Dying consumer lands on JB HiFi

The consumer zombie is shuffling in to eat the brains of superstar retail now. AFR:

The unravelling of some big retailers with large physical store networks such as Myer and vacuum cleaner retailer Godfreys is accelerating. Their old-school approach and big-store footprint around Australia leaves them much more vulnerable to the seismic shifts under way as more shoppers gravitate to buying goods online.

They have too many bricks and mortar stores on long-term leases not generating sufficient returns, and underwhelming online operations aren’t offsetting the lower levels of foot traffic from the physical outlets.

Yet the big-picture changes in consumer behaviour in retail heartland are having an uneven impact. There are retailers such as electronics and appliances group JB Hi-Fi with a large store footprint, which are still making solid headway. (Yet, even after posting solid profit growth on Monday, JB Hi-Fi shares were hammered as it revealed it would have to cut prices and spend more strengthening its online offer).

…It’s an issue being tackled with urgency by boards and senior executives in retail across the country as they grapple with how to optimise their retail footprint, shut down poorly performing stores with the least possible financial pain, and set up nimble distribution centres to service increasing online sales.

KordaMentha principal Mark Korda says it is a big area of focus across a range of industries. “People are grappling with fixed cost bases including long-term contracts and disrupted revenue streams. That is the same for retail,” Korda says.

Ferrier Hodgson’s retail practice leader James Stewart sums it up. “Getting the mix right is really difficult,” he says.

Fund managers with investments in big shopping landlords are uneasy. “There is a real tension there,” Stewart says.

It is obvious in some cases that rents are too high for some retail stores to be viable in the new landscape, but a shopping centre owner taking a big haircut on rental income is often unpalatable.

JBH versus MYR:

It’s rents, it’s online, it’s competition. Whatever you do don’t mention the consumer for she is dead.

Comments

  1. Paul-Henri Spaak

    The dichotomy of a booming, or at least performing well, economy and the reality of the impoverished population as income inequality explodes can be seen in the consequences of Britains £50 Billion increase in rents culminating in Brexit.

    The natural tendencies of all markets is to monopolies. Thats why the board game is called that – its a very simple yet profound philosophical lesson on economics – monopoly.

    And the tendency in monopolization has its most common revelation in property (again the board game) and Britain has been one of the best historical exemplars in the power of the ownership of land, the landed gentry and all its deeply perverse consequences – serfdom in all its glory.

    And here we are again today – hurtling back towards those with nothing, living hand to mouth, subsistence living at the whim of our land Lords, barely making rent and enough to eat with little left over for anything else.

    And the people will endure it. For it is their families and daily survival which occupies their mind and consumes all their time with little spare to consider the politics of revolution.

    Until of course they snap – and in the dead of night they drag the bastards from their beds and burn them on the pyre with flames reflected in their eyes against the dark night to shrieking howls of justice. Until their minds can bare the bilious hatred with which their masters not merely exploiting them but sadistically torturing them and denigrating their meager scratchings in the soil – humiliating them not as fellow humans but beggars to be toyed with, sub humans they would prefer never to have to see – forcing them to use back doors and building fences and bollards to keep the vermin from their minds. Then, when the indignity can be borne no more for the hole can go no deeper – then they will climb out of the deepest, darkest depths of despair and line their abusers up on the scaffolding and watch their severed heads pile up and fill that bloody hole.

    That is the history of the endless, unrelenting cycles power and oppression. The waxing and waning throughout millennia – from Greek Tyrants Chinese war lords, despotic banana dictators or even African tribal chiefs – when you govern and rule in your own interests eventually you will be taken out into the jungle and fed to the lions.

    It is the unstoppable juggernaut of destiny which simply can not be diverted and infinitely cycles.

    • until the british aristocracy discovered a way to continue their oppression while convincing the oppressed that they were in control of their own destiny and preventing them feeling the need to uprise. And it has proven so effective that it has spread throughout the world and continues to allow the elites to maintain society as they see fit with the plebs taken along for a ride obliviously. Long live Elective Dictatorship aka modern democracy.

    • You mean…… like this?

      Episode 49

      Disclaimer: All characters and events in this Episode -–even those based on real people–-are entirely fictional. All celebrity voices are impersonated…..poorly. The following Episode contains coarse language and due to its content it should not be viewed by anyone.

      Not so long ago in a party room in a galaxy not so far away……

      Leader A: Damn, cracks started appearing in our economy. They are too visible to ordinary punters for us to keep painting a rosy picture. What can we do about it?

      Leader B: It may be about time that we stop painting a rosy picture. A shock therapy, you know.

      Leader C: But then again, that bloke who talked about a recession we had to have quickly went out of business. He totally misread the electorate.

      Leader B: As a pollie, he must have known better. He should have said what people wanted to hear not what they needed to. We shouldn’t repeat his mistakes.

      Leader A: Stop whining. The question is what we can do now to climb out of the deep shit we are in. Is there any chance that the electorate will buy the drivel that financial engineering is the golden ticket that will make the Australian dream come true?

