Start Of A New Era
By Steve Smith -- TWICE, 2/9/2009
The end of Circuit City marks the end of one retailing era and the beginning of a new one in consumer electronics. And the new era may seem familiar to some who remember the late 1970s and early 1980s.
Back then there was RadioShack as a national CE chain and not much else. At the time, Circuit City and Best Buy were part of a large pack of regional retailers that dominated the electronics/appliance market. Distributors played a key part in CE sales, with few suppliers selling direct.
Both chains were members of the NATM Buying Group in the mid-1980s. At that time, these two retailers, and others, saw opportunities in other markets. They left the group due to competitive concerns and went to Wall Street for some capital to expand. (Ah, those were the days.)
Plenty of other well-known regionals followed in their footsteps. But by the 1990s they eventually got gobbled up by Circuit City and Best Buy, got slammed by mass merchants like Wal-Mart and others, or just plain mismanaged their way out of business.
That's history. But what will come next? My guess is that we won't see the likes of a new national electronics chain any time soon, if ever. Today's regional powerhouses don't seem to want to overreach.
This should leave Best Buy as the only national electronics/appliance chain in the U.S. Even though it has announced a layoff, Best Buy is not going away any time soon. On the CE side, RadioShack is still around and will hopefully meet the challenges of its own and those of this economy.
Of course, there will always be Wal-Mart. It will continue to have the capacity to ship a large quantity of boxes of just about any consumer product at low prices for the foreseeable future.
Manufacturers legitimately worry that Wal-Mart will take a good piece of the business now that Circuit is gone and will dictate tougher terms than ever. Wal-Mart will pick up share, but will it lose focus in CE (like it sometimes does) and eventually treat it like any other category?
Regardless, CE manufacturers will (or at least should) turn to the aforementioned regional retailers and independents to explain and sell its wares, if for no other reason not to be beholden only to Wal-Mart or Best Buy. Most of today's successful independents are affiliated with buying groups giving them buying power.
And, of course, there are dot-coms, the most notable being Amazon, which didn't exist a dozen years ago, let alone in the mid-1980s. Younger consumers are more inclined to buy even large-screen TVs online, so dot-coms run by existing retailers or new operations will take a larger chunk of the market because, thanks to the Web, they can also research and explain new technology.
Distributors should continue to increase their influence since more CE manufacturers are relying on them to sell and service the brick-and-mortar and online retailers who will pick up the market share. (As for manufacturers opening their own retail stores? Not likely, but they may become more Web-savvy in selling to consumers.)
At least that's what my cloudy crystal ball predicts, if manufacturers want a diverse number of retail channels that can sell profitably as well as explain their new products and technologies.
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