It’s a guilty addiction we all subscribe to and it’s helping the major retailer thrive despite the sector’s gloomy forecast.
It’s a guilty addiction we all subscribe to and it’s helping the major retailer thrive despite the sector’s gloomy forecast.

Aussie habit behind JB Hi-Fi’s boom

JB Hi-Fi is cashing in on Australia's growing reliance on technology and digital products with the retailer this week reporting a new record half-year profit.

Many have decried the sector is in recession on the back of weak consumer confidence and electronics is traditionally vulnerable in these conditions.

But chief executive Richard Murray said the ubiquity technology products means its corner of the market can longer be classed as discretionary.

The company's profit jumped 6.55 per cent to $170.6 million for the first six months to December 31.

Sales growth in communications, audio, computers, visual and accessories led to the company's revenue lifting to nearly $4 billion, almost 4 per cent higher than last year.

"Consumer electronics is less discretionary than it was a decade ago," Mr Murray told news.com.au.

"The mobile phone, the laptop and all that connectivity is just so mission-critical to how people think about their personal ecosystem.

"But we sell the same box as somebody else so we need to sell that in a more authentic and better way than our competitors so people want to keep coming back."

This is where the passion and knowledge of the in-store staff "cannot be undercooked", the retail boss says.

 

Aussies can’t live without their phones and computers.
Aussies can’t live without their phones and computers.

 

The so-called "retail apocalypse" which has claimed the scalps of Jeanswest, Bardot and EB Games in the first month of the decade is nothing new or unique for the sector, according to Mr Murray.

"There is always retailers post-Christmas that fold and you're seeing most of those are in fashion," he said.

"But there are players that become more and more efficient and constantly reinvest in their model to be more productive.

"We're one of them and I'd like to think this result is testament to being focused on our costs, being measured in our investment and continuing to deliver to our customers.

"There are always good news stories in retail and as retailers we need to celebrate those more because there are obviously retailers that aren't doing as well."

 

JB Hi-FI chief Richard Murray says electronics is no longer discretionary. AAP Image/James Ross
JB Hi-FI chief Richard Murray says electronics is no longer discretionary. AAP Image/James Ross

 

While fewer people are buying physical copies of movies, music and games across JB's 199 local stores, the business said it was finding sales growth on the internet.

Online sales in Australia lifted 18.3 per cent to $170.8 million - representing 6.3 per cent of total sales.

Mr Murray told news.com.au the online division is a "core part of our offer" but insists it should be used to supplement the bricks and mortar approach rather than replacing it altogether.

"Investors are starting to understand you have to have a great store offer and you have to have a great online offer," he said.

"Even if you look in the US where 20 per cent of shopping is online, that still means 80 per cent is in store."

The chief executive said "people love shopping at stores".

"Sometimes they have low involvement purchases and they couldn't care less they just want that cable delivered, and we need to make sure we deliver that efficiently and effectively and in a low cost manner.

"But at the same time when customers have a more engaged purchase they want to come in store and get great advice and great service.

"So we need to make sure both work."

 

The company has performed well in a “competitive environment”. Picture: AAP Image/Darren England
The company has performed well in a “competitive environment”. Picture: AAP Image/Darren England

 

LAZY RETAILING

Queensland University of Technology retail expert Dr Gary Mortimer said the cost of business pressures are having an impact on the growing number of failing brands but attributes a portion of the closures to a short term approach to discounting.

"I often refer to this as lazy retailing," he said.

"This extensive and long term discounting has simply eroded profits while the costs are going up.

"That long period of intense discounting has also encouraged consumers to never pay full price and equally I think we have consumers that are focused on saving and not spending."

Dr Mortimer says the increased cost of living has forced Australians to be more frugal and discretionary retailers have run into trouble as a result of this.

And the now defunct chains such as Ed Harry, Roger David and Harris Scarfe have struggled for relevance and are commonly viewed as outdated.

"That middle tier sector doesn't have a strong brand position, doesn't have a strong value proposition and doesn't have a point of differentiation," he told news.com.au.

"Which means they generally are forced to compete basically on price, and in those situations it's a spiral downwards."