A retail analyst has praised a move by JB Hi-Fi to include more discounted products in a “daily deals” type strategy, even though investors remain glum about the chain’s outlook as it prepares to reveal its finances for the first half.
The move also comes as JB Hi-Fi is experimenting with a few different retail strategies, including importing products directly from manufacturers to escape GST costs.
Analyst Mark Wade of Linwar Securities has written in a research note that despite some concerns about the company’s business model, the new “Factory Scoop” deals represent a willingness to try new ideas and respond to consumer demands.
“With this particular aspect of the business, it’s another avenue for generating revenue, the prices are sharp and should attract consumers, and the model is a deviation in the way they’ve previously operated.”
The Factory Scoop deals, launched in late 2011, provide online-only deals for certain products with heavy discounts. And although new deals are not posted every day, Wade agrees the new venture draws a parallel to what many of the daily deals companies are doing.
“It’s not every day they’re adding deals, no, and it doesn’t look like it’ll be a big earner for them. But the fact they’re doing something different for consumers at a good price is a great move, and this is one way of providing that.”
However, despite the praise for the new venture, concerns about JB Hi-Fi’s finances remain. In December, the company downgraded its expectations for first half profit, promptly sending shares down 11%.
Once the great hope for Australian retailers during 2009-10, JB Hi-Fi has also suffered the effects of timid shoppers. And as Wade points out, there are still a number of dangers.
“Some of the concerns that remain are cyclical and structural ones, but there’s also concerns regarding digital migration. People are buying music and movies online, and circumventing retailers, and the price scrutiny there is huge.”
JB Hi-Fi has attempted to counter some of this by introducing new features, such as its streaming music service. But Wade says that on its own this may not be enough – and he points to several signs that the company may be maturing.
These include an increased dividend payout ratio, increased store guidance, and the first ever profit downgrade announced in December.
“Users are becoming much more well educated about what’s out there, and that’s going to put a lot of pressure on JB Hi-Fi as time goes on. Often the customers will know much more about what they’re shopping for than the store itself.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
