This marks the 13th year I have developed the Top 100 CE Retailers rankings for TWICE, and as many hotels and buildings do with their floors, I wish I could pretend there is no 13th version.
Underscoring that feeling were comments from two retailers who, when talking about the state of their CE businesses, told me “TVs suck” and “I’m only in CE because I have to be.” These are long-standing retailers on the list and their comments sum up a dour 2016 CE retail industry.
Sure, the big guys like Best Buy and Amazon continue to pick up the crumbs from retailers who haven’t been able to survive, but we are watching a retail industry evolve into one where the biggest control the market. Looking back at the 2004 reports, the top 10 retailers accounted for 71 percent of sales on the list. By 2010, that percentage increased to 74 percent. In 2016, 84 percent of CE sales from the Top 100 go through the top 10 retailers.
If the likes of those outside the top 10, who we largely classify as electronics/appliance stores, were left to sell only CE, I do not think it’s a stretch to say they would not be around anymore. Note how many of these in the past few years have moved mattresses onto their floors, only to be followed with furniture. These retailers are savvy merchants who are moving into other categories because CE has not delivered for them over the past few years. They are not adding new floor space for these mattresses and furniture sets; it has come from reducing floor space for CE.
Compare this to the appliance side for most of these CE retailers. After going through the housing collapse, sales have been increasing and retailers are focusing on white-goods and those other margin-generating categories. A slowly recovering housing industry, product innovations and pricing are also helping to push appliance sales.
So where will the CE push come from?
The current crop of new products from innovators such as Apple, Samsung, Sony and LG has not yet been able to revitalize a weak CE industry. Note the slowing sales of iPhones as a bellwether that smartphone saturation is almost complete across households. New growth is not coming from the product side and new product categories have not yet gained traction.
Add to that the fact that the modest growth eked out by the Top 100 over the past five years is simply keeping pace with growth of new households. Over that time span, households have grown 1 percent each year, while the CE sales of the top 100 have simply kept pace. Average spend per household across the top 100 in 2012 was $1,095. In 2016, it was $1,088, across 4.7 million additional households. That’s not real growth.
I do not need to belabor the story of failures like hhgregg, RadioShack and others, but many years ago when a retailer flopped, newcomers were around bringing innovation and energy to the market. It may be happening, but it’s not on a large enough scale to notice, even online. In fact, when was the last time you heard of a new consumer electronics retailer starting up in your city? Not a new location from the likes of GameStop or Target, but someone who decided that CE retail was an opportunity.
I like Amazon. I’m an Amazon Prime member. I respect what they have done. But I don’t want Amazon as my only choice when I buy CE products. I don’t want my 26th year of doing this turning into a Top 100 Amazon Affiliate report.
What can the industry do to rebound? Keep pushing the frontiers of innovation; continue to lobby for reduced regulations and barriers to starting new businesses; and look beyond the younger-age segments, which have traditionally been the go-to groups for early adoption. As many of our clients look for ways to leverage the Internet of Things (IoT), the greatest innovation opportunities are likely to be among those who are not typically early adopters but with aging-in-place boomers.
Smart-home systems are still trying to hit a critical mass, but success will come to those who can deliver innovations that allow the aging population to remain in their homes longer, with controls allowing them to operate devices indoors and out, along with monitoring capabilities whereby adult children can keep a remote eye on them and their health conditions.
Bob Tancula is a 21-year veteran of TWICE market research partner The Stevenson Company and is founder and principal of Senex, which provides research for product development, trend mapping and market simulation.