The Forthcoming Irrelevance Of The Australian Consumer Electronics Retailers
This is a post service aimed squarely at my hedge fund managing director readers who regularly inquire me what to curt inwards Australia. The most obvious target (in my view) is retailers - too equally a taster I start amongst the big-box consumer electronics retailers.
Commonwealth of Australia even hence has 2 electronics chains doing big-box consumer electronics. These are JB HiFi which is good run, has a modern format, a curt history too non much residuum canvass too Harvey Norman which is a picayune to a greater extent than quondam fashioned (like Circuit City inwards the 1990s it even hence sells fridges on prime number existent estate) but has a improve residuum canvass (reflecting its 1 time glorious history). Harvey Norman also has a franchise model - it does non ain all of its stores.
In the United States the debate is whether the province tin back upward 1 or zippo highly profitable large box chains. Best Buy - the bears fence - is the showroom for Amazon. In Commonwealth of Australia equally I said nosotros even hence accept 2 chains - its equally if Circuit City were even hence around. Moreover because Harvey Norman has a residuum canvass it tin live quite a long fourth dimension too Gerry Harvey is prone to say it is the challenger that volition driblet dead out of business. But Harvey Norman actually is losing part to JB Hi Fi too ultimately both volition lose part to the internet.
Gerry Harvey sounds somewhat desperate these days - firstly disputation that internet shopping is a con (nobody makes whatever coin inwards it) too hence disputation that there should live additional taxes on it. Then he sets upward an cyberspace fellowship inwards Ireland. It looks actually bad except that because of the above-mentioned residuum canvass he tin remain to a greater extent than or less for a piece too he mightiness fifty-fifty live able to liquidate too live left amongst something valuable at the end. (I even hence believe liquidating a large retailer is scary-hard.)
The JB HiFi model
JB HiFi spends a lot of coin to human face cheap. Have a human face at their website - it is close a parody of old-style discounting pamphlets. The stores accept fake plywood floors to brand them human face similar a discounting house. They accept immature staff wearing casual clothe too signs that are carefully printed on a reckoner hence that they human face hand-drawn. The store is deliberately cluttered giving it a feeling of beingness (very) crowded. They don't do products that are non hip. There are no fridges, blenders, toasters but lots of pads, laptops, large covert TVs too reckoner games. The Apple products are given prime number house non because selling them is profitable but because it makes the store human face cool.
And for a long fourth dimension JB HiFi actually were cheap. The website flashes the slogan "cheapest prices - always". This was a fellowship amongst the virtuous bike of looking inexpensive too beingness cheap, selling fast, having high turnover too depression inventory costs (important inwards electronics where obsolescence is quick) too simply looking similar a happening place. It was also a hot stock.
But it does non band truthful whatever more. They are not the "cheapest prices always" - far from it. They stand upward for prices on large items where people cost depository fiscal establishment check too they volition stand upward for prices if you lot actually force them (trade practices police force inwards Commonwealth of Australia makes it difficult to advertise the cheapest cost if you lot don't accept it) but I am noticing that on "convenience items" such equally cables too SD cards they are pricing aggressively high. They pass coin to human face inexpensive but they aren't whatever more. It is the advertising tag-line of a decaying business.
They missed earnings expectations a piece agone - the stock is having a fossil oil time. But it is even hence fairly richly valued (do comparisons of cost to sales if you lot want). The immediate inquiry is how far farther volition it driblet dead too volition Gerry Harvey maintain throwing his goodness residuum canvass at staying inwards the game too give them pricing pressure. Gerry Harvey it seems wants to live the survivor.
My Christmas Observation
I purchased a camcorder at Christmas too forgot to purchase an SD card. These orbit a lot of information hence a large (ie 32gb) carte du jour was required.
Here is the exclusively such carte du jour at the JB Hi Fi inwards the major shopping mall inwards Bondi Junction.
You run across that cost right: $299. It is the 45 mb/s version.
Here is the same production via an Amazon partner store at $128.
Gerry Harvey doesn't do better. Here is a 32 gb carte du jour at the Harvey Norman inwards the same shopping centre.
The production is a Sandisk "ultra" at $190. Amazon will sell you lot an identical production for $39.
I am trying to operate out the dynamics of this amongst regard to the stock. My best model is the reject of Radio Shack which did this earlier them. Radio Shack had a trouble concern model built on squeezing rattling fatty margins out of customers that needed something now. They had 2400 stores over America hence they were unopen plenty to anyone who needed them pronto.
And proximity was useful. Remember the days you lot absolutely needed that Firewire cable too were prepared to drive to the local Radio Shack (or Dick Smith inwards Australia) too pay $10-20 for something that would cost 50c to purchase inwards China? As the Onion observed nosotros do non take away hence many cables whatever to a greater extent than too Radio Shack has driblet dead irrelevant. These days it survives past times selling mobile scream upward contracts.
Well equally my picayune SD carte du jour survey demonstrates the big-box electronics stores hither accept driblet dead Radioshack - albeit amongst a bigger footprint too the pretence of "lowest prices". But Radioshack didn't blow upward - it simply form of drifted away. The stock was $70 inwards 2000 - the peak yr inwards which everyone was connecting their computers to the meshing too needed all those cables. It is $9 now.
That I intend is the futurity hither too. The 2 stores won't bargain either 1 a death-blow. Gerry Harvey volition proceed to lose part to JB Hi Fi (who human face cheaper too cooler) but he too his fellowship are rich too they tin bleed for a rattling long time. JB Hi Fi volition proceed to accuse "convenience prices" to the customers hiding behind their faux-cheap facade.
And nosotros volition wake upward inwards a decade too realize these companies are simply non of import - or for that thing fifty-fifty relevant.
