Telstra Relying On JB Hi Fi & Boost For Growth, They Don’t Own Either
Should JB Hi Fi who are currently in contract renewal talks with Telstra, offer to take over the Telstra stores establishing a network of small format retail locations that could sell an expanded range of accessories.
The concept of small format stores is currently being rolled out by Best Buy in the USA, with their store format reducing the space for customers to browse by nearly half to focus more on getting digital orders out the door while selling attach accessories at the same time with some observers pointing out that the Telstra locations are “perfect for this “service driven style” retail store.
Currently Telstra is paying JB Hi Fi millions of dollars a year with both Boost and JB Hi Fi who are critical to Telstra’s business going forward currently in contract renewal talks with the big carrier.
Both organisations, are seen as the only growth engines that Telstra has, despite Telstra not owning either of the these businesses.
Boost financials reveal that they are contributing to the bulk of Telstra’s pre-paid business while JB Hi Fi is delivering the bulk of the handset attach deals.
ChannelNews has been told that at one stage a proposal was floated for JB Hi Fi to buy the Boost Mobile business.
The concept of JB Hi Fi taking over the Telstra stores which the carrier has struggled to run in the past would as one observer said “Bring in a retailer who knows how to run a retail business. Telstra have failed in the past and they will fail again. One option if Telstra insists on owning their retail stores would be to recruit former JB Hi Fi and Harvey Norman staff who actually know how to run a consumer electronics retail business”. they spoke.
Telstra CEO Andy Penn who is desperately trying to cut costs while trying to identify where his future growth will come from has failed to identify who will run the Telstra retail business going forward.
Another insider who worked for Telstra in a senior management role in the past said, “The Telstra shops have been a failure for years despite the carrier employing at a high cost, European and US retail experts to help them remodel and grow this side of their business”.
The big question now is whether Telstra walks away from JB Hi Fi and tries to go it alone with a new store network or whether Penn, tries to reduce the cost of doing business with JB Hi Fi which is costing Telstra more than $50M a year with Telstra believed to be paying between $300 to $400 per new customer making it a very expensive acquisition relationship.
This would leave the door open for JB Hi Fi to cut a deal with the TPG Vodafone operation who are currently ramping up their own mobile operation after the two carriers merged.
Currently communication carriers around the world are facing several major issues from turning off 2G and 3G networks as they expand their 5G and 4G wireless networks to the retailing of handsets to wholesale relationships with retailers such as Aldi Woolworths and Coles or utility operators such as AGL all organisations who have the ability to deliver customers.
Boost Mobile is already battling problems in the USA as wireless customers, many of them low income, will be forced to upgrade their phones or lose service after Dish Network which took over the Australian developed business recently.
T-Mobile US which operates the 3G network used by Boost customers, plans to decommission that technology on Jan. 1, 2022, according to a regulatory filing.
According to Bloomberg the wireless network serves “a majority” of the 9 million Boost Mobile customers, according to Dish, which is developing an advanced 5G network of its own and also offers satellite-TV service.
Boost Mobile Founder Peter Adderton told ChannelNews “Carriers in Australia will face the same problem. We predicted this one year ago as the cost of migrating customers to a new network is expensive and time consuming. What should happen is that the SEC and the US department of Justice should mandate that they keep the networks open until the customers have been migrated over. If not, it will be a disaster”, he said.
According to Adderton COVID-19 has shifted forward the “digital revolution forward by 5-7 years this has resulted in carriers and retailers seeing their digital plans made obsolete with them having to rethink their future in particular retail future as more people buy online.
Some see the move by Best Buy in the USA as a consumer electronics retail experiment as they tweak their business models to cope with the sharp uptick in e-commerce during the pandemic.
The new format, first tested late last year in four locations near Best Buy’s Minneapolis headquarters, provides additional space to prepare digital orders for pickup or delivery from the store.
Like JB Hi Fi, Best Buy’s online sales almost tripled last quarter, but it said demand could slow as COVID-19 issues are resolved and consumers return to stores.
Currently the company is cutting some jobs at its US retail locations.
The smaller sales floors will showcase fewer items. In a few locations, some of the additional floor space could be devoted to the retailer’s Geek Squad service desk.
Chief Executive Officer Corie Barry said in November that it was “imperative to move quickly.”
Best Buy temporarily closed almost all of its stores early in the pandemic, limiting customers to curb side pickup only. By the end of June, almost all of its stores were reopened.