Can JB Hi-Fi maintain its record sales amid cost of living challenges?

e Good Guys – reported an 8.6 per cent increase to its group wide sales to $5.3 billion over the December half. JB Hi-Fi’s sales grew by 9.1 per cent and 16.1 per cent in Australia and New Zealand respectively – to $3.6 billion and NZ$160.6 million – while its tax paid profit grew by 14.6 per cent, to almost $330 million, in the December half. Lecturer in marketing at Swinburne Business School, Dr Jessica Pallant told Inside Retail that interpreting sales results is difficult, as this growth might be compared to pandemic affected years, and might actually reflect a return to where the business might have been otherwise. In general, she believes the brand has set itself up well by investing in omnichannel strategies, and integrating its online and in-store experience. She contends that – as other retailers struggled with online delivery times – JB Hi-Fi’s click and collect and in-store options have been attractive to customers. Pallant added that electronics and household goods are likely to perform well during promotional and discount periods like Boxing Day and Black Friday – as these categories are traditionally hot ticket items –and that JB Hi-Fi is often top of mind for many customers when it comes to sale events  But, she suggested that short term gains don’t necessarily result in long term loyalty. “It will be interesting to see if JB Hi-Fi can maintain growth, or if they have shifted consumer spending to these peak sales periods,” Dr Pallant told Inside Retail. Meanwhile, professor of marketing and consumer behaviour at Macquarie University Jana Bowden noted that demand for technology products is set to continue growing throughout 2023.  She explained that continuing pandemic trends, such as work-from-home categories, will boost demand for technology products, and added that categories such as video, audio and handheld gaming are also experiencing an uptick as consumers continue to invest in and upgrade their homes.   Further, she said there is burgeoning interest in novel technology products and services such as augmented reality, virtual reality and AI products.  But, she questioned the extent to which customers will spend the savings accumulated throughout the pandemic on technology lifestyle items – particularly when confronted with a looming cash crunch. “Consumers so far have been resilient and have splurged their way through the festive season, [but] just how resilient they will be in 2023 is yet to be seen,” Bowden told Inside Retail.  “There have already been some early warning signs that consumers are tightening their belts with news of increased mortgage rate rises and worsening inflationary conditions.  “The biggest crack in consumer resilience may be yet to come in the negative wealth effect from falling house prices. Typically this has the biggest impact on consumer spend when it comes to outlay on big ticket items like TVs, furniture and top end goods.”   A conundrum for retail Consumer confidence is running at the recessionary levels of the early 1990s, with the majority of consumers confessing that now isn’t the time to buy a major household item. With pessimism surrounding spending conditions, Bowden believes that it’s especially important for retailers to deliver on value. The effectiveness of heavy promotional activity and discounting has been demonstrated by Myer and JB Hi-Fi’s record sales toward the end of 2022, and will become more important over the coming year as consumers look to stretch their dollars further, amid cost of living pressures. Bowden points to YouGov research – which indicates that 77 per cent of customers see price as a primary attribute when making a purchase – and highlights that this is not consistent across all demographics. For customers aged between 17-24, sustainability, device integration and design features are the most significant factors when making a purchase. For customers over 55 years old, ease of use, and brand prominence and reputation, are front of mind. Bowden believes that this can present a conundrum for retailers, especially when sustainability can be at odds with lower price. But, she said that JB Hi-Fi has a reputation for delivering value for money with strong service support. “The brand has also effectively delivered on its multichannel strategy capturing share in-store as consumer preferences changed away from online,” she said. Customers have the jitters According to Pallant, JB Hi-Fi effectively utilised targeted marketing over Black Friday and Boxing Day, which helped to educate and guide customers who were looking to make the most of these deals.  She believes that this type of messaging is especially important amid sales events, when customers are unsure as to whether the present deal will be the same, better or worse than what’s offered in the future. “The strategies JB Hi-Fi are using, [such as] a countdown and not starting early, are helping make this more transparent for consumers,” Pallant said. She added that it will be interesting to see whether demand continues throughout the year,  or if consumers will only look to make purchases during key sales periods. Bowden noted that customers currently have the jitters and are feeling uncertain about the year ahead. This, she said, will impact how customers use their disposable income. “What we know from previous periods of instability and indeed market fear is that consumers turn to trusted, value-driven brands and retailers,” Bowden said. “This should serve JB Hi-Fi well as we head into an uncertain 2023.”