in 2003 , JB Hi-FI has disrupted, and subsequently become a leader, in the personal electronics category. The company’s low-cost sales driven model, combined with a focus on customer service and store layout/design, has seen it repeatedly take strong sales growth to shareholders, including 8.3 per cent growth in FY16. The company is now about to undergo one of the biggest changes since its inception, with the acquisition of home appliance retailer The Good Guys. The acquisition stands to complement JB’s continued move into the white goods and home appliance category, with lines in the sand being drawn with rival Harvey Norman. Matthew Elmas: JB Hi-Fi is known as a low cost operator. What’s driven that focus? Richard Murray: We drive sales. The reason the cost of doing business is low as a percentage is because we’re a sales-focused organisation. We’ve always been known for taking the deal. We’ve got the highest sales per square metre of anyone in the space and maybe who aren’t in the space. That high sales productivity ensures that our costs as a percentage of sales keep us very lean. ME: Keen to touch on the JB/Good Guys merger. You’ve decided to keep the offices of both companies separate, which is a decision that analysts have questioned. What’s behind your decision making on that one? RM: Some of the analysts who have made comments have just made a simple observation that you would assume that you would merge the offices. What’s more important for us is maintaining the culture and the DNA of these two great brands. Therefore, we’re going to maintain a lot of the customer facing function that supports the stores and the online businesses to stand alone. The best way to achieve that is to maintain two support offices. They’re not located particularly close to each other either – based in Chadstone and Essendon. So to make sure we don’t disrupt the staff, we’re keeping them separate. ME: The Good Guys bought out its franchise network before the acquisition, but as we understand, some are still continuing on until mid-2017. Do you think that could be a challenging or disruptive period for the acquisition? How will you navigate that? RM: Yes, everything to do with the JB Good Guys transition is a challenge. The Good Guys have done a lot of planning. I know Michael [Ford] and his team have done a lot of planning and we’re just looking to support them. That’s why we’ve said that during this period of change, it’s a light touch in regards to the integration because there’s already a reasonable level of change within the business currently and we want to ensure that we stabilise the business post-transition and then look to lean into integration more in 2017-18. ME: In relation to your operations in New Zealand, you’ve had a challenging run over the years, but things are looking up a bit this year. What’s been the focus there? RM: Our two major competitors, Harvey Norman and Noel Leeming, turn over about NZ$600 million and we only turn over about NZ$200 million. But the reality is that our top stores are among the best performing stores in the country. We only have 16 stores at the moment, therefore we don’t have the presence that we have in Australia. ME: How do you plan to stand out and increase your presence in New Zealand? RM: We restructured our New Zealand business in June last year and we’ve now got Rod Korff who’s the general manager of buying over there. We’ve made a lot of positive steps in the New Zealand market and we’re looking forward to a solid Christmas into the New Year. ME: Gerry Harvey seems confident that his “quality offer” will be able to come out on top against the JB/Good Guys merger, what are your thoughts? RM: I’m just trying to think through that. When you say quality, I don’t really understand because what I’m hearing is that between The Good Guys and JB, we basically sell the same products as Harvey does, give or take. JB is the number one in the Australian corporate reputation index. The Good Guys have been number one with Canstar for the past five years. The reason JB is number one in personal appliances and Good guys is number one in home appliances is because we represent a compelling offer to our customers on price, quality, range and store location. We think Harvey is a formidable competitor, but we run our own race and I think our offer is in line with our relevant customer groups. ME: JB HI-FI converted 13 stores to HOME formats this year. Is that going to be a focus for the business moving forward? RM: Yes. We see what the JB HI-FI HOME stores are doing and what The Good Guys stores are doing as different. They have different customers. Where JB has a lot of stores in shopping centres, The Good Guys is more for destination style homemaker centres. From that perspective, we see the opportunity for both brands to engage in the home appliance market. We’ll constantly evolve the offer. Our low cost of doing business (CODB) is an enabler across our entire business, including what we are achieving in HOME. ME: JB HI-FI is investing in a new fulfilment centre in Adelaide. How are things coming along there? RM: They’re fit for purpose, so while they are an important part of what we’re doing, they’re not a massive investment for us from a capital perspective. They’re really fulfillment centres, rather than large scale warehouses, and it’s just another example of JB keeping its low CODB in a fit-for-purpose, nimble, agile supply chain in the Australian stores. ME: We’re seeing retailers across the board move to automated supply chain solutions. Is that something JB is moving towards as well? RM: As part of the integration with The Good Guys, we will be thinking about the combined group’s logistics and supply chain needs. We’re early in that journey, but we do think it has the opportunity to create value across the group. ME: I’m keen to touch on the online part of your business as it’s a growing part of your sales stream. What are your plans to expand the service now that you’ve acquired The Good Guys? RM: Our Job at JB or The Good Guys is to delight our customers, both in-store and online. We all recognise that customers from both brands start their journey often online and then some people complete the transaction online and some come into the store. The critical thing is to ensure that you have a great online presence, not only for your online sales but to support your in-store sales. I don’t have a strong view about what proportion we should have online. I have a strong view around the fact that I want to delight customers wherever they want to shop. Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.