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When A ‘B’ Isn’t Really A ‘B’

It’s report card day — at least for CE retailers.

Our annual day of reckoning for retail, known around here as The TWICE Top 100 CE Retailers Report, hits today and our overall grade for the industry is probably a solid B, based on a decently healthy 4.3 percent growth in CE sales at retail in 2015. But as always with letter grades, there is more to the story.

A look behind the numbers reveals a challenging landscape for traditional CE stores, and it’s not a new story. Bottom line, more and more CE purchases are being made online, and outside of a few outlying performers, those purchases are coming at the expense of CE specialists and independent dealers.

As I said, this is not a new story, but what sets apart this year’s narrative is the presence of a rapidly growing, ravenous villain that is raiding the pantries of the CE villagers. Yes, it is he who should not be named: Amazon.

The online behemoth has been stealing share for years but set itself apart this time with a whopping 28 percent growth in CE sales in the year. To put it in perspective, the Top 100 CE retailers grew their sales by a total of $5.64 billion — more than $5 billion of that was Amazon’s growth. In raw numbers, if you take out Amazon’s growth, the rest of the Top 100 grew their sales collectively by less than $600 million.

In all, there were 38 retailers besides Amazon that our research team identified as showing growth in 2015.

One of those retailers was Best Buy, which managed to hang on to the No. 1 slot by racking up more than $30 billion in CE sales, at a comparatively healthy growth rate of 3.8 percent. If you are looking for evidence that Hubert Joly’s “Renew Blue” resurgence plan is showing progress, the defense rests.

But once again, the story behind the numbers is more compelling, because much of Best Buy’s progress has come digitally.

In its most recent reported quarter, higher conversion rates sent online revenue up 13.7 percent to nearly $2 billion, raising e-tail’s share of total domestic revenue to 15.6 percent, up from 13.6 percent last year.

Compared with Amazon, those numbers may look diminutive, but Best Buy is showing that there is still share to be had in online CE sales. As are others, like Dell, B&H Photo and Crutchfield.

Amazon’s amazing year caused it to leapfrog Walmart as the new No. 2 CE retailer in the U.S. Walmart, which was everyone’s favorite punching bag before Amazon came along, continues to struggle in the CE category, with their CFO calling the category “a sales headwind.”

The challenges facing traditional CE retailers are certainly daunting, but they are not necessarily fatal. What has been proven time and time again is innovation, brilliant merchandising and superior customer service breed customer loyalty. Just look at the growth at Apple Stores, Electronic Express, Nebraska Furniture Mart and even Costco.

Give the people what they want and they will come back.

As always, our Top 100 report is a massive undertaking, so thanks go out to those behind it — our research partner, The Stevenson Company, and their point man, Bob Tancula; project honcho, senior editor and retail guru Alan Wolf; and digital editor Lisa Johnston — for making the whole thing readable.