Specialty Retailers' Status
By Steve Smith -- TWICE, 10/24/2005
In announcing the closing of its Good Guys stores, CompUSA's president/CEO Larry Mondry said, “The need for stand-alone, high-end home entertainment retailers is declining ... as home entertainment products become more prevalent among consumers.” (TWICE, Oct. 10, p. 1.)
Larry Mondry, a veteran CE and PC merchant, is well respected by us and by the industry, but his statement has to be news to the many local specialty high-end CE dealers who read his comments. One could debate whether or not the Good Guys, as it expanded at its home base in California and later acquired by CompUSA's parent company Grupo Carso, was really a “high-end home entertainment retailer” in the last few years. Or did the chain begin to ape the big box and mass merchants it was competing against as it expanded?
We're certainly not here to pile on the Good Guys, a chain that at its best was one of the more innovative and valued retailers in the industry, or to debate what the nature of a high-end specialty CE retailer really is. With A/V products becoming more and more complex the strengths of these high-end dealers — expert salespeople, great installation and service and top products — should mean that this important retail channel should be booming.
And as we have traveled around the country and visited many of these retailers, who are members of PARA and part of several industry buying groups, those retailers and organizations have reported strong sales and profits over the past several years. That's why national chains have begun to take pages out of the high-end specialty playbook, most notably Best Buy with its Magnolia Audio Video and Geek Squad operations.
During last week's CEA Industry Forum the organization's CEA market research department addressed the issue of high-end specialty retailers. (See story on p. 14.) It noted that while the general public says that it likes and admires the services and products this retail channel offers, and regular customers to those operations spend liberally there, only 17 percent of total CE sales go through the channel.
For many the stumbling block is price. (What a surprise!) While the CEA report does not say “Cut prices in half and make it all up in volume!” it indicates that these high-end specialty retailers could expand their loyal core audience with a variety of strategies. A couple of ideas that caught my eye were “just-in-time inventory philosophies” and “solution-based showrooms” like Ikea.
But one of the unmentioned keys to the success of this channel is that the overwhelming majority are not public companies that must continue to expand outside their towns, counties and eventually states to satisfy Wall Street. The local knowledge and local touch of these retailers, with entrepreneurial managers on site or close by to solve problems and implement new strategies, are an important advantage as sophisticated technology becomes more available and more national retailer want to become more and more local, upscale retailers.
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