What an alternate industry would look like.
The consumer electronics retail landscape would alter radically, following the purchase of The Good Guys (TGG) chain by either JB Hi Fi or Harvey Norman.
If JB were to acquire TGG, a combined Good Guys-JB Hi-Fi operation would increase its store footprint from around 180 stores to 300, delivering a larger combined market share than Harvey Norman in some retail categories.
It would enable JB to penetrate the premium end appliances market where it now has limited appeal due to its ‘cheap and cheerful’ branding and deep digital positioning.
(JB Hi–Fi was established in 1974 by John Barbuto, trading from a single store in East Keilor, Victoria. Barbuto had one simple philosophy: to deliver a specialist range of Hi–Fi and recorded music at Australia’s lowest prices).
The acquisition would boost JB’s total sales from $43.9 billion to almost $6 billion and it is estimated to add between $100 million and $110 million to earnings before tax and amortisation.
This would also give the company leverage in deals with global suppliers who now desire high end showrooms to display their suites of often connected appliances.
However, the deep purchase of 100 bricks and mortar stores may not be the best long term strategy for JB, observed Winnings Appliances CEO, John Winning (pictured below).
“Considering JB is in the early stages of expanding into the appliance market the prospect of a takeover isn’t completely unbelievable.
“The acquisition would complement JB’s current offering and help it achieve its projected HOME store growth. However, I’m not sure how I would feel having more than 300 stores during a time where most retailers want to consolidate their physical footprint as the world adopts online as an alternative channel,” he told Appliance Retailer.
Meanwhile, if Harvey Norman were to acquire TGG, Harvey who has 191 stores, said he would likely retain the Good Guys brand. The leverage that the company would then wield, would make it virtually unassailable in the Australian market and most likely cripple the growth of JB’s HOME brand,
Harvey’s market capitalisation of $5bn is double the size of JB Hi-Fi’s, meaning it would be easily able to scoop up The Good Guys.
“We have 10 times the resources of JB Hi-Fi, so we have the resources to buy them. That’s the business we are in. That’s what we have done all our life. The synergies would flow from us having another large business which is very similar to ours” he told the media.