COMMENT: The decision by JB Hi Fi to sell branded digital camera products imported directly from overseas distributors as opposed to sourcing products directly from digital camera subsidiaries operating in Australia has been brought about solely because of competition.Online consumer electronics and IT web sites that have exploded in popularity in Australia during the past few months are sourcing digital camera products directly from several large distributors such as Dropshipping Limited, a well established Hong Kong distributor who has the structure and the volume capacity to offer prices that the local subsidiaries of the same digital camera companies are unable to offer for the simple reason that their parent companies do not want to do small production runs for Australia.
JB Hi Fi who has one of the best online web sites in Australia as well as a brand name that consumers trust is now taking it up to several ankle biting online competitors by playing the likes of Kogan at their own game.
They are delivering the same grey imported products at the same price or cheaper than their online competitors. They are also throwing down an option to consumers to choose between a well known branded retailer, who has high street credibility Vs purchasing from a little known and often not trusted online retailer.
Right now every digital camera vendor whose products are being imported via grey distributors will tell you that they “don’t like the concept” and that the practice is fraught with problems.
The reality is that there are little if any problems. Firstly Dropshipping Ltd is offering to replace any faulty digital cameras and should consumers want the latest manual all they have to do is go online to check whether the manual in the box is the latest on offer.
What consumers are getting is high profile big brand digital cameras from the likes of Nikon, Canon, Sony and Panasonic at a significantly reduced price. If successful, I envisage that the retailers will move to other categories outside of the digital camera market.
One category being investigated by mass retailers is Hi Fi where products being sold in Australia are up to 60% more expensive than what the same products are being sold for overseas. A classic example is Onkyo receivers which has a distributor margin of between 20 and 25% added before the retailer adds their margin. Then there is the manufacturer margin which in Australia can be up to 15% higher than what the same manufacturer is offering retailers overseas.
Grey Importing is set to become a way of life in Australia and there is not much that manufacturers can do about it for the simple reason that we have a population of only 22 million which is extremely small when compared to most other developed countries, such as the UK, USA, Japan, Canada, Germany and France.
Local digital camera vendors are trying to spook consumers with claims that their branded products do not meet mandatory safety and certification codes, may not have been handled properly and therefore may malfunction. These fibs are sheer garbage.
These are the same products coming off the same product lines as the expensive Australian supplied products. Canon, Nikon, Sony and Panasonic do not have separate production lines for Australia. What they have is a separate power cable, an Australian manual and a guarantee from a vendor.
JB Hi Fi is offering a full warranty on the products they are importing and while they don’t get marketing support from the local digital camera vendors, they are potentially set to reap the benefit of increased sales and higher margins to the retailer, while also providing consumers with a local online shopping option that takes it right up to overseas web sites.