Amid the gloom and doom of retailing, there are no doubt long, envious looks from other retailers at JB Hi-Fi, which continues to defy the headwinds battering other businesses. JB Hi-Fi and Bunnings Warehouse are arguably the two most successful Australian retailers of the past two decades on revenue, earnings and market share metrics as well as network growth. It would be easy to argue that JB Hi-Fi has simply been fortunate to be in the right place at the right time in respect of the products
ducts that consumers want. Outlasting the competition That assumption would overlook the fact that JB Hi-Fi has seen off significant competitors such as Retravision, Billy Guyatts, Dick Smith, Virgin Entertainment and acquired Clive Anthony and The Good Guys. JB Hi-Fi has also outpointed Myer, David Jones, Harvey Norman and the discount department store chains, and has achieved consistent growth despite competition from local and global online vendors across relevant product categories. JB Hi-Fi has grown from a single store in Melbourne’s northern suburbs to become the seventh-biggest retailer in Australia, with annual revenues exceeding $7 billion. The retailer is arguably the most successful graduate from private-equity ownership between 2000 and 2003, when it listed on the Australian Securities Exchange. The private-equity ownership, Macquarie Bank, developed the corporate infrastructure the chain needed for expansion nationally and into New Zealand but it didn’t tamper with JB Hi-Fi’s culture. JB Hi-Fi’s early growth was on high-street locations, which ensured it didn’t become a sanitised shopping mall format store, and allowed the chain to build strong brand recognition. A distinctive advertising signature smashing the retailer’s logo boosted brand recognition and underscored its pricing strategy, while its staff were product-savvy rather than immaculately uniformed and stores were no-nonsense with dense product ranges. When JB Hi-Fi moved into shopping malls it was in a strong negotiating position as a retail brand that could generate customer traffic. The chain cut good deals on rents and ensured it had the flexibility in terms of permitted uses in its leases so that it would not be prevented from expanding into new product categories. Expanding the brand JB Hi-Fi has successfully expanded into new categories, leveraging the recognition of and trust in its brand and exploiting technology to boost its engagement with customers and build one successful online platform. Flexibility and adaptability have been crucial to the continuing solid results and growth of JB Hi-Fi which has seen the CDs, videos and computer games categories for which it was market leader eroded by new consumer options such as Netflix, Stan, Apple iTunes and Spotify. Having wanted products in technology, entertainment and household appliances obviously helps, but JB Hi-Fi’s success is really due to its strong brand, effective marketing, competitive pricing and consumer engagement. Management stability is another important ingredient to success, and it is worth noting that if you are a retail worker interested in working in the product categories sold by JB Hi-Fi, the chain is the retailer of preference. CEO Richard Murray points to the passion and knowledge of in-store staff as a critical factor for success, given that the chain is essentially selling a product in “the same box as somebody else”. JB Hi-Fi maintains a sharp focus on its metrics keeping a tight rein on the costs of doing business, including the key areas of technology, supply chain management and the productivity of retail floorspace. For the first half of the 2020 financial year, JB Hi-Fi has passed $4 billion in revenues with comparable sales growth across its store network of 4.4 per cent. The retailer posted a profit of $170.6 million for the six months to December 31, up from $160.1 million despite the challenges of bushfires and drought and a consumer spending lethargy that has sent a number of retailers into the hands of administrators. JB Hi-Fi’s online sales in Australia increased by 18.3 per cent to $170.8 million in the half, representing around 6.3 per cent of total revenues. Investors who were not convinced of the wisdom of JB Hi-Fi acquiring The Good Guys in 2016 are smiling now, with the retailer’s share price doubling in the past 12 months to $41.55, just shy of the price for Woolworths scrip and eight times higher than Harvey Norman.