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Harvey Norman Moves To “Spoiler” Strategy After JB Hi Fi, The Good Guys Deal

Soon after the JB Hi Fi, The Good Guys deal been announced suppliers were getting calls from Harvey Norman executives.

One supplier who is currently under NDA with The Good Guys told ChannelNews that Harvey Norman executives were probing as to what stock The Good Guys would be ranging running into the peak Christmas New Year period.

And at last night’s steering committee dinner for PC manufacturers the big discussion was “the JB Hi-Fi deal”.

Privately Harvey Norman executive are concerned that the merging of The Good Guys and JB Hi Fi could impact the big retailer going forward.

A senior Harvey Norman franchisee said “what JB Hi Fi management will deliver is stock control efficiencies and due to the restructure of The Good Guys into one single entity, this will allow them to negotiate with suppliers and quickly get stock into their network. Harvey Norman still has a problem with their steering committee model and the allocation of stock to stores”.

“What we are being told is that we have to take advantage of the transition period and the potential that key people from The Good Guys will either leave or be poached I know that Harvey Norman has already approached some The Good Guys management team. Internally Harvey Norman management believe that it will only be time before JB Hi Fi buyers take over the buying process and that only a small number the current management team at The Good Guys will be retained, they have done this in the past in both Australia and New Zealand.”

The source also claimed that the loss of key management due to the buyback of stores by The Good Guys could be a factor that will impact The Good Guys going forward, however several analysts that ChannelNews has spoken to claim that JB Hi Fi has not only the management skills but were well aware of the issue prior to the acquisition.

Good Guys chief executive Michael Ford has committed to stay on in his role as CEO of The Good Guys.

Yesterday after the lifting of a trading halt JB Hi Fi shares rose with the deal winning a vote of confidence from shareholders who claim that the deal will boost sales of The Good Guys.

Legg Mason Asset Management chief investment officer Reece Birtles told the AFR “I think synergies is not the big issue – the real issue is whether JB Hi-Fi can improve the performance of The Good Guys over time,” said Mr Birtles.

“The opportunity of running the business really well is a much bigger opportunity than $15 million or $20 million or $30 million in synergies,” he said.

After extensive due diligence, which included shadow shopping customers at The Good Guys stores, Mr Birtles believes JB Hi-Fi already has plans in place to boost sales per square metre through tactics, such as upselling and encouraging shoppers to buy more than one product.

“We think it looks like a very good acquisition for JB Hi-Fi,” he said. “JB Hi-Fi is an excellent retailer in terms of getting execution right and knowing how to compete in different markets and we think they can bring their skill set to a new category in home appliances.” he said.

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