COMMENT: Stock Supply Going To Retailers Who Play Ball With Brands
Harvey Norman shares have fallen 2.9% this afternoon, as investors question whether the next six months will be as good as the last six months when the big retailer was able to negotiate stock deals to their advantage.
According to insiders several big brands spanning both consumer electronics and appliances allocated stock to Harvey Norman at the expense of other retailers due to supply problems with several brands claiming that they are now back in control as opposed to retailers who in the past have held sway in negotiations with brands.
Senior executives at several brands claim that stock supply could be a” major problem” for at least the next 12 months, several have told ChannelNews that they are also anticipating price rises due to the rising cost of freight.
A Sales Director at a major CE brand said “What is coming into play now is the real value of retailer relationships with brands. The era of pay to play or pay for ranging is out the door as there is limited supply and brands are looking for margin to compensate for reduced sales”.
“This applies to all the big retailers who have pushed retail costs onto brands because big brands such as Microsoft, Oppo, Lenovo, Google and Samsung have been prepared to pay millions to get preferential positions and in store merchandising displays into stores at the expense of brands who don’t have the same marketing dollars to spend with retailers”.
“Right now, retailers such as Harvey Norman are taking margin over playing a discount game with other retailers, and this shows in their latest results. Payment for Isle ends, banner advertising are being bought into play with brands now giving stock to retailers where they are getting the best trading terms” they said.
Several suppliers have told ChannelNews that in a lot of cases supply is being limited to three key retailers in Australia Harvey Norman, The Good Guys and JB Hi Fi, with several smaller retailers now ranging stock they have not necessarily carried in the past due to supply constraints.
A former senior executive at a major retailer said “An FMCG approach to selling consumer electronics and appliances is not going to work in this market. Brands are in control; they are selling direct via Company web sites, and they are also picking which retailers gets the lions share of available stock”.
The lack of stock is also opening doors for brands who in the past have struggled to get ranging with stock availability in key categories now critical for retailers, who are anticipating a flood of people back to stores when COVID restrictions are lifted.
Earlier today Harvey Norman posted a 75.1 per cent rise in full-year net profit to $841.41m as revenue for the year rose 14.9 per cent to $9.721bn.
Harvey Normans Australian operation spanning both Company owned stores and franchisees posted a 12.8 per cent lift in sales to $6.95bn with like-for-like sales better by 12.9 per cent.
The Australian franchising business delivered a record profit result of $628.19m, an increase of $279.6m or 80.2 per cent, from $348.59m in the previous year.