While their brand is synonymous as one of Australia’s most trusted tech retailers over the past 30 years, online retailer Harris Technology (ASX: HT8) will soon be expanding into a range of household products with plans to launch a new HT Home division.
The launch of the new division comes following Harris Technology’s record FY22 sales where the retailer generated $50.4m in sales (unaudited), a 20% increase on the $41.8m in FY21.
While sales growth was impressive, Harris Technology flagged the expansion into household products as part of their plans to diversify their product categories, having largely just been a tech products retailer since being founded in 1986. Since that time, the Company changed hands a few times which included ownership by Officeworks before focusing their efforts as a pure play online retailer in 2018.
As one of the biggest online marketplace sellers of tech products, Harris Technology achieved substantial success throughout the pandemic as online retail exploded, lifting sales from $9.0m in FY19 to $13.6m in FY20 and then $41.8m in FY21. Although sales were again up in FY21, CEO Garrison Huang has flagged to shareholders that the Company endured a stiff increase in supply chain expenses which adversely impacted margins.
These increased expenses have hit the entire eCommerce sector hard, largely driven by higher oil prices that have flowed through to the cost of freight and importing. This has been felt particularly hard in the tech space sector where the majority of technology products sold in Australia are sourced from Asia. To combat this, Harris Technology tweaked its inventory composition in 2021 to reduce its product range while focusing on high-margin items that were turning over with greater frequency.
“Harris Technology has moved quickly to reduce inventory and aging stock in light of fast-changing economic conditions. The company is in a strong position to drive its expansion into the Household category with minimal cost implications,” said Huang.
“Diversifying into Household products on all major eCommerce platforms in partnership with local Household product importers and wholesalers through the launch of a dedicated Household eCommerce site creates an opportunity to gradually improve the overall margin of the business.”
Harris Technology first started trialling household products across their eCommerce channels in September 2021, in the lead up to Christmas. These primarily consisted of items found in every household, with many purchased in recurring frequency such as cleaning supplies and garbage bags. Eventually, these would be coupled with hardware products, garden supplies or arts & crafts etc for higher basket sizes of low-cost products.
Although the individual products alone were rarely more than $20, when coupled with others and combined with the frequency of orders, Huang witnessed attractive margins with minimal inventory expenses compared to bulk tech items like laptops through the flagship HT brand. Given the Company had upgraded its warehouse facility last year and already established seller profiles on all major marketplaces, minimal capital expenditure was required to expand into the Household category or set up the HT Home website.
The product range offered by HT Home profiles similar to variety goods retailer The Reject Shop (ASX: TRS) which for the 6 months ended 31 December 2021 reported $424.7m in sales for $15.4m in net profit after tax.
Unlike The Reject Shop however, Harris Technology does not operate any brick-and-mortar locations, enabling them to pass on savings from overheads on to their customers.
HT Home is currently undergoing Beta testing and is expected to be fully operational within weeks.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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