A retail analyst has commended JB HiFi for their strong online channel but remains concerned over the company’s business model.
As of late 2011, the yellow retailer has been heavily discounting selected products online and marketing them as “daily deals.” This strategy, coupled with the company’s recent move to grey import cameras is being praised as a dynamic response to customer wants.
Mark Wade, a retail analyst at Linwar Securities, commended JB HiFi for their willingness to try new ideas that cater to consumer demands.
“With this particular aspect of the business, it’s another avenue for generating revenue, the prices are sharp and should attract consumers, and the model is a deviation in the way they’ve previously operated,” he documented.
Wade refers to JB’s online strategy as “Factory Scoop” deals and believes they align the big retailer with hungry, cost-cutting smaller companies, even though they’re not updated daily.
“It’s not every day they’re adding deals, no, and it doesn’t look like it’ll be a big earner for them. But the fact they’re doing something different for consumers at a good price is a great move, and this is one way of providing that.”
Despite being praised for their aggressive online strategy, worries regarding the company’s finances still loom. In December, JB lowered its profit expectations for the first half of 2012, causing a drop of 11 per cent in their share prices.
Wade recognises JB is currently restructuring its retail and online operations in search of models that better position particular products. This has been the case with their Music Now online service, which sees the famed distributor of CD music transition into an online environment.
Read: JB HiFi’s Music Now Sounds So Sweet
“Some of the concerns that remain are cyclical and structural ones, but there’s also concerns regarding digital migration. People are buying music and movies online, and circumventing retailers, and the price scrutiny there is huge.
“Users are becoming much more well educated about what’s out there, and that’s going to put a lot of pressure on JB Hi-Fi as time goes on. Often the customers will know much more about what they’re shopping for than the store itself.”
Although the company is listening to customers and responding to change, Wade is concerned they may not be enough to fight of signs of maturity. To support his argument, Wade cites an increased dividend payout ratio, increased store guidance and the first ever downgrade in profit expectations.
