JB Hi-Fi launches direct import model, as retailers cut off the middleman

Electronics and entertainment retailer JB Hi-Fi has quietly introduced a new direct import model for some of its products, just weeks after the company said at its annual general meeting that it would do so if suppliers couldn’t be negotiated with on pricing issues.

But the move isn’t exclusive to JB – other retailers say they are cutting out the middle man and now source products directly from overseas, and intend to start doing it much more.

“We’re doing some importing, and we’re likely to increase that amount,” Everten Online founder and chief executive Hal Pritchard told SmartCompany this morning.

OzHut founder Wai Hong Fong also said this morning the company ships some products directly from overseas, saying distributors have “good stock levels, and good inventory times”.

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

JB Hi-Fi updated its website on Friday to show off its new range of directly imported products, which at the moment is limited to cameras and related products. It comes after chairman Patrick Elliott said last month that “it remains open to JB Hi-Fi to import directly and bypass suppliers”.

On its website, JB Hi-Fi explains that it now provides some products acquired from international distributors, and that these products are much cheaper than alternatives supplied by Australian companies.

It explains the company has made the move due to changes in supply chain mechanics, which means it is much easier to provide a “high probability of availability and supply”. It also notes that customers have requested the move.

But there are other issues at hand. The higher dollar ensures direct imports are much cheaper than in previous years, and as the company lamented last month, working with suppliers has made things difficult.

This comes after a number of larger retailers including Target have spoken with suppliers about lowering prices. But as local online retailers suggest, it’s just becoming too easy to cut out the middle man altogether.

“The model of having a distributor in Australia is pretty shaky now,” Pritchard says. “It just adds another person into the mix and you’re not competitive on an international basis.”

“If you’ve got a local distributor, you’re just adding 30% to the cost. It means you can’t be competitive with international players, particularly with low margin products like electronics. It’s a tricky business.”

The one disadvantage here is that retailers will need to add their own warranty programs when opening direct import models. JB Hi-Fi has done just that, saying it will offer its own warranty for imported products.

Fong says this is the most difficult part of opening a direct import model, as opposed to stocking new products and expanding warehouse sizes.

“The only thing that needs to be dealt with is a warranty. So if you’re happy to provide your own warranty, then you’re fine. It’s not a difficult thing to organise.”

Pritchard says if retailers want to stay in business, they need to start looking at direct import models as local distributors lose their relevance.

“I think if you want to keep moving, you need to look at this. We’re becoming a global market, and not just competing with the local guys.”