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Why JB Hi Fi Has A Winning Formula With Home + Office

By David Richards | Wednesday | 28/11/2012

Last month we exclusively tipped that JB Hi Fi was set to move into the "Home" market, a decision that is logical and one that could reap big rewards for the Company moving forward.

We also revealed the Melbourne based Company, who has built their brand to be a lifestyle destination for the Apple and Google, is moving into the small medium business space with a push to sell office products.

With JB Hi Fi there are three core operations--back of house, online and front facing stores--and if CEO Terry Smart and his team can layer on additional products and services without increasing their cost base disproportionally, they will be successful, as an increase in sales from appliances and office products is equivalent to opening several new stores without having to worry about leases and fit outs.

What JB Hi Fi has over retailers like Harvey Norman is a target audience of shoppers who are young, upwardly mobile and have money. They trust the JB Hi Fi brand.

They are also an audience moving into domestic relationships or getting married and the chances are they will shop for a new generation of appliances, from red kettles and smart cooking appliances, at JB Hi Fi, as opposed to walking into a Harvey Norman store which is seen by them as a store for the "oldies" or a mums and dads store.

The real sleeper for JB Hi Fi is their online operation. This is set to get a massive makeover in the New Year with a new CMS and upgraded servers and databases.

A lot of JB Hi Fi customers are executives working in jobs where the salary is "good". They are used to shopping online and are prolific users of gadgets such as tablets or smartphones. For them to buy office products or appliances online from JB Hi Fi is a logical extension of what they are already dong with JB Hi Fi and other retailers.

Many of their customers already buy their music from JB Hi Fi's Now online music store and they are not frightened of going online to buy items priced over $1,000. This year the retailer has seen online sales increase 77%. The Company has also moved to the Webcollage content system which allows manufacturers and distributors to deliver rich media content directly into a product SKU online.

The first retailer to adopt this technology, which is used by 70% of mass retailers in the USA by brands like Microsoft, Epson, Samsung, LG, Electrolux, and hundreds of current JB HI Fi customers, gives JB Hi Fi an edge as it will allow to market appliances and office products to consumers online using rich media information such as video, and interactive tours.

The Company is also building out applications so that a small business can easily place an order with the Company from either a mobile device of PC. 

The risk for JB Hi Fi is minimal as they already have powerful relationships with manufacturers. This, coupled with their relationship with the NARTA buying group--who have some of the best appliance relationships in Australia--puts JB Hi Fi into an excellent position to take on the likes of Harvey Norman, Betta Electrical and Winnings Appliances, who are also undergoing a major online makeover.

Recently JB Hi Fi expanded their commercial markets operation. After hiring several senior executives from Dick Smith, the Company is now pitching for major Government and large enterprise contracts for the supply of anything from the coffee in the tea room to the latest Ultrabook or smartphone.

When it comes to taking on traditional appliance retailers, JB Hi Fi is in an excellent position to compete. They can instantly rebrand their Clive Anthony stores as JB Home.

Shortly JB Hi Fi will move to an in store system whereby staff using tablets and smartphones will be able to engage with customers using the same content  delivered to their web sites.  Overseas this is proving valuable with retailers who are having to compete with the likes of Amazon and other mass online and can now use content to show the difference between devices in store.

Research done by Staples and Best Buy in the USA reveals that content and the ability to demonstrate one product vs. another in store is bringing consumers back into retail stores prior to making a purchase decision.

A big user of this system is Microsoft who has invested millions into delivering content into the Webcollage system for use online and in store.

With the role out of JB Hi Fi Home, management at the mass retailer is set to trial a small number of concept stores in Queensland, with two more to follow early next year.

For Harvey and Betta Electrical this is a real threat.

Harvey Norman has had one of the most successful retail models of the past two decades, but the imminent entry of JB Hi-Fi is going to set off alarm bells.

One thing clear is that the JB Hi Fi management team get retail; they have a plan, a vision and are prepared to take a minimum risk testing new waters, while Harvey Norman is still dishing out more of the old in the hope that the customers who have deserted them will return.

This year Harvey Norman has experienced a 31 per cent decline in earnings and there is nothing on the horizon to indicate things are set to get better. According to Gerry, he is banking on a bit of hot weather to drive his air conditioning sales.

The latest National Australia Bank online retail sales index shows online sales, while still only about 5.6 per cent of the overall retail market, continue to rise and totalled about $12.3 billion in the 12 months to October.

Gerry Harvey reckons he is not getting any of this growth at Harvey Norman.

Business Spectator said interestingly, and in line with the overseas experience, growth in online retailing is now being driven by domestic retailers who have belatedly recognised both the threat and the potential of online retailing and are scrambling to reconfigure their business models and strategies.

The recent Click Frenzy exercise might have been a debacle but it did highlight the appetite of Australian consumers for online offers from trusted domestic retail brands. With growth in online sales running at 10 times that of traditional retailers the bricks and mortar retailers have to have a meaningful online presence to remain relevant, and perhaps to survive.

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