inferior locations, including some already rejected by Bunnings and is rumoured in the property sector to be paying big prices."

3. Selling the wrong stuff

Masters has admitted it had the wrong products at the wrong time of year.

In the first few years it had failed to grasp the seasonality of hardware — its ties with Lowes USA meant stock was out of season in Australia.

It has also entered the highly competitive whitegoods sector while ignoring high-margin basic hardware.

"We didn't have a deep enough range in some of our core categories — hardware, garden care and power tools," Mr Tyson said.

He said Masters was now switching focus and extending its product range by 2,500.

4. Flawed workplace culture

Bunnings has successfully developed a strong organisational culture where workers feel empowered.

Bunnings head of human resources Willem Pruys championed a workplace where challenging the boss was expected and feedback and ideas welcomed.

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"The culture has produced a number of outcomes," Mr Lake said.

"Team members by and large love working at Bunnings. The staff churn is incredibly low.

"Customers who know nothing of the culture notice eye contact, smiles, willingness and enthusiasm not often experienced in Australian retail.

"It also results in rapid feedback of market information to those making ranging decisions. For a huge retailer, Bunnings is amazingly nimble.

"Woolworths is a very top-down company.

"Masters has a written policy of insisting staff park their cars tail-in to the kerb, which is symptomatic of their rigid workplace culture."

5. Shopping experience

Hiring ex-tradies has been a boon for Bunnings and created trust with customers seeking good advice.

A trip to Bunnings has become a day out for many Australian families — offering free activities and workshops for adults and children.

It gives the feeling of a jumbled marketplace where you can touch and feel.

Masters has been unable to replicate the experience and recognises the store layout has been unsuccessful with customers.

Financial analyst Sam Ferraro wrote an open letter to Woolworths chief executive Grant O'Brien, encouraging him to exit home improvement.

"Perhaps your greatest legacy to the company you have worked at since a teenager will be to have the courage to admit to past failures and exit home improvement, while re-assessing the synergies that exist between general merchandise and supermarkets," he wrote.

Citi analyst Craig Woolford estimates exit costs to top $1.6 billion.