Narta chief executive Michael Jackson has said the decision by JB Hi-Fi Group to end its membership of the buying and services organisation was reached by mutual agreement, in his first public comments since the move was announced.
Jackson said Narta remains a substantial business without the JB Group, pointing to "core supplier" purchases of well over $1 billion, which he said collectively represent more than 20 per cent of the consumer electronics, camera and home appliance market. For suppliers, he argued, that represents significant value, and he stressed that the group's role extends beyond buying.
Sixty-one years of collective scale
Jackson described Narta as 61 years old and born out of servicing independent retailers, with a stated purpose of bringing independent businesses together so that scale allows them to compete effectively against major retailers.
He recalled that when JB joined Narta more than 25 years ago it had one store in Melbourne and one in Parramatta, and said nobody could have predicted its growth into a publicly listed company of its current size. He said Narta is proud to have been part of that journey.
The acquisition of The Good Guys, and its subsequent entry into Narta, changed the organisation considerably, he said. It brought scale but also "a significant imbalance across the membership", and soon afterwards COVID overshadowed those underlying shifts during several years of extraordinary industry growth, when businesses and the industry were largely focused on how well things were going.
Jackson said the market is now very different, and that over the past six months in particular Narta has recognised an even greater responsibility to its shareholders and its total membership.
Services beyond buying
He said Narta's remit today is much more than purchasing, listing services that include:
- forecasting and stock-on-hand visibility;
- end-of-life management and new model implementation;
- product content and training;
- predictive analytics, AI and automation.
Independent members, he said, need the capabilities to survive and thrive against JB Hi-Fi, Harvey Norman and businesses such as Bunnings, Woolworths, Big W, Costco and Amazon. To access the services, technology and investment required, they must unite and work collectively, he added.
Jackson said that in discussions with Nick Wells, JB agreed Narta had taken the right path over the past five to six years by investing in and building its service infrastructure, and that without those investments there was every chance Narta could have struggled to fulfil its responsibilities to members.
No trigger, no request to leave
He said there was never going to be a perfect time to end the membership, but that a few weeks ago both sides agreed the best way forward was for Narta to focus on its strategy and members' needs while JB focuses on its own strategy and priorities. He said no event, incident or disagreement caused the departure and JB had not been asked to leave.
Jackson noted that JB is a publicly listed company with four businesses — JB Hi-Fi Australia, JB Hi-Fi New Zealand, The Good Guys and e&s — which carries its own strategic priorities, and said each side understands the other's position.
Since the announcement became public, he said he is even more confident, citing what he described as an overwhelming response from suppliers over the preceding 24 hours and their stated appetite for a strong independent retail channel, choice and competition.
Cost base and the next 12 months
The loss of JB's scale is significant and will affect Narta's income and operating costs, Jackson said. As a not-for-profit whose members contribute to running costs, the organisation will need to change its structure and cost base, with difficult decisions including redundancies and cost reductions across the board and executive structure.
He said the priority is to keep Narta financially sustainable and to retain the experience and capabilities needed to deliver for members and suppliers. Suppliers have told Narta that their cost to serve continues to increase, he added, and they will rightly challenge the channel if it cannot demonstrate efficiencies and a competitive cost to serve; Narta, he said, will be judged on its collective actions over the next 12 months.
Narta will no longer be the largest buying group, Jackson acknowledged, but collectively will remain number three — a position he described as still significant in the market and valuable to suppliers and independent retailers. Its stated purpose, he said, has not changed: to strengthen independent retail.