As consumers around the world face inflationary pressures, there has been a rising trend towards low-cost alternative tech products, a trend that eCommerce company Harris Technology (ASX: HT8) is capitalising on overseas and is set to make these products available to Australians in time for Christmas.
Over the past 12 months, Australia’s retail industry has been heavily hit by macroeconomic headwinds where high interest rates have put pressure on households which have been forced to cut back on retail spending. Rather than heavily discounting their products at the cost of product margins, Harris Technology instead turned their attention overseas with their Manufacturer-to-Consumer (M2C) division which has been selling private-label tech products in the United States, United Kingdom, Canada and Singapore.
From a small range of tech products sold into those markets which have been less impacted by inflation than Australia, Harris Technology has gathered valuable data on products that are likely to perform well domestically. These private-label products are typically manufactured overseas and listed via online marketplaces as low-cost alternatives to household brands, and prove extra popular due to tighter household budgets, according to CEO Garrison Huang.
“Increased activity from the M2C division has been encouraging and highlights an opportunity for Harris Technology to sell private label tech products into more international marketplaces,” said Huang.
“While demand for Harris Technology’s traditional range of IT products has slowed over the past 12 months, we’re seeing consumer behaviour starting to turn with greater demand for private-label and refurbished products as an alternative to premium tech brands.
“We are actively in discussions with international manufacturers and look forward to adding more private label products to our eCommerce channels in the coming months in preparation for the busy retail season that includes Black Friday, Cyber Monday, Christmas and Boxing Day.”
For the quarter ended 30 September 2023, Harris technology reported $4.4 million in revenue with positive operating cash flow of $226k.
Lifting the Company’s gross margins has been a strategic focus for Harris Technology which has been preserving cash reserves and opting not to compete for revenue via excessive discounting on better-known tech brands. Instead, they sought expansion into the household products category which has more recurring demand for products which are commonly found in all Australian households, and sold at margins upward of 40%.
Harris Technology has experienced a steady increase in average product margins thanks to the contribution from its household category, especially from seasonal ranges such as Christmas and summer holiday products. To cater to these trends, Harris Technology began listing and distributing these products earlier than in previous years. Notably, unsold inventory from previous seasons generated sales in September and October, showcasing the Company’s nimbleness and adaptability in responding to market dynamics.
As the busy retail season approaches, Harris Technology is well-positioned to meet the needs of consumers seeking quality, affordability, and reliability in their tech purchases.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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