John
Disclosure: no seat inwards the funds. For diverse revenue enhancement reasons nosotros accept elected to accept no Australian positions.
Commonwealth of Australia even hence has 2 electronics chains doing big-box consumer electronics. These are JB HiFi which is good run, has a modern format, a curt history too non much residuum canvass too Harvey Norman which is a picayune to a greater extent than quondam fashioned (like Circuit City inwards the 1990s it even hence sells fridges on prime number existent estate) but has a improve residuum canvass (reflecting its 1 time glorious history). Harvey Norman also has a franchise model - it does non ain all of its stores.
In the United States the debate is whether the province tin back upward 1 or zippo highly profitable large box chains. Best Buy - the bears fence - is the showroom for Amazon. In Commonwealth of Australia equally I said nosotros even hence accept 2 chains - its equally if Circuit City were even hence around. Moreover because Harvey Norman has a residuum canvass it tin live quite a long fourth dimension too Gerry Harvey is prone to say it is the challenger that volition driblet dead out of business. But Harvey Norman actually is losing part to JB Hi Fi too ultimately both volition lose part to the internet.
Gerry Harvey sounds somewhat desperate these days - firstly disputation that internet shopping is a con (nobody makes whatever coin inwards it) too hence disputation that there should live additional taxes on it. Then he sets upward an cyberspace fellowship inwards Ireland. It looks actually bad except that because of the above-mentioned residuum canvass he tin remain to a greater extent than or less for a piece too he mightiness fifty-fifty live able to liquidate too live left amongst something valuable at the end. (I even hence believe liquidating a large retailer is scary-hard.)
The JB HiFi model
JB HiFi spends a lot of coin to human face cheap. Have a human face at their website - it is close a parody of old-style discounting pamphlets. The stores accept fake plywood floors to brand them human face similar a discounting house. They accept immature staff wearing casual clothe too signs that are carefully printed on a reckoner hence that they human face hand-drawn. The store is deliberately cluttered giving it a feeling of beingness (very) crowded. They don't do products that are non hip. There are no fridges, blenders, toasters but lots of pads, laptops, large covert TVs too reckoner games. The Apple products are given prime number house non because selling them is profitable but because it makes the store human face cool.
And for a long fourth dimension JB HiFi actually were cheap. The website flashes the slogan "cheapest prices - always". This was a fellowship amongst the virtuous bike of looking inexpensive too beingness cheap, selling fast, having high turnover too depression inventory costs (important inwards electronics where obsolescence is quick) too simply looking similar a happening place. It was also a hot stock.
But it does non band truthful whatever more. They are not the "cheapest prices always" - far from it. They stand upward for prices on large items where people cost depository fiscal establishment check too they volition stand upward for prices if you lot actually force them (trade practices police force inwards Commonwealth of Australia makes it difficult to advertise the cheapest cost if you lot don't accept it) but I am noticing that on "convenience items" such equally cables too SD cards they are pricing aggressively high. They pass coin to human face inexpensive but they aren't whatever more. It is the advertising tag-line of a decaying business.
They missed earnings expectations a piece agone - the stock is having a fossil oil time. But it is even hence fairly richly valued (do comparisons of cost to sales if you lot want). The immediate inquiry is how far farther volition it driblet dead too volition Gerry Harvey maintain throwing his goodness residuum canvass at staying inwards the game too give them pricing pressure. Gerry Harvey it seems wants to live the survivor.
My Christmas Observation
I purchased a camcorder at Christmas too forgot to purchase an SD card. These orbit a lot of information hence a large (ie 32gb) carte du jour was required.
Here is the exclusively such carte du jour at the JB Hi Fi inwards the major shopping mall inwards Bondi Junction.
You run across that cost right: $299. It is the 45 mb/s version.
Here is the same production via an Amazon partner store at $128.
Gerry Harvey doesn't do better. Here is a 32 gb carte du jour at the Harvey Norman inwards the same shopping centre.
The production is a Sandisk "ultra" at $190. Amazon will sell you lot an identical production for $39.
I am trying to operate out the dynamics of this amongst regard to the stock. My best model is the reject of Radio Shack which did this earlier them. Radio Shack had a trouble concern model built on squeezing rattling fatty margins out of customers that needed something now. They had 2400 stores over America hence they were unopen plenty to anyone who needed them pronto.
And proximity was useful. Remember the days you lot absolutely needed that Firewire cable too were prepared to drive to the local Radio Shack (or Dick Smith inwards Australia) too pay $10-20 for something that would cost 50c to purchase inwards China? As the Onion observed nosotros do non take away hence many cables whatever to a greater extent than too Radio Shack has driblet dead irrelevant. These days it survives past times selling mobile scream upward contracts.
Well equally my picayune SD carte du jour survey demonstrates the big-box electronics stores hither accept driblet dead Radioshack - albeit amongst a bigger footprint too the pretence of "lowest prices". But Radioshack didn't blow upward - it simply form of drifted away. The stock was $70 inwards 2000 - the peak yr inwards which everyone was connecting their computers to the meshing too needed all those cables. It is $9 now.
That I intend is the futurity hither too. The 2 stores won't bargain either 1 a death-blow. Gerry Harvey volition proceed to lose part to JB Hi Fi (who human face cheaper too cooler) but he too his fellowship are rich too they tin bleed for a rattling long time. JB Hi Fi volition proceed to accuse "convenience prices" to the customers hiding behind their faux-cheap facade.
And nosotros volition wake upward inwards a decade too realize these companies are simply non of import - or for that thing fifty-fifty relevant.
John
Disclosure: no seat inwards the funds. For diverse revenue enhancement reasons nosotros accept elected to accept no Australian positions.
No comments