Kogan bets JB Hi-Fi CEO $1m on Apple pulling out of retail

Apple will go direct with its sales within three years, says Kogan founder

Professional stirrer and technology retailer entrepreneur, Ruslan Kogan, is finally putting his money where his mouth is, challenging JB Hi-Fi chief executive, Terry Smart, to a $1 million bet that Apple will pull its products from JB stores within three years.

The bet — that in three years there will no Apple hardware products for sale at JB Hi-Fi stores — was laid down in an open letter to Smart today.

“I challenge the current CEO of JB Hi-Fi, Terry Smart, to a $1,000,000 bet that on March 14th 2014 there will not be any Apple hardware products for sale at JB Hi-Fi stores,” read the letter. “If Mr Smart is going to stick his head in the sand, he should at least give his investors the facts so they can make up their own minds.

"I urge Mr Smart to accept the bet and to be more transparent with the people whose money he is charged with managing.”

The bet follows claims by Kogan that 30 per cent of JB Hi-Fi's revenue relies on Apple products and related accessories.

In the letter, Kogan also said that the retailer faced threats from increased price transparency, vertical integration, and sales of DVDs and CDs increasingly going online.

“In today’s age, manufacturers are less reliant on third-party resellers than they have ever been,” read the letter. “The Internet has allowed any manufacturer to sell directly to consumers through their online stores.

“When Apple sells its products through third party resellers, it sacrifices margin on the product so that the third party reseller can make money too.

"But consider this; if iPods, iPads and MacBooks were only available in Apple stores and their online shop, would it significantly affect the sales of these products in 2011?”

According to Kogan, a decision by Apple to discontinue its third-party resale agreements would allow the vendor to sell products at a lower cost and make higher profit margins.

“Customers will benefit and Apple will benefit," the letter read. "Win-win situations like this invariably create change.

"Apple already has the wheels in motion to make this happen by tracking when people visit their website prior to purchasing their products from any store and by logging the email addresses of their customers through iTunes.

“But it won’t just be Apple. Other manufacturers will embrace the direct to consumer business model. We will see the likes of Samsung, Sony and LG do the same. Apple will simply be the first because they have the most unique product offering and they are the most responsive to change.”

Kogan’s $1 million stunt follows a continued campaign in favour of online retailers by the outspoken entrepreneur, who in January slammed the campaign for the application of GST on overseas online sales, saying Australian retailers needed a “reality check”.

“By asking consumers to shop at their expensive stores, the big retailers are basically asking all other industries to subsidise their fat profits,” Kogan wrote in a blog post.

“The big guys say they want an ‘even playing field’, so they spent millions of dollars on a national campaign to get a ’fair go’. But, it's hard to take them too seriously when Harvey Norman alone spent more than $355 million on ‘marketing expenses’ in FY2010, which was more than 26 per cent of their total sales revenue.”

Computerworld Australia sought comment from the JB Hi-Fi chief executive but was informed that “Terry Smart would not be commenting on [the bet].”

Follow Tim Lohman on Twitter: @tlohman

Follow Computerworld Australia on Twitter: @ComputerworldAU

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