Cellnet has disbanded its audio-visual (AV) importing division and dumped plans for its own consumer brand as it tries to improve the performance of its traditional IT and telco products. The news comes on the back of a management restructure.
Cellnet general manager of retail, Peter George, said the decision to close the division was prompted by declining hardware margins as well as stiff competition. Three staff members hired for the division, including general manager, Gary Newman, had been made redundant.
The distributor announced in February that it had established an AV import division to source, brand and market its own range of consumer electronics goods. The unit was expected to focus on more traditional brown goods such as TVs, DVD recorders and home theatre hardware.
"We cited the fact that trading was difficult: the margins are low and there is a lot of competing product," George said. "We had a good look at it, and may do so again in the future, but there were a few things which made us decide not to pursue that area."
The main contributing factor was the distributor's overall falling profits, he said. Last month, Cellnet issued a profit warning to the ASX, revising its estimates of between $7.3 million and $7.5 million down to $6.1 million. At the time, managing director, Adam Davenport, put the fall down to a bad six months in the retail market as well as slow sales of its higher margin products.
"Our sales have gone up, but profitability has gone backwards," George explained. "A significant part of our business is in the IT and telco space. But it's not making as much money as we'd like. We want to firm it up and get it into better shape."
Despite closing the door on an AV subsidiary, Cellnet would retain its own brand of accessories and carry similar items from third-party vendors, such as Sony headphones, he said.
The main focus now was to drive cross-selling opportunities and existing product sales, George said. To help with the charge, Cellnet has restructured its management team around customer segments, rather than specific product categories.
George, who was previously accessory business manager, has been appointed general manager for retail.
At the other end, IT Wholesale general manager, Darryl Tucker, has become the general manager for the corporate division. His responsibilities include Cellnet's technology distribution houses, IT Wholesale and Cassa.
Cellnet has also hired a general manager to cover its supply chain.
"We're trying to knock down walls and have people see us as a single distributor with telco and IT products," George said.
While it was still fine-tuning the details, Tucker said it would combine Cassa and IT Wholesale together as part of the focus on cross-selling all products to customers.
"There's an opportunity for us to go to our major customers to tell them that they can buy everything now," he said. "Before we were sitting in silos." The retail division would promote products suited to the retail market, such as mobile phones, IT and AV accessories.
"We want to look at it from customer groups, rather than distributor groups, and focus on customers, not products," he said. "We have about 7000 products on our stock list. We should be getting a lot more growth out of those."
The new structure could also see Cellnet drop several product lines in favour of those which are performing best.
"Part of this is about putting more effort into key products that are going well for us," he said. "We may focus back on products and maintain those that bring in most of our revenue."
While IT Wholesale and Cassa still exist, George said plans were well underway to develop a brand strategy for the whole group. He would not specify any timeframe on when the strategy would be launched.
"We won't ignore their [IT Wholesale or Cassa's] customers," he said.
"But we haven't done as much as we'd like to sell their products across other sectors. We want to make it easier for customers."