Mega Competitors
By Steve Smith -- TWICE, 6/19/2006
There has always been a concern that national chains, or warehouse clubs, or Web-only retailers would come in and crush traditional electronics/appliance dealers.
Some have closed over the years, out of increased competition or choice, but many independents and regional chains have survived and thrived.
But the newest “gloom and doom” scenario to their existence really isn't new, just different mega retailers and suppliers.
Last week Best Buy reported double-digit increases in net earnings and revenue for its most recent quarter. Wal-Mart posted record earnings for its first quarter, and as we reported (TWICE, June 6, p. 18), emphasis is being put on consumer electronics.
Mega retailers like these and others cannot be content to sit still. They have the cash and the ideas to try a variety of different store formats. If you were in their shoes, wouldn't you do the same?
Obviously suppliers can't stand still either, because some of them have become your competitors.
Of course they wouldn't like to be described that way, but many of the industry's leading brands have either started their own chains or have begun selling direct via the Web.
This trend began with computer suppliers. As you can see by the annual TWICE Top 25 PC Retailers report starting on p. 34, Dell, Apple Retail Stores and Gateway are featured prominently.
While traditional CE manufacturers have used the Web to sell their products directly to consumers, or to point out local retailers who carry those products, for much of this decade, Apple's retail success as iPod exploded onto the market drivves the point home.
The Apple Retail Stores' ranked No. 12 on the TWICE Top 100 Consumer Electronics Retailers report (TWICE, May 8, p. 10), with $2.145 billion in sales for calendar year 2005, a whopping 45.6 percent increase. That same report also showed that Sony Style stores had $674 million in sales from 44 locations and online and ranked No. 22 for calendar year 2005.
Sales by Apple's and Sony's retail operations had to come from somebody. And Sony's innovative test of a kiosk program (See p. 1) will only add to the company's CE retail sales total. And now Pioneer just said it has expanded its online sales site to about 60 home and car SKUs. (See story p. 6.)
Will every brand that traditional CE retailers are selling, or would want to carry, begin selling directly to consumers? Maybe. Will most consumers turn their backs on traditional retailers and go with powerful national chains or retail operations of major brands? Some will, but not all.
To be as diversified as the products they sell and the consumers everyone serves, CE manufacturers need a healthy base of independent retailers out there. They know they can't do it alone. It is vital that independent retailers get the same pricing and availability they provide their own retail efforts and those of national chains.
If major brands don't, independents have an alternative. They will turn to the up-and-coming brands that are arriving here every day from China and other parts of the world.
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