Despite JB Hi-Fi’s 5.6% gain in sales to $6.5 billion, suppliers to the big CE and appliance retailer are concerned as to what the next six months are set to deliver.

The falling dollar and constant discounting by retailers are driving margins down and are among the concerns that distributors have, along with inflation pressures affecting consumers.

While Harvey Norman is reporting sales are of concern for the industry due to their problems with Harvey Norman Commercia, JB Hi-Fi numbers have delivered a lot of confidence among suppliers, according to several that ChannelNews has spoken. Many even unanimously agreed that if there is one retail management team who can deliver in difficult times, “It’s JB Hi-Fi and The Good Guys”, they claim.

Several suppliers claim that the switch on, switch off approach adopted by Harvey Norman, who has been suspending or cancelling deals, is having a negative effect on the industry.

“Their actions really hurt us when they cut off orders” claims a major supplier of appliances.

ChannelNews understands that the Premium Audio Company had to resort to discounting Klipsch Hio Fi stock recently after a previous order was cancelled.

JB Hi-Fi CEO Terry Smart acknowledges that “heightened uncertainty” is a big issue for the industry as rising interest rates play out in certain markets.

He claims that demand for essentials such as whitegoods or replacement appliances as well as smartphones are holding up.

On the downside, analysts are claiming that spending is in outright decline in Victoria and NSW where spending fell by 0.3% in Victoria over the past 12 months and by 0.2% in NSW, according to the Commonwealth Bank’s new household spending insights report.

The figures are based on an analysis of payments data from 7 million Commonwealth Bank customers, representing 30% of total spending nationwide.

Shortly after JB Hi-Fi results were announced yesterday the stock rallied $1.46, to be up 3%, to $48.67 in afternoon trading.

The Reserve Bank, which has been slashing rates in an effort to drive down inflation still has consumption growth to decline to get inflation, currently 6%, back to its 2.5% target range.

The only problem is that bankers do not want bank spending to fall so sharply that it triggers a recession.

The Commonwealth Bank data shows households are sacrificing some non-essential purchases such as clothes and appliances as a result of cost-of-living pressure, but they are still making space in their budget for experiences.

Spending on recreation was 7.1% higher in the year, due to strong growth in online travel bookings, commercial airlines, cruise lines, and travel agency bookings.

According to JB Hi-Fi management, travel, health care and mobile accessories are still growth categories.

Industry executives agree with Smart’s sentiment that his management team is well-placed to capture more shoppers’ dollars trading down in a tougher economic environment and expects sale events such as November’s Black Friday to resonate strongly with consumers.

Suppliers who were looking for margin relief claim that the JB Hi-Fi buying teams “Are among the toughest negotiators in the business” and that there’s little chance of margin sacrifices.

“If there is a dollar to be taken, they will find it” claims a major South Korean supplier.

When asked why suppliers like dealing with JB Hi-Fi several were unanimous in praising their buying process versus the likes of Harvey Norman.

A supplier of accessories said,” You know where you stand, unlike Harvey Norman where you have to convince a steering committee and then do a separate sell to franchisees, with JB Hi-Fi they make a quick decision, and you then know how many stores that a product will be ranged in”.

“The Harvey Norman model is broken especially when head office dictates as to the stock levels they can carry or issues an email stopping orders all together”.

“This model is broken and it’s playing right into the hands of JB Hi Fi management”.

Smart claims his management team is well-equipped to handle what is thrown at them by leveraging JB’s scale, keeping costs under control, and offering more targeted promotions, with plans to further mine the data of its 9 million customer databases.

Additionally, Smart told The Australian Financial Review that he is keeping a close eye on the younger customer who is after the latest tech but is also under pressure with rising rents and university fees.

“We saw strength in those categories that resonate with that group, mobile phones and gaming consoles continued to be strong, so we just keep a ‘watch out’ on that to see if they will eventually be impacted,” he said.

“What we’ve been seeing is a pattern of customers really responding to promotional activity, more so than in the past, and therefore we anticipate that the Black Friday events relative to the normal sales will be strong.”

One issue that is of concern to suppliers is warranty returns.

According to sources NARTA is currently working on a process to reduce the amount of returns coming back from retailers who claim that in some cases 95% of what is returned “have nothing wrong” with the product.