Narta chief executive Michael Jackson has spoken publicly for the first time since JB Hi-Fi Group announced it would end its membership of the buying and services organisation, describing the split as a mutual decision rather than the result of a dispute.
Jackson said Narta remains a substantial business without JB. Core supplier purchases are worth well over $1 billion, he said, and its members collectively account for more than 20% of the consumer electronics, camera and home appliance market. He said that scale remains valuable to suppliers.
History and changing balance
Narta is 61 years old and was built to serve independent retailers, Jackson said. Its model has relied on bringing independent businesses together so that, through collective scale, they can compete with major retailers. JB joined more than 25 years ago when it had stores in Melbourne and Parramatta, and Narta was proud to have been part of its growth into a public company, he added.
The acquisition of The Good Guys and its later addition to Narta changed the organisation materially. Jackson said the move brought considerable scale but also created a significant imbalance across the membership. Soon afterwards, COVID-19 hit and years of extraordinary industry growth overshadowed those underlying changes, with businesses and the wider sector focused on how well trading was going.
Different market, broader services
Jackson said the market is now very different. Over the past six months, Narta has recognised a greater responsibility to its shareholders and total membership. He stressed that Narta does more than buying, listing forecasting, stock-on-hand visibility, end-of-life management, new model implementation, product content and training, predictive analytics, AI and automation among its services.
Independent members, he said, need the capabilities to survive and thrive against major retailers including JB Hi-Fi, Harvey Norman, Bunnings, Woolworths, Big W, Costco and Amazon. They need to unite and work collectively to access the services, technology and investment required to compete, grow and remain relevant.
Mutual decision and cost impact
Jackson said discussions with Nick Wells led to agreement that Narta had taken the right path over the past five to six years by investing in and building its service infrastructure. Without those investments, he said, Narta could have struggled to fulfil its responsibilities to members. He added that there was never going to be a perfect time to end the membership; a few weeks ago the two organisations mutually agreed that Narta should focus on its strategy and member needs while JB focuses on its own priorities.
He said no event, incident or disagreement caused JB Group to leave, and it was not asked to leave. JB Hi-Fi Group operates four businesses — JB Hi-Fi Australia, JB Hi-Fi New Zealand, The Good Guys and e&s — and has its own strategic priorities as a publicly listed company.
The loss of JB's scale will affect Narta's income and operating costs. As a not-for-profit organisation whose members contribute to running costs, Narta will need to change its structure and cost base. Jackson acknowledged difficult decisions, including redundancies and cost reductions across its board and executive structure, while saying the experience of its people remains important and stable.
Supplier response and next test
Jackson said suppliers had responded overwhelmingly in the 24 hours since the announcement became public, and that they want a strong independent retail channel and understand the importance of choice, competition and balance. Suppliers have also told Narta that their cost to serve continues to increase, with the economy, rising operating costs and market conditions affecting them as much as retailers.
Narta will no longer be the largest buying group, Jackson said, but collectively it will remain number three. He said that position still carries considerable value for suppliers and independent retailers. The challenge, he added, is to ensure members are connected, working together and actively using Narta's services. Narta expects to be judged by its collective actions over the next 12 months, and Jackson said its purpose is unchanged: strengthening independent retail, which he believes is more necessary than ever.