yARN: JB Hi-Fi has kickstarted the next retail evolution

But what will the local channel think about it?

It's funny, when you think about it, that it took this long for a major retailer to start selling grey market products to local consumers. After all, in the Internet age, the entire world is your local storefront.

Last week, JB Hi-Fi announced that it has begun selling so-called "grey import" products direct to consumers, following the lead of smaller players like Kogan. It's a move that has long been anticipated given the growing number of customers who buy products online to save money. With the recent strength of the Australian dollar, it's unsurprising that local retailers are beginning to feel the effects of this online armada of shoppers.

Essentially, these products are purchased directly from overseas resellers at a heavily discounted price, and sold at a price significantly cheaper than the local product. While there are many reasons for this price difference, the biggest is the fact that there are fewer people taking their slice of the money from the product's sale. There's also no GST paid on products bought from overseas worth less than $1000.

Given the fact that people have been doing this for years - long before Gerry Harvey started complaining about it, anyway - you may wonder why the JB Hi-Fi move is so significant. The reason is simple - JB traditionally deals with the local arms of these international corporations, who are all losing out with every sale JB makes using "grey market" products. While we don't exactly know how these companies are going to react to JB's move in the short term, the only option for them in the long term is to look at adjusting their pricing model.

Consumers are getting more and more savvy when it comes to getting the best value for their money. The only thing a locally imported product offers the consumer is a proper, local warranty. And given that JB Hi-Fi is offering a warranty for all direct import products sold (which it sort of has to, thanks to the Australian Consumer Law Act), there's very little difference to the end user if they choose to save a significant chunk of change by buying the cheap version, outside of some minor localisation tweaks.

This means that the traditional retail model is going to need to evolve. Because whether they like it or not, the arrival of the Internet and online shopping has heralded the start of a new age of retail, and traditional giants are going to have to adapt, like JB, or die…

CHANNEL CHOICE: Vote Now for your favourite in the three categories: Vendor, Distributor and Reseller. Voting closes August 8.

Tags JB H--Fietail Australian Consumer Law Actkoganretail

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1 Comment

Pete

1

You are wrong when you suggest more people have a finger in the pie when JB sell a camera through Australian sources. They buy it direct from Canon.
With the direct import model they are probably buying from a drop shipping firm who would buy it from a Canon distributer who would buy it from Canon.
So the single critical issue is that Canon adjust their pricing for different areas around the world and they charge retailers more for cameras in Australia than say Hong Kong and the USA.
If what JB are doing forces Canon and Nikon towards world wide pricing parity, well that will be great for retailers in Australia!

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