      Leader B: With a little luck, the electorate might start believing that free lunch does exist after all in the new millennium. A country does not need an industrial base to prosper in the new era – all it will need is a financial engineering hub. The financial factories there will produce currencies that can be used to buy whatever one will need, from food to shelter.

      Leader C: The Australian dream means that time will only get better with time and life easier. Those lucky people who happen to live at the turn of the millennium are the chosen ones and therefore *deserve* to benefit from the new paradigm. I think the electorate will buy it.

      Leader A: Any chance that the scheme unravels quickly?

      Leader B: Even if it did, we can make sure that it won’t come back to bite us. According to the latest research, if anything goes wrong there is a good chance that the electorate will actually start liking the sinking feeling. The research also found that skipping a meal here and there would be a good start for them to get accustomed to the new normal. That will keep them busy, living hand to mouth.

      Leader C: That reminded me of what I heard last week. Apparently, one of our unis will soon start offering a new course that is designed to train their students with new skill sets. The new course will enable the students scavenge rubbish dumps more efficiently than the way it is being done, so their graduates will be better equipped than their peers in the new era.

      Leader A: It is deeply satisfying to see our unis taking initiatives to prepare our population adapt to changing social environment in a timely manner. It is a testament that our demand-driven tertiary education system works. Our former PM must be proud.

      • I see in question time yesterday there was a dorothy dixer about terrorism in Australia.

        That old chestnut is the gift that keeps on givin.

    • PH, the one thing, above all else, that is contributing to this development is the modern-day monetary system.

      In short, the wealthy borrow money that has been conjured into thin air by the banking system and use this magic ‘money’ to acquire real assets. If you can take ‘fresh air’ and exchange it for assets you are clearly going to end up one of the winners, while those without access to credit end up losing out because the cost of creating money out of thin air manifests itself in inflation, which is simply a tax on those holding cash or earning a fixed income. The more inflation the more wealthy the owners of assets become while the salaried classes get bent over and rooted hard. And so it continues.

      In order for this iniquity to be addressed, the money that ordinary people earn needs to retain its purchasing power and the only way that can happen is via the adoption of a sound money system. The chances of this happening voluntarily are next to zero as powerful vested interests stand to lose too much and Govts will no longer be able to afford expensive militaries and expansive welfare schemes. And genuinely free economies don’t tend naturally toward monopolies like you think — the monopolies arise from powerful corporate entities shoring up competitive positions with the help of a compliant Govt. Without Govt monopolies couldn’t exist.

    • If rent is the issue, why do they have outlets in the CBD?

      They have 5 outlets in postcode 3000! And if rent is the issue, should not their products be cheaper in Dandenong?

      Their CBD staff should say “you can take this for $50 or we can deliver it to your house in Berwick tonight for $45”.

  2. The business press has it a*se about. The causes for retail pain are something like:

    1. High rents
    2. Cash strapped consumer

    10. Online

    Online is still a very small segment of the market.

    BUT, bricks and mortar are forcing people to online due to high prices caused by their high rent (and other overheads like penalty rates).

    The adjustment will come but it will be slow because landlords are greedy and quite dense.

    • TailorTrashMEMBER

      Add to it that Westfield shopping centres are now totally unpleasant places .
      Once they had aisles you could walk with relative ease. Now the aisles have been sold to increase rental space/yield to sushi bars, more coffee shops , pop up shops selling recliner chairs,Chinese imports of various types and even appartments .
      In some centres you are lucky to have room in the aisles to pass two shopping trollies .
      This has to be driving people away from these places as they are certainly not providing a pleasant shopping experience .

      • Don’t forget parking! Man I hate having to find a parking spot in some of these hell holes…the green lights help. Just…

    • >The adjustment will come but it will be slow because landlords are greedy and quite dense.

      And so, henceforth they shall forever be referred to as the “pricks and Mordor” class, to keep with the reality of dealing with them or going into one of their lairs.

  3. “Whatever you do don’t mention the consumer for she is dead.”

    As someone else here mentioned a few weeks ago the effect of consumers spending less is mitigated when the total population is increasing due to rampant immigration

  4. JB Hifi stores look pretty low rent but they do the business – a lot of stock crammed in on the floor space and prices are not bad – if anyone is going to survive I’d say they’d be up there, at least until free delivery online kicks in (and if they can match that they might still hang in there).

  5. Diogenes the CynicMEMBER

    Amazon’s delivery charges have decreased markedly (halved on my last order) since they opened their warehouse in Australia. Makes them even more compelling than the high rent/high cost shopping centre model of our retailers.

  6. Ferrier Hodgson’s retail practice leader James Stewart sums it up. “Getting the mix right is really difficult,”

    Here is an interesting meme. Financial people believe that they are dealing with a simple, linear system which can produce any desired outcome by correctly “blending” components. Luci Ellis up above is cut from the same cloth. This is 19th century steampunk thinking in the extreme. Once you start recognising these inane little thought bubbles it is overwhelming. Our economy is run by people barely a rung above poo-flinging monkeys in a zoo.

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