A Stampede Of Competitors
By Steve Smith -- TWICE, 2/23/2004
A call came in last week just after President's Day weekend from a daily newspaper from the Midwest. The news hook for the paper was that Circuit City just closed a couple of stores in the area, while Best Buy seemed to be more customer-friendly. The reporter wanted to know who would win this "battle of national chains" for CE retailing supremacy in the United States.
I'm sure executives from Best Buy and Circuit City reading this are probably saying to themselves, "Oh, if it were that simple."
To use the vernacular, "This ain't a match race." We're a little more than two months away from the Kentucky Derby, the first jewel of racing's Triple Crown that provides a stampede of a dozen or so thoroughbred three-year-olds. That's what CE retailing has been for years, a stampede, only today it's more complicated.
Take a look at the TWICE Retail Roundtable, which begins on page 16. Held annually at CES and moderated by senior editor Alan Wolf, it illustrates the dramatic new challenges that retailers and manufacturers face in today's marketplace.
Here are just a few of the new realities:
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More CE manufacturing than ever before is taking place in China. That is driving down the cost and price points, some say prematurely, of new, emerging and profitable categories.
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This development has allowed traditional PC retailers and manufacturers to enter digital CE categories profitably, with even thinner profit margins, by using its well-honed supply-chain management tactics.
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Home networking, either PC or audio/video-based, is almost ready for widespread consumer acceptance. For retailers to cash in on this trend, traditional and new-wave retailers need to make a bigger investment in their businesses to succeed.
What's the bottom line? More than ever, everyone is vulnerable to a quick, lethal attack. All of the major chains participating in our Roundtable said they are all fine-tuning their approaches to the market. They don't want to be a victim of consolidation.
And I didn't forget about Wal-Mart. The retailer who taught everyone how to manage supply chains is also changing to adapt to sell new, relatively complicated, CE products.
In the middle of all this are independent retailers, who have done pretty well over the past several years selling upscale major appliances and electronics. I explained to the newspaper reporter who called me that the performance of independent retailers has gone largely under the radar of business analysts and the like, since all of the retailers are privately-held businesses.
Of course any independent electronics/appliance chain worth talking about is part of a buying group. The largest, Nationwide, held its winter meeting earlier this month. (See story on p. 1.) They seemed to be doing very well, but the message that executive director Ed Kelly is telling their membership is that they have to be as aggressive in managing change as they have ever been, just to maintain their growth.
Our thanks to retailers that participated in our Retail Roundtable at CES, and to Nationwide for inviting us to its winter meeting. We look forward to visiting with the MARTA Cooperative of America and NATM Buying Groups, who will probably hear the same message at their dealer meetings during March.
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