Home > Latest News > Comment: Telstra Store Take Back Is A Recipe For Disaster, What Will Happen To JB Hi Fi Relationship?

Comment: Telstra Store Take Back Is A Recipe For Disaster, What Will Happen To JB Hi Fi Relationship?

The move by Telstra to take back control of their own retail stores smacks of desperation especially as the big carrier has had several cracks at trying to get consumers to take their stores seriously and are struggling to even sell their NBN packages.

In the past they have spent millions on makeovers, internal systems, and marketing only for consumers to flock to JB Hi Fi who happens to be their biggest retail partner only to see handset sales decline across their own store and franchised network.

Telstra even flew in US retail experts to repackage their existing stores some years ago, this cost millions and the “Experience” Centre exercise failed to bring customers back to Telstra stores.

It was only six months ago that Telstra was flicking their Company owned stores such as Mosman NSW over to a franchise now they want to take back control of this store.

At the same time that they were announcing their store takeback plan Telstra reported a double-digit decline in earnings for the December half, dragged down by payments to the national broadband network and an estimated $170 million hit from the COVID-19 pandemic.

Now they are desperately hoping that their battered mobile division would return to growth by taking control of their retail stores.

The telco giant’s revenue fell 10.4 per cent to $12 billion in the half year to December 31, while net profit dipped by 2.2 per cent to $1.1 billion as chief executive Andrew Penn who is seen as more accountant than entrepreneur as he grapples with trying to generate revenue for the big carrier who also has an image problem when it comes to service.

Earlier today shares in Telstra franchisee store partner Vita Group fell 22% at the opening of the share market, this is a group who have had their fair share of problems working with Telstra.

In 2019 after an upgrade of Telstra’s Siebel customer system to Salesforce dealers such as Vita Group were left struggling to transact contracts and were not able to update existing customers, the issue lasted for months.

New Samsung Display at JB Hi Fi store

According to dealers who contacted ChannelNews the problem “has impacted their abilities to do business at a store level”.

Recently Telstra had major problems supplying their own stores with Apple’s iPhone 12 after they took planning away from Brightstar. This led to several stores being without stock with franchisees blaming Telstra for the “stuff up”.

The move by Telstra to take back control comes as arch-rival Optus comes as the Singapore owned carrier works with JB Hi Fi arch-rival Harvey Norman to grow their smartphone operation.

ChannelNews understands that several smartphone brands especially in the value and affordable premium market have been approach to supply Harvey Norman with a new range of devices in 2021.

The single biggest issue that has not been addressed by Telstra is the financial model and the value proposition of taking back control of their own retail network.

Some say the move could cost Telstra millions.

Others have told ChannelNews that if Telstra starts stripping share away from JB Hi Fi smartphone sales the door would be open for JB Hi Fi to cut a deal with the TPG Vodafone operation who are looking to grow their smartphone sales in Australia.

For the Telstra stores to be successful they have to sell accessories from headphones to speakers to network gear to a host of products that JB Hi Fi are already selling to smartphone customer and this should raise serious concerns for JB Hi Fi management.

At the same time the family run franchise stores have done a better job of selling attach accessories than Telstra staff according to suppliers.

The latest move by Telstra is not the first time that the big carrier has had to negotiate with Vita Group.

Back in 2017 the Company founder and CEO Maxine Horne saw her stake in the company drop in value by $17 million in a single day.

This was after ChannelNews revealed that the business was involved in ongoing renegotiation with Telstra.

The discussion saw Vita Group shares fall 30.5% to $1.55 at close.

Horne, who at the time held 25 million shares, received $92 million in 2016 for selling the same number of shares.

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