By Patrick Avenell
The combination of a successful business model and consumer targeting will allow JB Hi-Fi to continue its aggressive expansion despite fears the economy is steadily slipping into a global recession.
In his presentation to the UBS Emerging Australian Companies Conference, Uechtritz noted the advantages that come from being a low-overhead retail business which is able to offer entertainment products at cheaper prices. This has attracted a younger demographic than its consumer electronics retail rivals, who are more targeted towards families seeking big ticket items.
For Uechtritz, the younger generations are insulated from the financial crisis through reduced exposure. This means they will not be as dissuaded from purchasing to the same extent as the older, and more at-risk, customers familiar to some retailers.
“A large percentage of JB customers are younger and thus have less of no negative sentiment, about shrinking share [prices] or super portfolios or declining or flat real estate prices,” said Uechtritz. “Retail spend is as much about sentiment as anything.”
Uechtritz continued to stress that JB Hi-Fi’s strategy is to process large volumes of low-to-mid range value sales, rather than a small number of high or ultra-high transactions.
“As JB’s average customer order value is $100, we are not reliant on considered purchases of large ticket items,” he said.
For those that will be affected by economic conditions, Uechtritz is confident that JB Hi-Fi will continue to attract sales even if the worst hit are turned off non-essential retail.
“JB specialises in entertainment. If consumers are cutting back elsewhere then it is likely that they will be at home more and will focus on home entertainment.”
With Uechtritz secure in the JB business model, and the Rudd Government’s stimulus package set to be realised, Uechtritz is optimistic about the short-to-medium term future of the retail group.
“Subject to the economic environment not deteriorating further, the company remains confident that it will meet market expectations for FY09, setting the company up in a strong position for FY10 onwards,” said Uechtritz.
During this time, JB Hi-Fi plans to open approximately 70 new stores in Australia and New Zealand. Uechtritz also signalled the intent to open smaller model stores, which will carry similar product offerings, and be based in areas of lower population.
For news on JB Hi-Fi’s support of Federal Government’s plan, click here.