JB will survive the threat posed by e-commerce rivals, but smaller players won’t be so lucky, analysts believe.
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However, other players will not be so fortunate, as low cost online operators surviving on lower margins will push out smaller bricks and mortar operators, a new Morgan Stanley investor report has indicated.
However, large scale operators like JB Hi Fi look to be the exception to the rule and are “relatively well placed to handle the threat (of the internet, compared with) its peers,” believes Morgan Stanley analyst Thomas Kierath.
Online now accounts for 7 per cent of all retail transactions.
“JB Hi-Fi is a low cost operator offering the right product in the right place.”
Its future growth potential and ability to survive on lower margins due to its large store numbers will be a key part of its survival strategy and “expect over 40 per cent space growth over the next four years,” analysts believe.
However, as JB’s gets bigger, the smaller operators will fade away as ever narrower product margins and price deflation which has hit the retail sector en masse in recent times kicks in further.
“We expect industry consolidation to accelerate as the big – including JB Hi-Fi – get bigger, and small format stores exit the industry,” Kierath said.
It currently has over 140 stores in Australia and has done well from online sales and was one of the first electronics retailers to jump on the e-tailing bandwagon.
In February it reported online sales grew 35 percent in the previous quarter and last year almost doubled its web visitor number to 916,000 – a at 42 per cent lift.
Its competitive pricing strategy has also become more intense undercutting the likes of Harvey Norman and Dick Smith on key categories like gaming and notebooks. It sold Nintendo 3D S for $298 undercutting both online and retailers by as much as $50.
It recently opened a new ‘concept’ store in Sydney’s Westfield CBD as it tests new selling techniques in what it admits is a highly competitve environment.
However, it too is feeling the pinch, with Marketing Manager Scott Browning recently admitting it is working with an economic retail model ‘that is very difficult to deliver a return.’
Earlier this month, leading high street names including Woolworths, owners of Dick Smith, Harvey Norman and JB called for the right to open on holidays including Anzac and Christmas Day, blaming the 24/7 nature of the web as creating an unfair advantage.
