But it’s not all bricks and mortar. Online sales grew 77.3% in the past year.
Asked if there was a false dichotomy in thinking online and bricks-and-mortar retailers were essentially different, Smart says “absolutely”.
“The way we think of it, [online] is just part of the business … It needs to be integrated in. For us, it’s always been about giving the customer choice about how they wish to shop.”
“There’s not going to be a day where we’re online-only. Bricks and mortar will continue, absolutely, it’s just a question of what percentage will be online versus what percentage will be physical stores. Across both of those will be a focus on convenience for the customer.
“We’ve got our store-pieces right, but we’ve got a lot of work to do with our online,” he admits. “We’re working on that this year.”
Smart says online selling has the potential to offer more products to customers. “What it enables you to do is put the full range from a supplier online, where you wouldn’t have carried that in store because of the slow sales rate,” he says.
Delving into the figures, computers and telecommunications delivered some of the strongest growth for the company. JB Hi-Fi is famous for its audio-visual entertainment offering, but sales of music, movies and games are falling.
Smart says the shift to hardware is one of several changes the retailer has successfully negotiated. He gave the example of car audio, speakers and component stereos, which once represented a large part of JB Hi-Fi’s sales. “We’ve managed the decline of those categories in line with consumer demand,” he says, “and we can do it again”.
“No doubt the market will remain challenging, but all we can do is focus on our current strengths, adapt and remain relevant to consumer.”
Retailing in Australia is being buffeted by both cyclical and structural concerns. “Although on average we feel it’s more cyclical, that’s obviously hard to quantify,” Smart says.
Part of this shift has seen the top 500 Australian retailers cement their market share, at the expense of smaller rivals, a recent report by Morgan Stanley – Australian Retail: Big retail getting bigger –found.
Between 2008 and 2012, the market share of the largest 500 retailer grew from 39% to just under 45%. This is what you would expect during a downturn, wrote equities analyst Thomas Kierath.
“Looking at the retail downturn in the late 1990s shows that small retailers tend not to gain [market share] back. So post a downturn, large retailers end up in a better relative position compared to small retailers.”
In the short-term, this has caused problems for JB Hi-Fi. Rivals WOW Sight and Sound, Dick Smith and Game have closed stores or shut down completely in recent months, sparking massive closing-down sales in the process, which JB Hi-Fi reacted to also discounting.
“While the impact on our earnings is clear, as a market leader with an everyday low price proposition, JB Hi-Fi will react aggressively to maintain our market leadership,” Smart told Fairfax papers in April.
But all things considered, JB Hi-Fi looks to gain from the recent closures in the industry. As its annual report said, the strong are getting stronger as less efficient retailers close.
Myriam Robin is a journalist with LeadingCompany. You can follow her on Twitter at @myriamrobin This article first appeared on Leading Company.
Myriam Robin is a media reporter at Crikey. She’s an economics graduate who previously reported on business for LeadingCompany and SmartCompany.
