JB Hi-Fi to negotiate with suppliers as comparable store sales fall 3.5%

Retail giant JB Hi-Fi has delivered a warning to its suppliers that it may be forced to request lower prices as it attempts to remain competitive in the lead-up to Christmas, with comparable store sales falling 3.5% in the September quarter.

The warning comes alongside an announcement from the Reject Shop that the discount chain had been slammed with higher premiums following the devastating Queensland floods.

The call on suppliers to lower costs comes just weeks after Target made a similar request, with the discount chain negotiating with some of its major suppliers to lock in key discounts.

JB Hi-Fi chief executive Terry Smart was contacted by SmartCompany this morning, but was not available prior to publication.

At the company’s annual general meeting, chairman Patrick Elliott reportedly stated that the dollar is affecting some products and that “it remains open to JB Hi-Fi to import directly and bypass suppliers”.

“If we have to go to a direct import model to do that, we will,” he said, although Smart reportedly added that negotiating agreements will be a complex process and that it will push suppliers “very hard”.

The business said it continues to trade in extremely difficult circumstances.

The relationship between suppliers and retailers has been a contentious issue this year. Earlier in the year, suppliers were in the spotlight as retailers complained they weren’t allowing online stores to carry goods that were being offered in bricks and mortar retail destinations.

eBay released research showing this was the case, with many retailers complaining that suppliers wouldn’t deal with them. However, many retailers are now putting the pressure back on suppliers by requesting they drop their prices.

Chief executive of consultancy group Retail Doctor, Brian Walker, says any businesses looking to survive this Christmas season will need to have good relationships with their suppliers – and vice versa.

“This entire situation isn’t easy, and both sides are experiencing it together. Ideally, what you want is suppliers and their customers working together for the long haul, so that when you have cycles like this, it’s up to both parties to work on the partnership.”

“There has to be value for both parties in any of the negotiations, otherwise, no one is going to be able to get anywhere.”

Walker says while this issue is more of a short-term problem it still needs to be addressed, although adds it is up to the retailer to make sure there are customers walking through the door spending money.

“While some say that suppliers are seen as the answer to this, it is actually the retailer at the front end, with all the sales staff and experience, that are doing the work. That’s the easiest way to not have conflict with the supplier.”

Nevertheless, Smart said the company is confident regarding Christmas, saying the iPhone 4S and a number of new products will help. “If you think, really, of Christmas, it is somewhat a non-discretionary time… People have to shop,” he said.

Meanwhile, the Reject Shop has issued a warning to shareholders, saying it has been hit with a sharp rise in insurance premiums following the Queensland floods, when a distribution centre was severely damaged.

However, while chief executive Chris Bryce said the retailer is facing difficult circumstances, he also said the fact the company remains profitable is a testament to its strength.

“I would state that we have had more challenges this year than any other retailer,” he said.