“Race to the bottom”: Pain for appliance retailers as Radio Rentals shutters stores

appliance retailers

There’s been trouble in appliance retailing this week with two prominent independent retailers in the category failing to make it to the end-of-financial-year rush.

Radio Rentals South Australia last night announced it will shutter its 12 stores in the state by mid-June.

The retailer — not to be confused with the Thorn Group-owned Radio Rentals business in other states — blamed the retail blues and online competition for the downfall.

“After such a long time in business in South Australia, the decision to close our retail operations was a very difficult and emotional one. It was only taken after careful consideration and pursuit of all other strategic options including a sale,” the business said in a statement published on Tuesday evening.

One hundred jobs are expected to be lost in the Radio Rentals closure, bringing an end to more than 50 years of retail history which began with a store in Rundle Street, Adelaide, in 1958.

Meanwhile, insolvency notices were today issued for NSW-based appliance retailer 2nds World after it appointed administrators from de Vries Tayeh earlier this week.

The five shops in the 2nds World network now face an uncertain future as administrators pursue an urgent sale process.

“Race to the bottom”

Both businesses are expected to dump inventory in the lead up to July with discounting that will put even more pressure on traders in the category during a crucial sales period.

Stefan Kazakis, founding principal of consultancy Business Benchmark Group, says SMEs in the category are struggling to keep up with market headwinds.

“These type of businesses are being challenged by finding where their competitive advantage is,” he tells SmartCompany.

“The bigger businesses have enough resources to negotiate bigger deals, better packages and margin breaks, and their ships aren’t sinking,”

Kazakis says he’s noticed end-of-financial-year advertising start in April this year, earlier than he’s ever seen it before.

“It’s quite frightening — this is going to be a race to the bottom,” he says.

Mixed fortunes in appliance retail

It comes after a slow start to the year for larger players in the category, including JB Hi-Fi and Harvey Norman, both of which have reported trading weakness of late.

Like-for-like sales at Harvey Norman’s almost 200 Australian stores fell 0.6% in the six months to December 31 last year.

JB Hi-Fi performed better over the same period, reporting a 3% increase in comparable sales, although that dropped to 1.5% in January, far below the 4.8% comp growth booked for the first month of last year.

The Good Guys started the year relatively flat, recording a 0.3% increase in comp sales during January, although this was much better than the 4.8% slide experienced the year prior.

E-commerce players appear to be faring better. Kogan boasted record traffic last Christmas, booking a 10.6% increase in topline sales, while Catch boss Nati Harpaz also reported a strong holiday trade.

Winning Group chief executive John Winning said on social media earlier this week his 113-year-old retail business had managed 40% year-on-year growth in March.

Rising commercial rents, changing market dynamics and sluggish consumer fundamentals continue to underpin weakness where it exists, with appliances being far from the only retail category struggling in 2019.

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Leonard Bennett
Leonard Bennett
3 years ago

what’s with this word “shutters” – shutters is the plural form of a noun, not a verb

Leonard Bennett
Leonard Bennett
3 years ago

oh well, I guess no-one knows what the verb “shutters” means!

3 years ago

There is more to this story than what’s portrayed. Radio Rentals (SA) and its RT Edwards stores will be hard hit by the proposed National Consumer Credit Protection (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018 that will restrict lessors to a 4% (inclusive of GST) maximum fee per month plus a delivery fee for a maximum of 4 years that a recent Labor-dominated Senate Economics Committee rubber-stamped in order to embarrass the current Government. Coalition Ministers have rightly delayed its passage because it contains bad legislation. This legislation if enacted as is will hit other lenders, lessors and retailers hard but hey, forget either party’s promise of jobs, this call has been led by consumer advocates who constantly promote consumers to search for the cheapest goods. There’s no way retailers can survive with this kind of gross margin given the current economic downturn and rising costs (including shopping centre-ratchet rents).
The media are as much to blame for this as are the lessors that charged lessees many times the cost price of goods to bring the industry into disrepute. The problem in a retail market is those that charge the cheapest rate generally don’t survive long term but the catch call is as long as consumers get a cheap deal, it must make it OK.
Expect more of this as the industry is forced to consolidate. If the same forces exist for Thorn’s Group’s Radio Rentals, it’ll be interesting to see what statement is makes to the ASX when it discloses its full year results.

Patrick Hart
Patrick Hart
3 years ago

Its quite a shame watching this spread like a disease , nearly as much as watching the kiddies who employ nothing and no one prancing round with “idea’s” getting zillions thrown at them

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