Markets: JB Hi-Fi's bricks and mortar bet

The retailer's focus on increasing its physical stores is bold given that online sales are where it's likely to see the most growth.

If the internet is the future of retail then JB Hi-Fi has a curious strategy. It is hedging its bets, at least in terms of the internet. The company expects to add 12 new stores that will sell predominately consumer electronics in its 2014 financial year. That will bring its store numbers to 214 in Australia and New Zealand. In addition, it wants to roll out 10 more stores selling white goods so that by June 30, 2014 it may have as many as 18 such stores. JB Hi-Fi sees itself as having as many as 50 white goods stores by June 2016.

The retailer's online sales were $65.9 million, just 2 per cent of the company’s total sales of $3.3 billion in 2013. But online sales rose 30 per cent compared to an overall sales increase in Australia of just 6.3 per cent and a 5.7 per cent sales decrease in New Zealand, with rising costs of doing business in both countries.

The popularity of JB Hi-Fi’s website is increasing with each passing week. Unique visitor traffic jumped 24 per cent to 1.15 million visitors a week. The company intends to launch a new site to garner yet more traffic and sales. That seems sensible. The size of JB Hi-Fi's online store is also sensible, with as many as 18 million music tracks and 250,000 books available for tablets and computers. The company says it also wants to add download streaming and rental services for consumers to rent films and/or TV shows.

JB Hi-Fi says the mixture of bricks and mortar with an improved online presence will hold the company in good stead. But consumers lead increasingly busy lives. Burning petrol and, more importantly, time during the week or weekend to visit a store to pick out a computer or washing machine is unattractive, or just not feasible for many families. Some families have two parents holding down jobs that increasingly demand more of their time, while also ferrying children between a multitude of after-school obligations.

Consumers are using their phones, tablets or computers to book and pay for things they want to buy. If Australian companies cannot give them what they want they are quite happy to look for such things abroad. Witness the popularity of increasing numbers of consumers buying clothes from European or US websites because they are cheaper and customer service is better than what consumers can get at home.

It may be wise for JB Hi-Fi to put more of an effort into the internet rather than the store front. The company expects sales growth in 2014 to be as much as 8 per cent. It could be even bigger if the potential of the internet was better exploited.

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