Big Brown Box MD confident in business model and timing

By Martin Vedris

SYDNEY: The fact that other major retailers have not significantly invested in online retailing to date is no concern for Big Brown Box MD John Hughes, who believes that the time is right and so is his business model.

Radio Rentals is in a strategically favourable position to launch into an online retail store because it has existing relationships with suppliers, a knowledge of the product, the specific logistics in place already to deliver the goods and importantly, it does not have an established retail business to consider.

“There was certainly reticence by the major retailers already operating in the market, to go online, and I can understand why, because anything they do online is just going to take away from the significant costs of infrastructure that they have dedicated to retail,” he said.

“And if you look at some organisations that are franchisee-centric, then they would be very loath to do anything that is going to cause ructions within their franchisee group, unless they could find a magic formula by which they could satisfy their franchisees.

“There is really no one else in our position and also where it will not cannibalise their current business because the internet customer we see that Big Brown Box is going to attract is very different to the rental customer that we have through Radio Rentals. They are two very distinct and different consumer markets.”

Online retailing has its notable critics, and case studies such as Amazon taking years to make a profit are well-known, but Hughes is backing his business model.

“We are certainly one of the last countries to embrace the internet retailing of electrical products,” he said. “We had a strategy meeting literally 12 months ago and recognised an opportunity from the fact that the market was certainly underserviced from an electrical retailing point of view.

“Whilst the economic environment is tough I think there will be people who see this as a great new way to access and obtain product.”

Regional customers may be the biggest beneficiaries with a catalogue of product they can browse online which previously they had to drive for hours to see.

“Think of someone in regional Australia … to get the selection that we have on Big Brown Box, they will have to travel to a major town if not capital city,” Hughes said. “Yet they will be able to have that product, available to them, online at city prices and free delivery.”

Freight is one of the biggest costs of doing business online and free delivery is an expensive promise. How does Big Brown Box plan to maintain free delivery without going broke? The answer is piggybacking on its existing logistics system as well as the fact that it has lower overheads than traditional retailers.

“If the order goes from us to a supplier, the product is delivered FIS, or free into store, say, to our store at Tamworth, so then our Radio Rentals Tamworth store, purely as a delivery agent, nothing to do with Big Brown Box other than product fulfillment, then delivers the product, all we’ve done is leverage off our current logistics.

“In addition we do have an agreement with Allied for certain areas of the country … but don’t forget, we don’t have all the infrastructure of stores and all the store staff, so we’ve got a lot of capacity to be able to provide consumers with a great deal.”

It is a tough time to be launching a new business, but Big Brown Box has backing from its established Radio Rentals business, so Hughes feels that some of the pressure is off from the start.

“The good thing for us is that we’re not competing against last year’s figures, this is a new venture and we’re more than happy, no matter what the economic conditions are, to do a very slow and steady approach.”

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