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Apple Store: JB Hi-Fi & Co Biggest Fear?

By Oonagh Reidy | Tuesday | 11/09/2012

Apple Store invasion may gobble up rivals Dick Smith, JB Hi-Fi and Harvey Norman, analysts fear.

This comes as Apple's latest notches in its retail empire was unveiled over the weekend with the opening of stores in Canberra and Perth.

There are now 17 Apple Stores in Oz, with another believed to be opening in Melbourne's North West soon.

All the major retailers, including Harvey Norman and Dick Smith have witnessed a slump in sales lately, blaming economic uncertainty and cautious consumers, although Dicks did enjoy a slight resurgence in FY2012.

However, Citi analysts reckon the quiet invasion of Apple Stores in Oz could be the retailers real malaise, a new report warns.

Apple Stores "generates sales of more than $35 million per store," the Citi report notes, which "is in stark contrast to Dick Smith, which has sales per store of $3-$5 million."

However, discounter JB Hi-Fi could be particularly at risk from Apple Stores, warns Citi analyst Craig Woolford, since 20% of its sales are iOS goodies.

"As DVDs and CDs became a smaller share of [JB Hi-Fi] sales it moved towards TVs and computers, and at the moment, it's Apple products."

"The real challenge for JB Hi-Fi and any retailer is there's very little margin on the Apple products for the retailers so you're reliant on other product sales or the foot traffic they generate," says Woolford.

JB FY2012 figures, announced last month, showed sales rose to a "record" $3.13bn with hardware up almost 10%--in particular computer and accessories--although music, movies and games were down 3%, as was the AV category.

But JB boss Terry Smart dismisses Citi's theory, insisting all resellers take their share of the Apple pie and denies his outfit will take a hit.

"It's not a case of taking market share from retailers because the whole Apple ecosystem and sales growth is significant," he said to the AFR.

"There's good growth not only for Apple stores but also retailers that support Apple." And like Apple, JB is also increasing their store count and will have open 16 new stores in FY13, meaning it will have close to 190 stores in its retail network.

But Apple's Canberra operation already has had one victim - Mac 1 store in the capital city shut down last week ahead of the Store opening.

Similarly, the Mac Reseller fell foul of the new Apple Store in Sydney's Bondi Junction, which closed its doors within months of the Store opening.

 And the AFR also notes Next Byte, once the biggest Apple reseller has witnessed stunted growth and several store closures in the past few years.

If Citi's theory is correct, then another major Apple reseller Woolies owned Big W, could also be in trouble.

But JB aren't oblivious of the huge threat an Apple Store poses, either.

The JB HiFi store located directly across Apple's ACT store held a major sale last weekend - the very day the iOS rival opened its doors, according to reports.

And rival Samsung has been so spellbound by the success of the Apple franchise, it set up its own retail operation down the street on Sydney's George St, last month, showcasing its wares to city consumers. 

Apple has 375 stores globally and 300 million visitors have crossed its threshold so far in 2012, according to Macworld.

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