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

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.

NOW READ: “Difficult news”: Oxfam Australia shutters stores as not-for-profits struggle with retail reckoning

NOW READ: Retailers weigh in on “very tough” Christmas, but remain optimistic about 2019