Narta CEO, Michael Jackson has spoken publicly for the first time since the announcement yesterday that the JB Hi-Fi Group will be ending its membership with the buying and services organisation.

Speaking exclusively with Appliance Retailer, Jackson said: “Without the JB Group, Narta still has a very strong business, with ‘core supplier’ purchases well over $1 billion and collectively representing more than 20 per cent of the consumer electronics, camera and home appliance market. For suppliers, that is significant value. But our real value extends beyond buying. It is about bringing independent retailers together, creating efficiencies, reducing administration, lowering costs and minimising the investment individual businesses need to make.

“Narta is 61 years old, and we were born out of servicing independent retailers. Our DNA has always been about the collective strength of bringing independent businesses together so that, through scale, they can compete effectively against the major retailers.

“When JB joined Narta over 25 years ago, they had a store in Melbourne and a store in Parramatta, and no one could have predicted they would grow into the behemoth of a public company they are today. Narta is proud to have been part of their successful journey.

“The acquisition of The Good Guys, and subsequently later bringing them into Narta, created significant change for our organisation. It brought considerable scale, but it also created a significant imbalance across the membership. Not long afterwards, COVID hit, and a lot of these underlying changes were overshadowed as our industry experienced several years of extraordinary growth. Everyone was growing, and as businesses and as an industry, we were largely focused on how well things were going.

“Today, however, we are operating in a very different market. Over the past six months in particular, we have recognised an even greater responsibility to our shareholders and our total membership.

“When you look at what Narta does today, it is much more than buying. It includes services such as forecasting, stock on hand visibility, end-of-life management, new model implementation, product content and training, predictive analytics, AI and automation.

“Our independent members are all great businesses, and we need to ensure they have the capabilities to survive and thrive against major retailers, including JB Hi-Fi, Harvey Norman and businesses such as 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 in an increasingly challenging market.

“In our discussions with Nick Wells, JB agreed that Narta has taken the right path over the past five to six years by investing in and building our service infrastructure. Had we not made those investments, there was every chance Narta could have struggled to fulfil its responsibilities to its members.

“We know it is the right strategy. But with JB Group’s departure, it is now time for our members to embrace the importance of this investment, work together, fully engage with these services and deliver value as a collective.

“Suppliers need this from the independent channel. They will rightly challenge the channel if it cannot demonstrate efficiencies and a competitive cost to serve. Narta will be judged by our collective actions over the next 12 months.

“Suppliers have told us that their cost to serve continues to increase. The economy, rising operating costs and market conditions affect them just as much as retailers, so understandably their expectations are higher.

“On the other side, you have JB, a publicly listed company with four businesses — JB Hi-Fi Australia, JB Hi-Fi New Zealand, The Good Guys and e&s — and that brings its own strategic priorities.

“There was never going to be a perfect time to end the membership. However, a few weeks ago, we mutually agreed that the best way forward was for Narta to focus on its strategy and the needs of its members, and for JB to focus on its own strategy and priorities.

“We understand their position, and they understand ours. There has been no event, incident or disagreement that has caused JB Group to leave, nor have they been asked to leave. This is a mutually agreed decision that allows both organisations to focus on their respective futures.

“Now that the announcement is public, I am even more confident, particularly given the overwhelming response we have received from suppliers over the past 24 hours. Suppliers want a strong independent retail channel. They understand the importance of choice, competition and balance in the market.

“That said, the challenge for us is clear. We have built a comprehensive set of services that can deliver significant value, but unless our members are connected, working together and actively using those services, will we maximise our collective potential?

“We understand that we will no longer be the largest buying group, but collectively we will remain number three. That is still a significant position in the market, and one that carries considerable value for suppliers and independent retailers.

“The loss of JB’s scale is significant, and it will have an impact on our income and operating costs. As a not-for-profit organisation, with members contributing to our running costs, this will require changes to our structure and cost base.

“From a personal and empathetic perspective, we cannot ignore the impact this may have on our people. There will be some difficult decisions, including redundancies and cost reductions across our Board and executive structure.

“However, it is important to our team, members and supplier partners, our leadership team and board, the people, remain. The experience of these people remains stable. Our priority is to ensure Narta remains financially sustainable, retains the experience and capabilities required to deliver for our members and suppliers, and is structured appropriately for the future.

“Ultimately, Narta’s purpose has not changed. We exist to strengthen independent retail, and I believe the need for a strong, connected and commercially effective independent channel is now greater than ever.”

Appliance Retailer

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