JB Hi-Fi reveals Bunnings-style online sales engine overhaul

Australia’s department stores might be having a miserable winter at the hands of online commerce, but it’s a very different story for high street shops selling gadgets and games by the pallet.

Consumer electronics giant JB Hi-Fi Group is quickly emerging as the second major physical retailer after Bunnings set to successfully execute an accretive hybrid digital and physical sales delivery model, after the trend setting brand revealed it will soon deploy a new e-commerce platform to beat rivals.

The millennially-skewed tech gear emporium on Monday beat market expectations to deliver an eye-popping 2019 full year net profit lift of 7.1 percent to $250 million for the year on the back of a stubbornly sluggish economic conditions that have cruelled the retail sector.

The positive result is a record for the group, which snapped-up whitegoods retailer The Good Guys in 2016 for $870 million to create a local retail behemoth that now covers most inventory across the converging electronics and appliance markets.

While floor sales have remained defiantly strong JB Hi-Fi on Monday revealed its intention to migrate its eCommerce platform to Shopify Plus over the coming year to bolster sales defences against the likes of Amazon and other price-driven online distribution pure plays.

The cost of the new system was not revealed in the company’s results, suggesting the tech investment is sufficiently affordable to keep it under the material disclosure threshold.

Significantly, JB Hi-Fi at the same time revealed it has promoted its well-regarded tech chief Simon Page to the group executive leadership team to sit alongside strategy and digital director James Saretta.

JB Hi-Fi’s (the core brand rather than the group) results reveal that while online sales soared 23 percent to $258 million, digital sales still only comprise 5.5 percent of its $4.73 billion overall till take.

Like Bunnings, which also seems inoculated against the dilutive online retail flu, that figure leaves plenty of headroom for accretive growth because JB Hi-Fi Group’s ANZ footprint of 315 retail outlets that span across tightly packed mall stores to bigger lifestyle shops that sell appliances and musical instruments.

The key advantage that JB’s retail footprint gives it is that it can nuke expensive delivery costs via the well-trodden click-and-collect model that then allows it to upsell consumers as they shop the store.

The ability to keep delivery costs low is core differentiator over online rivals because it means JB can trouser significantly more margin per online sale, a factor that allows crucial flexibility in pricing.

JB Hi-Fi’s strategic update also reveals it intends to borrow a trick from Apple to weaponise its physical advantage - namely providing online customers with aftersales service and support, another qualitative differentiator from the likes of Amazon and Kogan.

Merger synergies between JB Hi-Fi and The Good Guys are also starting to emerge with support offices for the two chains now moved to the one location at Southbank in Melbourne over the past year.

At the same time a group merchandising function has been implemented and strategic review of group supply chain completed.

Those two moves will feed into an at-scale consolidation of data, customer insights and internal tech capability with the strategic update revealing plans to “harmonise processes and technology”.

For JB Hi-Fi, this has meant connecting in-store and online customer databases over the past year through an expanded database, with personalised marketing and targeted offers now in the development pipeline.

At the same time JB Hi-Fi is diversifying into consumer services starting with TV installation and branching into “connected technology” installation, as well as giving its SMB channel play JB Hi-Fi Solutions a “longer term aspirational sales target of approximately $500 million per annum through both organic growth and strategic acquisitions.”