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Surprising reason JB Hi-Fi flourish electronics chain incredible yearly profits competitors flounder

JB-Hi Fi is flying in the face of Australia’s retail apocalypse – making more money than ever as other retailers collapse around it. 

Retail experts say that’s not because the company is offering the cheapest prices, but because they are targeting consumers who are willing to pay more for better quality products. 

The electronics chain announced on Monday it had posted a net profit of $170.6million for the first half of the financial year – up from $160.1million.

The results are a stark contrast to the rest of the retail sector with 169 store closures – including some of Australia’s oldest retailers falling into administration – in the first month of 2020. 

JB Hi Fi sales reached $4 billion in the first six months to December 31.

The sale of communications, audio, computers, visual and accessories drove comparable sales growth by 4.4 per cent at its major Australian store segment. 

In the same period, HB Hi Fi’s online sales in Australia jumped 18.3 per cent to $170.8 million – representing 6.3 per cent of total sales for the electronics company. 

Roy Morgan chief executive Michele Levine told Daily Mail Australia even though it seems like the retail sector it’s failing – in reality a two-speed economy is in play. 

‘We have the very traditional consumers who are playing in the really commoditised space – just looking for cheaper prices,’ she said. 

‘Then we have the kind of antidote to that, which is ”premium consumers”, who are still willing to pay for things that they want and willing to keep buying again and again and again,’ she said.

Data shows around 40 per cent JB Hi fi customers are these premium consumers.

While they only represent about 24 per cent of the population they spend a much larger percentage on goods.  

Ms Levine said the company has managed to hook into this second type of shopper- and that’s why it continues to thrive.

‘JB Hi Fi has definitely got their product range right for this consumer group. But JB Hi Fi also has terrific policies where it’s really easy – if something goes wrong they give you your money back. It’s easy. It’s frictionless. When you look at a JB Hi Fi it looks chaotic – but it works,’ she said. 

She said while other retailers close their doors and companies enter voluntary administration, the company is playing to its strengths.

‘It’s doom and gloom if you’re in that traditional commoditised market if it’s all price driven, down down down. If you’re playing in the market you better have the cheapest price or you have real strife,’ she said. 

AMP Capital Chief Economist Shane Oliver told Daily Mail Australia one of the likely reasons for the company’s success is the business model. 

‘When you go in there it’s all jammed in, nothing like the old record stores or entertainment stores – where it’s all spread out – that make good use of their retail space,’ he said. 

He said the majority of that comes down to the way the physical stores work alongside online. 

‘A lot of retailers struggled with their online offering and that worked against them, you typically find that a retailer that has a strong online offering has managed to hang in there- and they feed off each other to some degree,’ he said.  

‘People who are happy to buy online might also be happy to shop in store as as well- and people might be happy to go in store and pick up the good from the store.’ 

Meanwhile JB Hi Fi Chief Executive Richard Murray said the strong growth was a result of the company’s sales during the festive season.  

‘We are pleased to deliver positive sales and strong earnings growth in the first half of FY20, with sales improving throughout the half and culminating in a strong Christmas quarter,’ he said in a note to the ASX.

‘In a competitive environment we remained focused on growing sales and market share in a sustainable manner whilst continuing to evolve the business.’

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