It’s official. JB Hi-Fi is acquiring home appliance retailer The Good Guys for a cool $870 million. What does this deal mean for consumers? Let’s find out.
JB Hi-Fi and The Good Guys are highly complementary businesses since they have traditionally been focused on different product categories with only some overlap. A JB Hi-Fi deal with the Good Guys would form a business with sales of almost $6 billion and almost 300 stores.
“The home appliance market in Australia is circa $4.6 billion, larger than many of the other categories JB Hi-Fi operates in and presents a significant opportunity for the company,” JB Hi-Fi said in its financial presentation last month.
JB Hi-Fi has dabbled in selling whitegoods and other home appliances and the acquisition of The Good Guys will mean that it can scale up that side of its operations quickly in the back-end. This means economy of scale when buying goods from manufacturers and potential savings that could be passed on to customers.
The Good Guys itself will also have access to a wider selection of home electronics; it has traditionally focused on whitegoods while selling home electronic items on the side. JB Hi-Fi plans to open up new The Good Guys branded stores in “under represented catchment areas”. It could see competition in the home goods space heat up which, again, could mean savings to consumers.
The fact that JB Hi-Fi and The Good Guys have traditionally concentrated on different product categories is a good thing for consumers. Last month, the Australian Competition and Consumer Commission (ACCC) gave the go-ahead for the deal, noting that it would not substantially reduce competition in either consumer electronics or whitegoods retailing. Harvey Norman and Bing Lee are just some of the companies that are competing in the market.
The Good Guys chief executive Michael Ford will continue to run under JB Hi-Fi’s ownership. The acquisition is expected to be completed by this year or early next year.
Comments
9 responses to “JB Hi-Fi Buys The Good Guys For $870 Million: How Will This Impact You?”
Surprised the ACCC took that view – to my mind there’s way too little competition in both the white goods and electronics areas. At least in terms of actual retail stores.
And this particular acquisition has absolutely no bearing on that whatsoever.
?
So….
You’re right about the ACCC being against monopolies, which is why they’ll stop certain takeovers that reduce competition. This is not one of those situations.
Let’s say, for example, that there a 3 white-goods retailers (Harvey Norman, the Good Guys, and Bing Lee); and two consumer electronics retailers (Harvey Norman and JB Hi-Fi).
If for some strange reason, Harvey Norman tries to buy JB Hi-Fi, this would reduce the number of electronics retailers to 1 (Harvey Norman), therefore a monopoly and something the ACCC would stop.
Now, let’s assume JB Hi-Fi wants to take over the Good Guys. We still have 3 white-good retailers (Harvey Norman, Bing Lee, and JB Hi-Fi) and we still have two electronics retailers (Harvey Norman and JB Hi-Fi). The only difference is that one of those white-goods retailers is now JB Hi-Fi.
And that is exactly why the ACCC (a) don’t care, and (b) wouldn’t have a case to stop it.
Sure, there is some overlap in what JB and the Good Guys sell (probably TVs only), there are literally hundreds of TV retailers, so no issue.
Fair enough. But there’s no Bing Lee in WA. So we’re left with, in effect, HN and JB as the only real retail store chains in those markets.
A duopoly is pretty much as bad as a monopoly for customers – you only have to take a look at how many times Cole and Woollies have been had up for price fixing to see that.
I’m just surprised the ACCC would be happy with this takeover. In a lot of other countries the equivalent bodies would, I believe, take a different view.
I don’t think there’s a Bing Lee anywhere anymore, but I could be wrong…
The key takeaway is that because the two retail products that are different enough, we still have the same number of players in each market, even though there are less players overall.
There might even be the argument that the buyout will enable what was the Good Guys to better compete against Harvey Norman, with the increased buying power of JB.
I must say, I was recently Television shopping and I was comparing prices between the Good Guys and JB Hi-Fi
True story
I worked security for JB when they ran the Clive Anthony appliance stores.
that was a cluster of massive proportions, so let’s hope it won’t be a repeat.
also means that JB will now probably move a lot of their white goods & home applicances out of their stores (especially their “Home” branded stores) so might mean more stock & space in regular JB stores again.