Despite a substantial drop in store foot traffic and an accelerated shift to online shopping over the last 12 months, JB Hi-Fi CEO, Richard Murray believes his 300-strong store network – circa 200 for JB Hi-Fi and 100 for The Good Guys – is sustainable for the long term.

Online sales now account for 15.4% of total sales for JB Hi-Fi and 10.2% of total sales for The Good Guys but Murray said whether it’s 10% or 20% of total sales, it’s not the way he thinks about it.

“We want to maintain and grow our market share and delight customers however they choose to shop with us,” he said when presenting the group’s first half financial results earlier this week.

“We obviously have some internal targets and internal focuses, but we want to grow our sales both in-store and online and if we deliver to customers, we will be able to achieve both.”

Most of the stores see turnover of $20 million and generate good earnings, but they need to remain relevant and this is a key reason the group hasn’t opened a lot of new stores over the last couple of years, Murray said.

“There are some stores that we are looking at, but we are not rolling them out like we were a decade ago. We feel that our store network is sustainable, and we see opportunity to grow faster online and we have a big focus on our supply chain and logistics.

“I have no doubt that over the next couple of years we will find opportunities to do some centralised fulfilment but so many of our overseas peers are moving back to store-based fulfilment because large distribution centres are expensive to run.

“When you are only picking one or two products, the cost of a delivery versus an in-store customer transaction is remarkably similar but the harsh reality is that when customers come in-store we sell them more because they are having a more engaged journey.

“For example, if they are purchasing a TV, they are likely to add a surround sound system, wall bracket and cables so it ends up more of a solution sell. But you will also get customers who just want a new watch band for their Fitbit and they decide to opt for next day delivery online.

“Customers have different shopping journeys at different times and we need to make sure that every time they engage with us, we deliver.”

Small format stores

Speaking to the group’s small format store strategy, Murray said: “We always want to test and learn and understand if we can get stores with lower turnover to work on a different model?

“We do not want a scenario where we have a store with two staff and customers come in and don’t get the right service. We have always believed that we need a certain amount of scale to make it work.”

He said subject to the lack of foot traffic in the Melbourne CBD, the Southbank store, which opened in November 2019, is performing ‘reasonably well’.

“It’s as much about testing and learning and identifying where we can build out the store network. My main concern with small format stores is customers coming in and not getting what they want. We can solve that with online by saying, ‘It’s not at this store but we can deliver it to you’ but there’s a lot of people who just want to click & collect or come in store to pick it up. Our products are ‘here and now’ and impulse driven so there’s a lot of gratification from the purchase and we want to lean into that.”