Outgoing JB Hi-Fi chief executive Richard Uechtritz has rightly won plaudits as one of Australia’s great retailers, after steering his company through a management buyout and a float to become one of the best-performed retail stocks on the sharemarket.
While the retail environment has changed repeatedly during Uechtritz’s decade in charge, on the numerous occasions SmartCompany has spoken with him the message is always the same – good retailers focus on low costs, the right products and the right prices whatever the market is doing.
Here are 10 of Uechtritz’s strategy secrets you can use in your business.
Market positioning
Even as JB has grown to a $2 billion company, its brand positioning has not shifted from that of the “value” player in the electronics retail market. While the company sells exactly the same big brands as rivals such as Harvey Norman and the Good Guys, JB is seen as the low-price alternative – a position emphasised by its deliberately low-end branding and shop fittings. During the downturn this market position was particularly powerful.
Cost control
Yesterday’s half-year profit result again highlighted JB’s stringent cost control, with its key cost of doing business ratio falling from 13.6% to 13.2%. And in a period where discounting was rife among electronics retailers, JB managed to increase its EBIT margin from 7.1% to 7.2%.
Rapid growth
JB Hi-Fi was essentially a Melbourne business when Uechtritz arrived back in 2000, but the business has been expanded to cover all of Australia and a good chunk of New Zealand. In the past three years, 42 new stores have been opened, taking the footprint to 122 stores. The target is 210 stores, giving the company five to six years of growth. Of course, while the growth itself is impressive, the fact the company has retained its financial discipline has been crucial to sustainable growth – something rivals such as Clive Peeters have struggled with.
Branding
JB’s branding is hardly what you’d call slick. Loud and slightly tacky print advertising dominates (particularly bulky catalogues) and television advertising is minimal. Store fittings have a sort of second-hand feel, with lots of hand-drawn price tags and signage to emphasise the feeling of a chain were you will always find a bargain. The branding is consistent across the stores, consistent with the product range and consistent with Uechtritz’s business model.
Diversification
In the age of illegal downloading, selling CDs and DVDs is a big ask, so JB has sensibly moved further into the digital products area, focusing on televisions, home theatre, computers and gadgets (particularly anything with the Apple brand on it), digital cameras and games. It’s a clever strategy – many of these products are high margin items and diversification helps insulate the business against fashion trends or cyclical downturns in any one product area.
Riding the trends
It is possible to argue that Uechtritz ran JB during a boom period for Australian retail, with explosion in tech sales thanks to digital gadgets, Australia’s strong economic growth, the stimulus cash handouts and a borrowing binge. But JB has ridden these trends – and other special events such as the World Cup and Olympics – extremely well, using special offers, deals and promotions to cash in where possible.
Selling the story
Uechtritz did a great job selling his company’s story – he was always accessible and always ready to comment on industry-wide matters (such as the effectiveness of online retailing and trading conditions). It’s a small thing, but very important in giving investors a face to put to the growth story JB was trying to sell.
Strong balance sheet
Despite the aggressive expansion, JB has managed to keep a very strong balance sheet during its time as a listed company. Gearing has been kept low and working capital has remained strong thanks to good stock and inventory management.
Strong management
While Uechtritz has always been the face of JB’s management team, it appears he has developed an extremely strong and very stable management team – many of whom have been with the company since the management buyout in 2000. That should make the succession – with chief operating officer Terry Smart assuming the top job – relatively smooth.
Great timing
The market will be sad to see Uechtritz go, but there’s an argument that he has picked his timing well. The company is about halfway towards its growth goal of 210 stores and a new CEO will need to start looking beyond this organic growth to other strategies. The time for new blood at the top might be just about right.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
