Amidst the challenging economic landscape of Australia’s cost-of-living crisis, eCommerce company Harris Technology (ASX: HT8) has emerged as one of the consumer friendly retailers offering low-cost alternative tech products that have proven immensely popular amongst cash-strapped households.
As economic pressure tightened the purse strings of these households, customers have shunned discretionary retail in droves, a trend that Harris Technology is turning from a weakness in their business to a strength. Over the past 12 months, the Melbourne-based retailer has pulled back its inventory of bulky tech products, instead driving sales of low-cost alternative products in the form of their private label products and refurbished products.
Private label products are sold via the Company’s Manufacturer-to-Consumer (M2C) division which sources the products and utilises third party warehousing facilities, while refurbished products have proven immensely popular at highly attractive price points for products that are renewed with fresh hardware and only a few years older than their brand new alternatives.
These products are then listed for sale on Harris Technology’s website and online marketplaces as authorised resellers, as low-cost alternatives to new models.
For example, when a brand new Macbook Pro is listed with major retailers for $2,700, Harris Technology is sourcing previously owned versions and refurbishing with new hardware (batteries, screens, hard drives, RAM etc). Once the product is refurbished to optimise performance, it is listed on the HT site or major online marketplaces as refurbished IT products. In the case of a low-cost MacBook alternative, they would list a refurbished MacBook Pro that might be 3 years old around $1,300 as an alternative to the brand new $2,700 product
Given the pullback in discretionary retail spending over the past 12 months, it comes as no surprise that the Harris Technology refurbished product is hugely popular when in supply for a product that is only 2 years old.
The result for Harris Technology has been a contrasting one, sacrificing sales revenue in pursuit of greater profit opportunities.
For the Half Year ended 31 December 2023, Harris Technology generated $8.8 million in sales revenue which was a decrease on the $15.3 million reported for the previous corresponding period. Remarkably though, gross profit of $2.4 million was $0.3m higher than the previous year, with gross margins lifting from 13.8% to 27.1% over the year.
CEO Garrison Huang, expressed satisfaction with the substantial improvement in gross margins despite prevailing retail challenges.
“The M2C division has performed well through the busy retail season meeting our margin targets. Adjusting to the changing economic conditions, we have seen a positive result from our entry into the Refurbished Tech product category where products are being sourced, renewed, and listed at attractive price points against their new equivalents.
The diversification into M2C and Refurbished products follows a similar expansion undertaken from Harris Technology 18 months ago when entering the Household category. In doing so, the retailer expanded their presence in Aussie homes beyond just the office, listing products that can be found throughout all households, with particularly attractive margins.
Following the demand trends from Australian consumers that appreciate value from M2C products, Huang is keen to list more refurbished tech products while demand is high.
“This is a vertical with strong momentum and we will look forward to growing this part of the business further,” he added.
Refurbished tech products undergo rigorous testing and refurbishment processes to ensure they meet quality standards, providing consumers with reassurance and value for their money.
Furthermore, Harris Technology’s prudent inventory management, ending with $4 million inventory on hand and fulfilling the inventory reduction initiative outlined in FY22, underscores its commitment to maintaining operational efficiency amidst subdued market demand for new tech products. With positive cash flow of $0.46 million and a cash balance of $1.7 million, coupled with $6.2 million undrawn from the finance facility leaves the company with no need to raise capital.
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