Valid points Mars. Regarding, Harvey Norman, I merely based...

Valid points Mars.

Regarding, Harvey Norman, I merely based calculations on their Net Profit figures ie. including franchisee income and property revaluations. Hence the net income margins on their consumer durables are probably well below the 9.9% I quoted, particularly since they also retail electrical products which are lower margin (JBH about 4% ). Probably worth mentioning some other retailers Net Income Margins too, such as SUL (about a 5% NIM) and PMV (about 7.5%). These companies tend to be highly regarded, although in different industries.

With regard to deflation, the RBA minutes from May 2013 provide excellent commentary on deflation of consumer durables in the Australian economy since 2000. "
"Much of the deflation in consumer durables in the 2000's can be explained by the appreciation of the exchange rate over that period."

However. the relationship between the exchange rate and retail prices did not hold true once the $A stabilised in 2011, the RBA noting that retail price deflation continued. Other factors mentioned contributing to lower retail prices during this period:
*Changing domestic cost pressures (wages)
*Changing domestic retail margins
*Changes in productivity

In the most recent minutes of May 2016, the RBA noted that consumer durable prices are in a holding pattern:
"The substantial depreciation of the exchange rate in the past few years has increased import prices and placed upward pressure on final prices of tradeable items. But low wage growth and heightened competition are placing downward pressure on retail prices. The net effect has been subdued inflation in consumer durables following price falls for several years..."

The most telling explanation of what happened (IMO) to retail prices of consumer durables in recent years is from the feedback from business to the RBA. Competitive pressures are cited by business as the reason for the divergence in the relationship between import prices and retail prices. The presence of online vendors (based in Australia and overseas) has had an effect on competition and retail prices, It has also possibly had the effect of local firms becoming more efficient to maintain margins, negotiating lower rents and cutting overheads.

Make of that what you will, who knows what the future holds. Certainly deflation seems to have subsided currently, but needless to say the exchange rate will continue to make its presence felt.