COMMENT: JB Hi Fi CEO Supports A Merger
Despite a 4.7% increase in sales JB Hi Fi is still suffering from margin pressure due in part to the growth of online operators and rising costs which under a Bill Shorten Labor Government could get worse.
The big question now is whether both State and Federal Governments need to review the pressure that retailers are facing in Australia.
While JB Hi Fi has delivered an excellent result with online sales growing 21% the same cannot be said for David Jones, Roger David who was placed into administration late last year or the likes of Myer or the thousands of smaller retailers who facing cost pressures due in part to overseas online operators being able to employ cheap labour and operate in a Country where the cost of doing business is cheap.
Richard Murray the CEO of JB Hi Fi wants retailers both large and small to be better represented and is now agitating for the merger of the associations representing mass retailers. In their latest results EBITDA margin at the big CE retailers was down 1 basic point, this is downward pressure that all bricks and mortar retailers in Australia are facing. Its called profitability.
Murray whose Company is set to report today is being backed in his push by Chemist Warehouse founder Jack Gance, both are successful retail CEO’s.
Currently the Australian Retailers Association, is in early talks to merge with the National Retail Association to form a stronger voice for the industry. The move comes as online operator Amazon becomes a major threat to the viability of local retailers as they crank up their presence in Australia.
Recently Amazon re-opened up their US web site to Australian consumers a move that now allows them to ship goods into Australia avoiding high local labour and retail costs. This is creating margin pressure for local retailers who are being forced to match prices while absorbing significantly higher operating costs.
One of the major concerns is that a Shorten led Labor government could bring back penalty rates if it wins power later this year and while calling for higher pay for employees takes no action against online operators who are processing orders from overseas.
Retailers also want longer and better trading hours something which the retail unions in Australia are against. In the USA retailers stay open till 10.00pm with families going to shopping malls after work to eat and then shop. Often these malls don’t open till 12 noon.
Retailers are also concerned about the cost of doing business in Australia while also trying to maintain a level playing field against offshore players.
ChannelNews understands that external consultants are currently working to put together a framework for an ARA and NRA merger.
The merger proposal is being advised by Mark Gell, co-founder and partner at Reputation Edge, and the man who helped to amalgamate the Institute of Chartered Accountants in Australia and New Zealand.
The retailers involved are keen to ensure the merger is seen to be a win for smaller retailers and not just the biggest chains. It is hoped the merger will give small and medium-sized retail enterprises a much stronger voice in Canberra as well as in the states and territories.
A merger would also bring together tens of thousands of shop- owners, retailers and employers in what the Australian said earlier this year can be a fractious sector.