Big Chains Focused On Upscale CE
By Steve Smith -- TWICE, 4/10/2006
Imitation is the sincerest form of flattery ... unless you're in retail and national chains are preparing to eat your lunch.
That's where we seem to be headed in consumer electronics retailing. The two chains that bring fear and loathing to regional and smaller independent CE retailers — Best Buy and Wal-Mart — are now focusing in on the profitable, upscale part of the industry as never before. Appropriately, the stories broke when I was attending a show for the highest end of the industry — custom installers and integrators — EHX in Orlando.
Best Buy confirmed that it will take its customer centric store format to all of its stores. The chain's brand-name stores, along with Magnolia Audio Video, posted a 14 percent increase in revenue during its last quarter. (See p. 1.) And Best Buy plans to add 200 Magnolia Home Theater in-store shops for a total of 300 by the end of this fiscal year.
As for Wal-Mart, take a look at senior editor Alan Wolf's story on the test store in Plano, Tex., which is clearly targeting upscale CE products. (See p. 1.) There is a department staff that is trained in CE, a more sophisticated ambiance and HDTVs from the likes of Hitachi, Panasonic and Sony. While this is a test store, if successful Wal-Mart will quickly begin to roll them out.
While the Wal-Mart store does not provide installation of any kind via this new store format, the message is clear: The boys from Bentonville are going after upscale CE products.
The news about Best Buy and Wal-Mart should not be a shock to anyone in this business. It has been brewing for some time. But the future of dealing with national chains with an upscale touch in this industry is now.
Can independents continue to be competitive? There are no easy answers. But there are strategies that continue to work, as Deborah Smith, former head of PARA and now the head of a consulting group under her own name, reminded those of us who attended her Custom Retailing Day at EHX last month.
One of the subjects discussed by Smith was how to sell more upscale home audio. Even though the talk was designed for custom installers and integrators, the points she made could be used by retailers trying to do the same thing. (See story on p. 27.)
She told her audience that they are now selling experiences, “and to sell an experience you have to create one” in your stores. In merchandising strategies the key must be to “do things mass merchants can't do.” That usually means service and expertise. Local retailers should know their customers and communities better than anyone, and they should leverage that with their experienced commission salespeople to provide a winning shopping experience for their customers.
All these suggestions are great, but the time has come. Best Buy, Wal-Mart and certainly other national chains want your customers. And if you don't have a credible plan in place now, you'd better create one, and soon.
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