Will the war on inflation crash the JB Hi-Fi party?

Hand pops yellow $ balloon

This article appeared first on Will the war on inflation crash the JB Hi-Fi party?.
Read the original article here: Inside Retail Australia

It was a case of right place, right products, right time for JB Hi-Fi, a brand that has raked in ample coin during Covid lockdowns.

The retailer had what everyone wanted for a life that revolved around the home. TVs, computers, stuff to shut the kids up – JB was our saviour. Coupled with a better-perceived value and a more efficient way to buy than many of its competitors, you’ve got to give credit where credit is due.

And while the recent financial results for the brand are undeniably good, the question begs to be asked: is the party now over?

One of the most intriguing aspects of the brand’s latest results is that, pre-Covid, stores were the frontline. More people shopped in bricks-and-mortar than they did online. Lockdowns saw online sales growing by a whopping 52 per cent as the retailer lobbed online bombs left right and centre. The results suggest this mob must be one of the best, if not the best, multichannel retailers in Australia.

Then, when restrictions eased, people flocked back to the familiar unassuming value-centric in-store environment. And they kept parting with the discretionary dollars that had been burning holes in pockets as they sat home staring at the walls.

But don’t be fooled into thinking JB doesn’t know what it’s doing, that the brand could do with a fancy branding agency to come in and clean up its act. Not a chance. JB knows it’s onto a winner with those dodgy black and yellow signs that look like they were created by a kid who tags bus shelters after school.

It takes work, planning and ruthless execution standards to look “homemade cheap” consistently across such a big store network. And JB nails it every time.

What the future holds

The real question for JB right now is what the future holds for the discretionary dollar. Surely we bought all the replacement necessities (and creature entertainment gadgets) for the home and home office while we were stuck there these last two years.

This obsession with upgrading our homes put almost as much pressure on disrupted supply chains as Putin’s hissy fit. And now induced inflation is on the march. Between the cost of electricity, petrol, your favourite morning coffee and the weekly grocery shop, who is genuinely thinking about a phone upgrade, or a fourth TV? I’m certainly not. But that’s a focus group of just one.

With the Reserve Bank of Australia continuing the war on inflation, some industry pundits are forecasting the steep rise in mortgage payments and resulting pinch in property values will also take the wind out of JB’s sails. And that could be true. We know people feel less rich and curb spending on non-necessities when property is in the crosshairs of the economy.

But even though homeowners are forking out an extra couple of hundred dollars a month to keep the banks happy, we’re yet to see this in the numbers for retailers like JB. I mean, what’s happening at Myer?

All this could be a product of the cash stores we saved in recent times which we’re yet to spend. Lord knows the chaos that is school holiday travel has people rethinking that trip away, which means more cash in the bank on average. Not even the recent election dinted retail sales when traditionally it does.

Still, when those belts start to get uncomfortably tight, I reckon JB is one of the best-placed retailers to weather the storm. The no-frills brand and advertising approach forever cement JB in our minds as a discount retailer and when we do need to replace or upgrade home essentials and gadgets, or think about that Christmas present for your tech-savvy sibling, it’s going to be the first port of call based on that perceived value.

And the uptick in online sales shows the brand has online chops. It might look thrifty but big bucks have gone into that infrastructure. As the saying goes, it’s expensive to look cheap.

We’re going to have to wait until the next round of results from JB to see if the ugly lights have come on and if it’s time to get off the dancefloor.

In the meantime, if I was JB, I’d just keep doing what I was doing. They’re clearly doing something right.

_ _ _

Note: Original article appears in the Professional section behind the paywall at insideretail.com.au.

Craig Flanders

A passionate advocate for the strength of full integration shaped by 25 years in advertising where he’s held a number of senior management roles, Craig oversees all aspects of our integrated offer.