Narta chief executive Michael Jackson has publicly responded to JB Hi-Fi Group’s decision to end its membership of the buying and services organisation, saying the separation was mutually agreed and that Narta remains a substantial player in consumer electronics and home appliances.
In his first public comments since the announcement, Jackson said Narta’s business without JB would still be strong. He said “core supplier” purchases were well over $1 billion and that Narta members collectively represent more than 20 per cent of the consumer electronics, camera and home appliance market. He argued that this scale remains valuable to suppliers.
Jackson also sought to frame Narta’s role as broader than group buying. He said the organisation, which is 61 years old, was created to serve independent retailers and to give them collective scale against larger competitors. 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 large public company, he said.
A shift in balance
According to Jackson, JB’s acquisition of The Good Guys and the latter’s later entry into Narta brought considerable scale but also created a significant imbalance across the membership. The COVID-19 period then overshadowed many of those underlying changes as the industry experienced several years of extraordinary growth, he said.
He said the market is now very different and that over the past six months Narta has recognised a greater responsibility to its shareholders and total membership.
Jackson described Narta’s offer as extending beyond purchasing into forecasting, stock-on-hand visibility, end-of-life management, new-model implementation, product content and training, predictive analytics, and AI and automation. Independent members, he said, need those capabilities to survive and thrive against major retailers including JB Hi-Fi, Harvey Norman, Bunnings, Woolworths, Big W, Costco and Amazon.
With JB leaving, Jackson said members must embrace the importance of Narta’s investment in service infrastructure, work together and fully use those services. He said suppliers want a strong independent retail channel and will challenge it if it cannot demonstrate efficiencies and a competitive cost to serve. Narta, he added, will be judged by its collective actions over the next 12 months.
Mutual agreement, no single trigger
Jackson said 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 members’ needs while JB should focus on its own strategy and priorities, he said.
He said JB is a publicly listed company with four businesses — JB Hi-Fi Australia, JB Hi-Fi New Zealand, The Good Guys and e&s — and has its own strategic priorities. According to Jackson, no event, incident or disagreement caused the departure, and JB was not asked to leave.
He added that supplier response in the 24 hours after the announcement had been overwhelming and reinforced demand for a strong independent channel. Narta will no longer be the largest buying group, Jackson said, but collectively it will remain number three.
Cost base and people
The loss of JB’s scale is significant and will affect Narta’s income and operating costs, Jackson said. As a not-for-profit organisation whose members contribute to running costs, Narta will need changes to its structure and cost base.
He acknowledged that there will be difficult decisions, including redundancies and cost reductions across the board and executive structure. Jackson said the priority is to keep Narta financially sustainable, retain the experience and capabilities needed to deliver for members and suppliers, and structure the organisation appropriately for the future.
He concluded that Narta’s purpose has not changed: to strengthen independent retail. Jackson said the need for a strong, connected and commercially effective independent channel is now greater than ever.