The Hot Seat: JB Hi-Fi's Terry Smart

28 July 2010

by Lars Brandle

We speak to JB Hi-Fi CEO Terry Smart about the future of the retail chain, diversifying and why they're focusing on retail in a digital age.

Terry, it’s only been a few weeks since you took the reins from Richard Uechtritz. How do you intend to drive the company forward?
I’m obviously a different person to Richard, but it’s still very much business as usual. We know what needs to be done and it’s now all about how we execute. We’ve always had a very collaborative approach to managing the business. We all have input, which ensures we’re all heading in the same direction.

Where does music fit in the context of the whole business: is it a loss leader or a key profit driver?
Music is part of JB’s heritage and it helps to complete the total entertainment piece. We don’t use music as a loss leader. It’s an important part of the overall business and it contributes its share to the overall profit.

Is music a strong seller for JB?
Music sales continue to perform well, even though the physical side lags behind the rest of the business in comparative store growth. Our online presence continues to grow year-on-year.

HMV in the UK has diversified with a handful of non-traditional retail purchases, including a buyin with a live venue operator and a cinema partnership. Do you see JB following any of these routes?
Absolutely not. We run a very different retail model to HMV; we carry a broader range of entertainment products and music is just one of them. We’ve always focused on what we know we do well - running a retail business - and we never want to distract ourselves from it.

Clive Peeters crashed. Is the physical retail landscape particularly volatile at the moment?
Yes, and you can expect further consolidation as the tougher trading conditions continue to bite and put further pressure on the smaller retailers.

Do you have expansion plans outside Australia and New Zealand?
No, not at this stage because we have so much opportunity here in Australia and NZ. Our plan is to have 210 JB branded stores. Given we currently have 130 JB Hi-Fi stores, we have plenty of work ahead of us. MORE ONLINE themusicnetwork.com/features US retailer Best Buy recently set up in the UK.

Can the Australian market take another big music retail chain?
It’ll be difficult for another big box retailer to open here due to the difficulties in finding the size of the retail space they require. Especially for a large format retailer like Best Buy. But it’s obviously possible.

Should labels be more aggressive about lowering prices on physical product?
We are beginning to see the music companies drop their backcatalogue pricing but it’s definitely not as much as we would like. However we are getting more temporary campaigns where we can price aggressively and move large quantities of stock. These campaigns prove if we can get to an everyday low-price offer, then volumes with Terry Smart should pick up. Chart is the other area where we need to see pricing come down so we can build our volumes.

Entertainment retailers around the world have been taking a beating for some time. What is it about JB’s formula?
The in-store experience. That’s what is critical to ensure customers continue to come back. It’s all about the in-store mood, the merchandising and, importantly, our keen, knowledgeable and engaging staff.

Does JB have plans to get serious in the digital downloading space?
We will, as we see it as an opportunity. We’ll continue to research to find the best way forward. Our strong brand will translate well into the online space but we need to ensure we do it right.