Retailers Taking a Hit in Outdated Price Haggling Mentality

Loren W
Melbourne Australia

Is JB Hi-Fi Market Recovery Short Sighted?

I have to admit I read with some interest a recent article (worth a read) by Roger Montgomery, founder of Montgomery Investment, in the weekend Australian. His observation on JB Hi-Fi and the concealment of a more complex reality, though I admit I agree with, I believe missed a few key points, though some were touched on.

Firstly, the US and UK market and the majority of the online market unlike the Australian brick and mortar market, is not built on haggling.  This means that almost anyone walking into JB and making even the smallest of purchases can haggle their way to a lower price. This is starting to show its age. I cannot walk into an Apple store and haggle a price, though they also are seeing the light and offering to price match against the likes of JB Hi-Fi and others, adding to the market competition.

Price haggling in this way as JB and others do is a dying trend but one that falsifies Roberts own perspective on JB being higher than the US market on list price alone. The point you missed is that because the perception in some cases and reality in others and the advent of online business means a haggled price though the norm does not help with perception regardless. Consumers are more market research savvy than ever, and an item that is $400 at JB say a new tablet, might be 20% less online. For many consumers, it is not worth trying to haggle when you can buy even from the US and have an item delivered 10-15% cheaper (even though JB would might have matched it if asked). In regards, to competition Apple recently announced they would price match other retailers on their own products, making the competition even hotter, there. Finally there is the dreaded Moore’s Law impact which observes the speed the market changes due to the speed the underlying technology improves. This means with new technology coming out so fast it makes the previous items outdated faster than ever, that the level of inventory required (and a risk) and resulting impact on profits is not surprising going to take a massive hit.  In the last 3 weeks alone we have seen a new Operating System for Microsoft, and Apple; a new iPhone beater for Samsung, a new office suite for Microsoft, a new tablet by Google all being released and a rumored new iPod, iPad, and iPhone (and Samsung again) in the next 3 weeks.  This trend and speed to market has resulted in many of the JB Hi-Fi’s peers in the US and UK going bump and many others going online only to reduce their product overheads. Pricing is a mindset; when was the last time you walked into Coles and negotiated over a bottle of milk. This duality of looking for a better price online and not knowing for sure what the lowest price is in your own retailer is silly at best, or market suicide, and the times have changed.

I recently had a chat with an area sales rep for Canon Camera Australia, that I cornered when I found the latest camera the 7D, had an RRP of $2100 in Australia, $1700 in the US and $1200 in Hong Kong and a cost to JB for $1600 but I was able to purchase it from an importer across the street from Canon HQ in Victoria for $1300, with the full warranty supported globally by Canon (cheaper if you buy online direct) Previously some folks would not have supported the gray import warranty. Canon had a different view and does not use the ‘Gray import’ label instead opting for a ‘Parallel import’ label. Their view is simple and one that folks like JB have to be worried about. Canon’s view was that though the retailer in Australia might not like it, a market savvy consumer should not be punished for their purchase by not having their warranty supported. It was highlighted that this trend is growing and folks like JB Hi-Fi will not be the only ones impacted.

Instead of price deflation what Australia needs is honest price reality, so the lowest price is always offered. Expect to see many other stores impacted in the same way.