How Australia’s largest home entertainment brand is preparing for Amazon’s arrival in Australian.
Recently ranked the 9th strongest brand in Australia, JB Hi-Fi is an Aussie success story but is this all about to change for the retail giant?
Last week JB Hi-Fi’s Group Chief Executive Officer and Executive Director Richard Murray spoke at PWC’s Retail and Consumer Event Series: Bold Moves. According to PWC, the Australian retail sector is facing seismic changes as global competitors enter the local market. This radical change of landscape requires an equally radical response.
While Murray recognises the impending threat, he believes JB Hi-Fi is better prepared than electronic retailers overseas were. He seems to be more of an advocate of brutal consistency rather than radical change.
Be Match Fit
According to Murray, brand survival is all about getting and staying ‘match fit’. This is a philosophy that has served JB Hi-Fi well so far, and they believe it will continue to be important to keep them focused in the face of Amazon’s market onslaught.
Match Fit, according to Murray is about the entire team staying focused and being clear about their brand value proposition. Murray believes that relentless consistency is key to success.
For JB Hi-Fi, this means delivering ‘good value everyday’ and ‘doing the right thing for their customers’. This is about being the best value over a basket of goods, but not necessarily individual items.
However, with Amazon entering and potentially starting a price war, this could quickly erode JB Hi-Fi’s value proposition and its market share.
Five bold moves
PWC maintains that radical changes are required to thrive. The five bold moves they’ve identified are;
Start a price war and beat global players
Cut your range by 25%
Refocus on core activities operating costs
Shut down 25 per cent of your store network
Join forces with your rivals by partnering with a ‘frenemy’
On the 5 bold moves, number 3 seemed to have the most merit for JB Hi-Fi. Murray believes many companies lose focus by trying to do too much. He says JB Hi-Fi has the ‘Big 4’ strategic initiatives that they focus on each year. These are related to improving the core business and their value proposition to customers.
With slim margins, he is not keen to start a price war. But he is confident that Amazon will do this anyway, so they need to be prepared to respond. Murray is bullish and claims that JB Hi-Fi already operates on a lean margin of 22%, which is much tighter than most others. However, he expects Amazon will take 4% market share within a few years.
JB Hi-fi is consistently reviewing their range and dropping anything that isn’t performing so he doesn’t believe there is opportunity to cut 25% at this stage. Part of JB success story is its successful brand evolution. Once a specialist music store, the brand is now the leading electronics and home appliances retailer in the country.
With the recent merger with the Good Guys, points 4 and 5 seem also highly relevant. There was much discussion on the future of JB Hi-Fi home. While Murray wouldn’t confirm it, it seems highly likely that store consolidation will be one of their ‘big 4’ initiatives for the year.
As for partnering with frenemies, well that is something that he thought was also interesting but didn’t give much away.
Key opportunities for JB Hi-Fi
Murray recognises that now, more than ever, JB Hi-Fi needs to strengthen its brand loyalty. The brand is one of the few retailers who doesn’t have any form of loyalty programme. Murray is not a fan on giving away more margin and says he can’t see them partnering with airlines to give customers points. However, he does recognise the importance of strengthening customer engagement and storing all purchases to make refunds and exchanges easier.
Murray also believes that Australians have a very negative view about delivery and installation costs. While it’s costly to the company, Murray is keen to see how they could reduce the costs and hence provide more value to customers.
Do you think JB Hi-Fi is prepared for Amazon’s entry to the market? What else do you think they should be doing?
Michael is Managing Partner and Strategy Director at Truly Deeply, a brand agency with 25 years’ experience working with brands to position them for growth. His deep expertise is in unlocking the strategic power of your brand to create a differentiated, compelling and authentic brand proposition that will engage all your audiences. Michael has extensive experience working across Australia and the Middle East working with leading Australian and International organisations across just about every sector.