COMMENT Trainor Appointment At JB Hi Fi Could Put Pressure On Suppliers
Are suppliers to JB Hi Fi and The Good Guys set to get squeezed?
The appointment of Cameron Trainor as Managing Director of Merchandising is tipped to put pressure on suppliers to deliver the same margins to both JB Hi Fi and The Good Guys as well as their commercial divisions, currently each retailer negotiates separately resulting in some suppliers squeezing additional margin out of The Good Guys due in part to past relationships prior to JB Hi Fi buying the appliance retailer. The decision to move to a new management structure was decided on 3 months ago.
All staff working under Cameron Trainor are set to be moved to new offices in Chadstone a move that could save the Company between $30 and $40M according to sources.
To appoint Cameron Trainor into the key role of Managing Director of Merchandising, could see major vendors having to renegotiate their contracts with a consolidated margin across both retailers it could also result in separate promotions or joint promotions across brands going forward.
Trainor is a highly experienced executive and could well be the first senior manager to be given a key role across both The Good Guys and JB Hi Fi outside of Group CEO Richard Murray. Under his management it’s expected that two brand managers for JB Hi Fi and The Good Guys will be appointed to manage each individual retailer.
While sales are up at JB Hi Fi, margins are being squeezed due in part to discounting by the likes of Amazon and Kogan and retailers such as Aldi stripping house brand market share in the appliance market.
At a buying level JB Hi Fi is moving to sell more branded products across both of their retailers and it is becoming abundantly clear that they must get both their buying and merchandising strategy right if they have any chance of taking on Amazon which is why they have parachuted Trainor into the critical role of Managing Director of merchandising.
In recent months several major brands such as Sonos, Fitbit Sony, Sennheiser, Samsung and Apple have moved to crank up their direct sell operations.
On Friday Samsung sent out an EDM to thousands of customers offering a $300 discount to buy the new Note 9 direct.
At the same time Sonos is blatantly marketing their products direct to consumers. A person who has registered a new JB Hi Fi purchased Sonos product is being promoted to buy their next product from Sonos direct.
In Europe and the USA retailers are now squeezing these direct sellers for better margins if they are to stay on the shelves of retailers with some tipping that a major brand who has been direct selling could find themselves dropped from shelves of retailers in Australia.
Some brands who have refused to offer lower margins to The Good Guy Vs Harvey Norman could well also themselves dropped from the mass retailers who is currently having “Meaningful” conversations with several premium brands.
Apart from the cost savings, the appointment of a single focused management team makes sense, especially as several organisations including both online and bricks and mortar are targeting JB Hi Fi and The Good Guys.
Last week Kogan announced a push into appliances however many are tipping that this strategy will fail.
At the Good Guys CEO Terry Smart believes that European appliances will deliver him both growth and improved margins he has grown market share by 67% at the same time EBIT margins have dropped 79bps from 3.69% in FY17 to 2.90%.
This is due in part to Smart moving to get rid of dead stock and house brands that were costing the Company. Among the house brands currently being run out and then dropped are Lakeland and Linden TV’s.
In their place will be brands such as Philips TV’s and Hitachi.
At JB Hi Fi the Soniq brand is struggling with the once exclusive JB Hi Fi house brand now being sold on Catch of The Day.
To put one executive in charge of negotiations with suppliers not only makes sense it puts pressure on suppliers to deliver “improved” margins to a retailer that has proven that they can deliver sales growth.