Focus on integrating online
While JB Hi-Fi may not have the greatest site in the world, there is no doubt the company has a good distribution system and has managed to pump a lot into the company’s online operation.
So much so that online sales grew by 40.3% in the first half of the year compared to the same period in 2011, totalling 2% of all sales.
That equates to $36.4 million in purely online sales. Harvey Norman may only be doing as much as half that, and certainly isn’t putting as much effort into its own online store.
JB Hi-Fi’s strength lies in combining both the online and offline channels, allowing customers to check stock levels online and reserve items for pick-up. Although only 2% of sales may be online, that figure is surely set to rise.
When you can’t sell, focus on cost-cutting
The best-performing retailers understand that by cutting your margin, you’re putting yourself in danger.
JB Hi-Fi revealed over the first half of the year it had increased its gross margin to 21.5 – up 30 basis points – as discounting was ramped down. Not only is the company able to do this through raising prices, but it simply knows how to manage its supply chain and look for cost-cutting elsewhere to maximise profit.
The company’s challenge will be maintaining that margin in an environment which remains discount-heavy.
Don’t roll out stores too quickly
Although JB Hi-Fi delivered a positive result for net sales and profit, like-for-like sales dropped by 3.5%. But there’s wisdom in this strategy.
The company currently operates 174 stores, and plans to open 214. But while retail analysts believe this will harm future sales growth, it’s also a sound strategy – other retailers have been harmed by too aggressive an expansion plan. The fact Terry Smart only plans to reach 214 stores before taking stock and deciding what to do next is a good lesson – never expand further than what you can afford.
Diversify your offering
All electronics retailers are under siege and categories such as televisions decline. Overall the company recorded an 11.2% fall in television sales.
Smart businesses understand expansion and diversification is the key to survival, and that’s exactly what JB Hi-Fi is doing.
Already operating a streaming music service, the company said it plans to start offering downloads of movies online and move into other categories as well.
Too many retailers stay stagnant. JB Hi-Fi understands survival depends on evolution.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
