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EXCLUSIVE: Small CE & Appliance Distributors Facing Balance Sheet Probe

Suppliers to appliance and consumer electronics retailers, are set to face new balance sheet analysis as questions are raised about the ability of some distributors to fund the products they are offering into the Australian market.

Top of the list will be suppliers who are offering consignment stock using a known brand that has no links to the original brand other than via a licensed name relationship.
Retailers are also set to examine the length of time a distributor has been in business and their financial stability.

According to the CEO of Narta Michael Jackson who saw three of their members exit the market this month either through administration or a commercial decision to shut up shop due to poor sales balance sheet and financial stability analysis is critical in today’s market.

“We have unfortunately seen three of our members exit the market, they represented less than 1% of the Narta business” he said.

He added “The white goods market is down around 8% and our average selling price is up. We believe there is going to be some consolidation and we believe that there will be rationalisation with suppliers going forward.”

He added “We are well aware of the potential problems out there with smaller distributors and we are carefully evaluating who we do business with”.

A senior executive at one of the big three appliance and consumer electronics retailers told ChannelNews that the market is “tightening” and it was important to evaluate the performance of suppliers so that retailers are not left with warranty or service problems.

They said, “It’s not the big brands that have international parent Company support or is it distributors who have a history of operating in Australia for a long time and have excellent retailer relationships”.
It’s the smaller distributors that are offering house brand or products made by a Chinese or Taiwanese factory and have borrowed to bring the goods into Australia. When these goods don’t sell through or shipments are delayed outside of a promotion cycle the pressure starts to build up on the distributor who has obligations for warranty and service support” they said.

“Some major retailers who are already facing their own financial pressure are demanding extended payment terms and operate on a consignment stock model when this stock does not sell through the pressure is quickly back on the supplier or distributor” they added.

According to Jackson some distributors are already doing it tough “We believe that there will be some rationalisation with suppliers, the market is tougher, and distributors are already facing pressure” he said.

On Tuesday Richard Murray the CEO of JB Hi Fi is set to use the Macquarie equities conference to deliver the latest update for JB Hi Fi who have today moved into new offices at Southbank.
This move will see JB Hi Fi and The Good Guys operate from the same offices for the first time.

Recently Synex, Australia’s largest consumer and enterprise technology distribution Company underwent a clean out of accounts and stock held in their warehouses, with several small distributors who have “limited or small” turnover set to be given the boot. This is set to place further pressure on small distributors who face increased logistic costs claim observers.

Currently several small distributors who cannot afford their own warehousing and logistic operations use organisations such as Synex to warehouse appliances, TV’s and accessories as well as PC and other technology SKU’s bound for retailers such as Harvey Norman, JB Hi Fi as well as Target and NARTA Group members. The only problem is that their stock are often slow sellers and when stored for long periods of time deliver inefficency for their logistic partners.’’

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