Is it a sign of the times? JB Hi-Fi's half year results were released today. It was a reasonable second quarter for the tech retail giant, bolstered by hardware sales, but software sales are clearly on the decline.
According to the results, JB Hi-Fi's hardware sales were up 4.7% in the quarter, with the result specifically naming console sales -- alongside fitness gear and appliances -- as the reason for that growth. Software sales, however, were down a massive 10.8%.
But given the majority of JB's sales are centred around hardware, it added up to an overall 1.4% growth in sales for JB. CEO Richard Murray was pleased with the results.
"[T]his was a pleasing result for the half year given the combined headwinds of a challenging first quarter sales result and the the cycling of both digital switchover in visual and the launch of new gaming consoles in the second quarter last financial year," he said.
But the rapid decline of software sales is a clear warning sign. Are consumers buying hardware in stores and then buying the games themselves online? Or is mobile gaming part of the problem? It's difficult to say, but stores like JB Hi-Fi have traditionally used video games as a loss leader for other products and a sales decline in software might be the proverbial canary in the coal mine. Games retail is an interesting business. Traditionally stores like EB Games and JB Hi-Fi will sell consoles at low margins, the idea being that those same consumers will come back to buy video games. Will the story remain the same when people are less likely to buy video games at brick and mortar stores? That's the question. Other retailers like Target, Kmart and Big W have already threatened to reduced its stock of games in stores, maybe we'll start to see JB Hi-Fi follow suit.