JB Hi-Fi’s base electronic operation has shown retailers around Australia that one consumer market looks set to outperform most other sectors – the youth market. Clothing is seeing a similar trend.
This is no surprise to parents and grandparents who are regularly parting with money as their children and grandchildren discover they need just one more piece of equipment to achieve their current objective. The fact mum and dad might be in the mortgage belt doesn’t stop peer pressure in the youth market, which can then swing to grandparents.
And when they go into JB Hi-Fi they often come out of the store with a better product and more equipment than they had planned. It's straight out of the Sidney Myer retail “hand book” with old retail techniques being modified for a younger customer base gaining affluence from parents, grandparents or because they take advantage of labour shortages or reliable government handouts.
Many of the former tech-savvy teenagers have become young adults and secured good jobs and become an even more valuable part of the JB Hi-Fi customer base. Suddenly, one of JB Hi-Fi’s growth markets has become fitness products. But to win in the youth arena requires a different approach to marketing
As my colleague Eric Johnston points out, JB Hi-Fi is boosting the youth and other consumer markets by applying technology to old fashion loyalty programs offering member discounts, access to coming sales and birthday greetings.
While JB Hi-Fi also indicates there has been a slowing in sales growth, it also explains some of the new mechanisms being used to attract the youth market. All retailers seeking to tap this market, including small and large clothing retailers, need to learn from JB Hi-Fi because the techniques are actually helping lift margins.
Sales of the traditional JB Hi-Fi business increased 9.1 per cent, but gross profit jumped by 14.5 per cent triggered by an increase of over one per cent in gross margin – an amazing illustration of the strength of the youth market
Obviously, the first essential is to have the products that the young customer base are after – sales of products in communications, audio accessories and computers were among the JB Hi-Fi growth markets.
The website was vital, but online sales actually declined by over one third to 15 per cent of total sales. Nevertheless, that still represents a 214 per cent increase on the pre-Covid 2019-20 level.
JB Hi-Fi instructions for all those who seek to expand their presence in the youth market, start with developing skilled, young staff.
To attract them in times of labour shortages requires a series of actions that were not necessary for past generations, who were more motivated by money.
And the techniques required to maintain and attract staff are actually very similar to those required to attract young customers.
JB Hi-Fi introduced a set of so-called “diversity and inclusion” initiatives to improve diversity in leadership. They donated money to causes that were relevant to employees. While these actions were specifically designed for staff, the word spread among the customers.
An issue that is of increasing importance among the children of the Baby Boomers is labour conditions in the supply chain. JB Hi-Fi is not alone in releasing a modern slavery statement outlining the progress the company is making to address the risk of modern slavery in “our operations and supply chain”.
One of the reasons why Australian inflation was depressed in recent years was that we imported low-priced goods. Like other retailers making antislavery statements including clothing retailers, JB Hi Fi’s cost of goods will rise and contribute to inflation.
Almost a “ticket to trade” with the youth market is a statement that says companies are working towards net-zero carbon emissions by 2030 including the gradual installation of solar power in stores.
Again like other companies making such claims JB Hi-Fi will face scrutiny, and it may need to speed up its solar panel installation rate.
The company will also be monitored in its claim to be lifting the management and recycling of waste and improving sustainable packaging. This is going to be a big issue across the retail sector, but it will be particularly important to those with a large younger customer bases.
While JB Hi-Fi was the standout, the group’s Good Guys operation also improved its margins.
In both operations, it is clear that the group was not overstocked like many of its competitors and the sales promotions and those on the floor created demand for the products that carry the best margins.
It should be remembered that in the half year to December 31, there was strong demand because the interest rates had not hit the pockets of most people, people were not travelling overseas so had spare money and there was a lot of spending catch up to do.
Many retail managements took advantage of the strong demand and the fact that prices were rising to add just a little to margin unless competitors were not over stocked.
In the next 12 months it will be tougher, but the secret to success will be to seek out consumer groups who are continuing to spend despite the problems. One such market maybe young people and technology, and JB Hi-Fi is in the pole position.
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