money can’t buy’ competitive advantage in a market segment that the electronics retailer ‘doesn’t get’. Inside Retail spoke with Sinclair about how the acquisition came about and what the potential synergies are for E&S and JB Hi-Fi moving forward. Inside Retail: JB Hi-Fi’s majority stake investment is a significant development for E&S. What were the key factors that led to this decision, and how do you envision this partnership benefiting both companies? Rob Sinclair: E&S when I joined was a business that turned over $1 million a year and had 12 staff. We were battered and bruised from the late ’80s and early ’90s recession, and quite frankly, sold the family home just to remain in business. To grow that business from those humble beginnings with no resources, and a brand portfolio that was 10 per cent of our current brand portfolio, means we’ve worked hard to manage capital and to garner capital for growth up until this point. The main motivator for this decision was to seek an investor that could deliver capital for the organisation. And of course, on top of that, if there could be market relevance and understanding and also an appreciation of the unique market position that E&S holds in the mid-to-top-end kitchen, bathroom and laundry category [that would make] them the ideal suitor. The reality is, there aren’t so many options and JB had shown interest in us as early as 2019. IR: How will E&S leverage the expertise of the JB Hi-Fi Group? RS: It’s the big business resources we’re looking for. They give E&S capital and a property department to help us acquire new store sites. The reality is, we’re looking to become a key division of a very large organisation that delivers us the big business resources to just get on with doing what we’re doing at scale. I’m a lover of their business, but the dudes and dudettes who work at JB Hi-Fi are unique to the JB business. I love walking into and shopping at JB Hi-Fi. It’s a business filled with people who love doing what they’re doing, but one very different to how E&S operates. The Good Guys business does many categories that E&S doesn’t do – they do small appliances.  The uniqueness of the businesses are very different. We both offer high levels of customer service, but serving a customer to buy a toaster or kettle, they’re in and out in five minutes – it’s very different to explaining the difference between one $6000 washer and dryer to another. The stakes are higher, the value is higher, and the time spent with the customer is much higher. IR: Why now? RB: I’ve always had a dream to take E&S national. The number one limiting factor in achieving this was the capital investment required. Here we’re placed to get on with it. IR: How will JB Hi-Fi’s$47.8 million investment and majority stake in E&S influence the growth strategy, particularly in the premium appliance market? RB: It amplifies it. Because of the unique segment that we play in, we’re very different to the JB Group. That’s why the synergies are so strong. Many markets outside of Victoria have no business like E&S and are absolutely desperate for someone to take their products to the consumer the way we do – which is in quality showrooms with highly educated and well-trained people who love serving customers to the best possible extent. Our vision in how we manage the interaction with customers is to truly have highly trained people who are there to understand the specific needs and the individual needs of each customer, and then use their expertise to deliver perfect matches and recommendations to those unique customers.  There’s no one like us. That excitement and that opportunity is to bring E&S and what we do in the kitchen, bathroom and laundry marketplace to consumers all around Australia. IR: How did the discussions with JB Hi-Fi evolve, and what aspects of their business made them the ideal partner for E&S? RB: As a business, we have many competencies they don’t. The E&S commercial business works with property developers, new home builders and builders in general, and is a well-developed Melbourne-based commercial business. We have something that they don’t have in that space – a sophisticated go-to marketplace in our builder and designer business.  We do bathroom [products], and at any given time, up to 18 per cent of the total revenue that comes into E&S is from this segment. There’s no doubt the desire to expand our bathroom footprint through a new store network is highly sought after by our bathroom partners, and is highly sought after as a new market for JB to enter into. JB’s position is entry- to mid [market], and E&S is mid- to- top [end].  and E&S fills a void in their organisation in the mid- to- premium space in kitchen, bath and laundry. IR: You confirmed E&S will retain its brand and unique operating model. How will you ensure the partnership enhances rather than dilutes the brand’s identity? RB: Through the whole process, the guys at JB have been really cognisant of thate fact and very humble in their recognition of the great job that we do in delivering a very specialised business [with] a very high-end service standard to the mid-to-top-end customers doing kitchen, bathroom and laundry renovations. JB Hi-Fi openly admit they don’t get that space.  It takes an enormous depth of talent and phenomenal culture based on long contact times with customers and developing deep relationships with the consumer on the journey. It’s very different to a quick pick-up and buy, that the JB Hi-Fi Group [offers] through The Good Guys and JB Hi-Fi stores. It’s a protracted, long-term, deep relationship that we have to build with our clients and a very sophisticated way to retail. It’s a long duration between the sale that is achieved, and the delivery times are also protracted. We have a business model that they recognise would be enormously hard for them to replicate.  That’s why we’ve become highly attractive to them, we’ve got a unique process in a unique, segment in the marketplace.