Just a few weeks after Harvey Norman snaffled 22 retail outlets off the struggling Vox Group, electronics rival Betta Stores has swooped on another 65 of them, which it now intends to franchise out and stock with IT hardware and software.
The move prompted cautionary comments from Harvey Norman financial director John Skippen, who said it will be a hard road from here for Betta Stores to make inroads into its dominant PC sales.
"The stores will have to be totally rebranded if they want them to be involved in the PC market," Skippen said. "To enter the market you would have to reoutfit the stores and retrain all the staff.
Vox tried to sell software and PCs themselves, but they didn't have the experience to play the game."
Betta Stores general manager Guy Houghton is nonetheless enthusiastic about the purchase, which will grow the company operations by approximately one third. Houghton believes the deal will see Betta's annual retail sales grow past $1 billion.
As all the outlets are set to be offered as franchises, the deal may throw up some interesting opportunities for the reseller channel.
"All of the stores, previously owned by Vox, will be offered as franchises," Houghton said. "Resellers would have the security of an established brand that has a measurable income."
The transaction, which includes the Chandlers and Archie Martin Vox brand names, assets, leases and staff as well as the bricks-and-mortar outlets.
The contract also covers some Vox head office staff in buying, marketing, field support and administration. Vox will keep 36 of its stores and retain ownership of the Billy Guyatt's brand as well as franchise rights to the Chandlers and Archie Martin Vox brand.
"We have also put on staff at the head office to oversee the expansion," Houghton said.
Houghton added the acquisition would inevitably lead to a scaling up of Betta Stores marketing. "Our sales and marketing budget is directly tied to the number of stores we have out there, so more stores will lead to a higher marketing profile," he said.
Harvey Norman's Skippen said his mail indicated there were still in excess of 30 retail outlets being held by the Vox Group, with an uncertain future.
If market growth is anything to go by, Betta has bought into the IT retail expansion at the right time, with PC mass merchants increasing sales, despite a wide spread slump in PC sales in the lead-up to the introduction to the GST.
Market analyst Inform's Phil Burnham believes the mass merchant channel has managed to cash in on the increasing SME PC penetration, and believes that the larger retail channel players are well positioned to continue this trend. This means opportunities for more players.
"PC sales have been terribly flat with the exception of the mass merchant channel," Burnham told ARN.
According to Burnham, while the rest of the channel was suffering in the lead up to the GST, SMEs were spending their pre-GST software rebate vouchers in large PC chain stores, and have since shown a tendency to return to these stores for their IT purchases.
Betta currently has around 338 outlets throughout Australia and is currently introducing computer products into member stores throughout Australia.
However, Skippen remains sceptical about the Vox stores' ability to make the turn-around, even under new management.
"It is a very competitive market. As we saw with Vox, if you don't go about it the right way you can easily get your fingers burnt," he cautioned.