There is no animosity between JB Hi Fi and Dick Smith, according to JB’s CEO Richard Murray, a statement which is most likely true, given that both these retailers have a common target in their sights: David Jones and Myer. According to Murray, the industry can be assured that JB is determined to ‘own’ the portable appliance category, despite its deep legacy in technology and gadgets.
Murray spoke to Appliance Retailer on Monday morning, a few hours after announcing JB’s yearly results that had earlier been posted on the ASX and holding an analysts conference where he detailed the company’s performance. The move into small appliances within the existing JB Hi Fi stores was discussed in depth.
Meanwhile, both Murray and Dick Smith CEO Nick Abboud (a former Myer executive) are aware of the parlous condition of the small appliance departments within Australia’s leading department stores.
According to the latest research from IBIS World, department stores (comprised of Myer, Dick Smith, Wesfarmers and Woolworths) have struggled over the past five years due to a weak retail environment and low consumer confidence.
“Consumers have become increasingly price conscious and reluctant to spend their discretionary income, preferring to pay down debt and increase their savings instead. Over the five years through 2015-16, industry revenue is forecast to contract at an annualised 0.9% to $18.1 billion. Despite record low interest rates, consumers are expected to remain frugal in 2015-16, with industry revenue forecast to decline by 1.2%,” the July IBIS Report said.
Compare this to JB FY15 results of 4.8% growth in the company’s total sales with online sales skyrocketing by 16.9%. Dick Smith’s results are likely to be in a similar realm when are released next week.
Murray rebuffed one of the industry’s concerns that JB Hi Fi sales staff did not have the skills to sell premium portable appliances. He said that the company had access to internal research that showed that JB customers were strongly adhered to the JB retail brand and “that people come to JB as a specific destination”.
He added that this brand equity would be leveraged via online engagement to entice them into the new small appliances department and that this database would be the basis of company’s direct promotional activities.
“Our staff have already been selling a range of small appliances for some time in JB Home and we have many of the highest ASP’s in the industry,” he said. Murray confirmed that training of the small appliance floorstaff had been in place for some time and was working well in the existing JB Hi Fi stores that were already carrying the new departments.
These stores are primarily in Victoria and located at The Glen, Watergardens, Werribee and at Wetherill Park in NSW.
While competitor Dick Smith has pointed to ‘The Internet of Things’ as being a customer attraction to a tech savvy retailer who now sells appliances, Murray was more pragmatic.
“The concept of ‘The Internet of Things’ is all about the future. We are investing in small appliances today because it is a strong growth category with great looking products. We will advance in this initiative because we have a larger format model with the lowest cost of doing business,” he said.