By Patrick Hatch
Harvey Norman will take the fight to new competitors if a predicted price war on small home appliances breaks out.
Dick Smith and JB Hi-Fi are muscling in on the $1.7 billion market dominated by Harvey Norman, The Good Guys and Bing Lee by introducing toasters, blenders and vacuum cleaners to their stores.
Harvey Norman executive director David Ackery said the retailer wouldn’t be the first to fire shots, but would keep pace if new competitors threw down the gauntlet.
“Whatever comes over the bow, we’ll respond if we need to,” Mr Ackery said.
“I find [a price war] highly unlikely, but, as usual, wherever there’s been a price war in other categories, we’ll stand our ground and gain ground.”
JB Hi-Fi chief executive Richard Murray has also hosed down speculation of a price battle.
However, retail consultant Brian Walker, from the Retail Doctor Group, said it was inevitable.
“They [Harvey Norman and The Good Guys] are going to respond on price and they’re going to respond on discounting and volumes, and they’re going to be very, very aggressive I think,” Mr Walker said.
“These products are reasonably undifferentiated . . . what else could they compete on other than price?
“So I think you’ll see a price war in these categories.”
Mr Walker said the solid footing of Dick Smith and JB Hi-Fi in phone, technology and computer products gave them an advantage over the established home appliance retailers because of the rise of the “interconnected home”.
“Your kettle will wake you in the morning with a nice cup of tea, and it’ll all be done by your iPad the night before,” Mr Walker said.
“That’s where it’s all moving to: the seamless, integrated digital home.
“You’d have to look [at] a business like Dick Smith or JB Hi-Fi and say they’re very well positioned there.”
Mr Ackery said Harvey Norman had no plan to meet the new competition head-on by discounting prices on small appliances.
“New players come and new players go, and that’s been the history of retail,” he said.
“Obviously, we respect them as competitors, but we’ll continue to run our own business as we see fit.
“We’ve got our plans in place for this year and beyond and we’ll be sticking to and executing them.”
Dick Smith said it would introduce home appliance in 100 stores by Christmas.
JB Hi-Fi will turn about 90 square metres of floor space over to appliances in 18 stores by November.
JB Hi-Fi is chasing market share through its 43 HOME stores, which specialise in appliances, and plans to have 75 stores by next year.
CMC Markets chief market analyst Ric Spooner agreed any response from the big retail players would likely be a pricing one.
“I don’t know it would necessarily follow too much from Dick Smith by themselves, but with JB Hi-Fi being in that space as well, it certainly does have the potential to create margin pressure,” Mr Spooner said.
“Without that being a certain outcome, there’s certainly a risk in that direction. There’s a potential for benefit for the consumers or risk for shareholders.”
Mr Spooner said the advantage normally enjoyed by encumbent retailers was lessened because JB Hi-Fi and Dick Smith already had supply lines, shops and online stores.
First published in Sydney Morning Herald, 26th August 2015