In the wake of escalating cost of living pressures, consumers are increasingly turning to refurbished IT products as a cost-effective alternative to new purchases – a trend being capitalised on by eCommerce company Harris Technology (ASX: HT8) which is seeing a surge in sales from refurbished products.
For the quarter ended 31 March 2024, Harris Technology reported sales revenue of $4.5 million. While this was a marginal decline on the $4.9 million reported for the December quarter, it was largely attributed to cyclical effects which have impacted all ASX-listed retailers in the post-Christmas washup.
These seasonal trends impacted cash flow with the Company reporting $582k in operating cash outflow, the first negative one in FY24 though, after reporting operating inflows of $235k in Q2 and $226k in Q1 FY24. As of 31 March 2024, there was also $4.2 million of inventory on hand, largely consisting of high-margin products in line with Harris Technology’s inventory strategy through these difficult trading conditions.
Demand for refurbished tech has risen alongside economic pressures as discretionary spending has plummeted over the past 12 months in response to interest rate rises that have put Australian households under financial pressure.
“Having identified a good growth opportunity in refurbished tech products, we are recording increasing success in this vertical where there is lower competitive activity,” said Harris Technology CEO, Garrison Huang.
“Harris Technology has an advantage in this space due to our established eCommerce presence and expertise across the tech products supply chain as consumers continue demonstrating higher price sensitivity due to the macroeconomic headwinds.”
Refurbished products, while previously owned, often exhibit little difference in performance compared to their new counterparts. Leveraging its Marketplace authorised reseller status and established supply chain, Harris Technology has increased the range of products they have been sourcing and refurbishing.
Where previously just upgrading laptops, the online retailer has now expanded into monitors, routers, servers, and docking stations with gross margins outperforming those of new IT products. This trend underscores the growing preference among consumers for affordable yet reliable alternatives in the face of mounting financial pressures.
The allure of refurbished IT products lies in their substantial cost savings where a 2-year old product can often be found via Harris Technology’s eCommerce channels at 50% discount to the latest new model. This retail trend has been a particularly appealing proposition for consumers grappling with the cost of living on the rise, as a way to stretch budgets without compromising on performance.
While demand for new tech products remains subdued, Harris Technology remains optimistic about the prospects of its refurbished products segment. By capitalising on consumer price sensitivity and offering viable alternatives, the Company has maintained its prudent cash management strategy while quickly pivoting its supply chain to best serve customer demand.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, bloodstock enthusiast and former Analyst.
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