By some estimates, the number of U.S. independent A/V car and home dealers is less than 70 percent of what it was 10 years ago. Some believe there are half as many, the result of relentless price pressure from mass merchandisers.
No doubt there are far fewer dealers today than in the past, but what about the future? Here are two scenarios:
Scenario 1: Downward price pressure continues, taking margin, sales and independent retail market share with it. More independents go out of business while mass merchandisers increase overall market share, at least in the mid- to low end of the market.
Scenario 2: The independent car/home A/V channel stabilizes while growth for some (but not all) mass merchandisers continues. Soon a renaissance occurs for a growing number of independent specialists, who gain increasing market share in their respective markets.
So, if we’re betting, which scenario do you think will happen? Well, based on what is, I have to go with Number 1, but based on what could be, Number 2. In fact, I will go so far as to say it’s not a question of whether or not the first scenario will happen, only when and by whom.
Here’s why: Much (but not all) of the “growth” occurring among mass merchandisers — Wal-Mart in particular — is of the “nature filling a vacuum” order. It happens because:
Circuit City and a few regionals went away, while …
- no other channel or retailer within a channel was ready to fill the void, at the precise time, and
- Wal-Mart decided it wanted a bigger slice of the CE pie.
The perfect storm? In a way, but not the way you might imagine.
Wal-Mart understands its limitations and plays to its strengths. I will bet the company will stay the course, improving what it does, selling still more, just as it has in every other vertical it has entered. But there is a natural limit, and it isn’t the total market.
I hope Wal-Mart succeeds. Its involvement introduces millions of individuals to products they would never otherwise consider. Yes, I know there are retail alternatives ranging from the diminishing list of independents all the way to Best Buy, as well as a very short list of other national mass merchandisers. But with all due respect to those retailers, each of which has its place in CE distribution, none does all that should and could be done, things that can be done only by a “new” independent.
If you are an independent and feel you’ve lost business to Wal-Mart, Best Buy and other mass merchants, you’re trying to sell the wrong product to the wrong consumer, likely in the wrong way. Many (but not all) who buy their home/car A/V products at a mass merchandiser have little to no need to buy from you, presuming you want to sell them what the other guys offer. Your customers are those who are ready to move up, people who are ready for more functionality and greater performance, including the kind of pre- and post-sales support not available at Wal-Mart, Best Buy, and other mass-merchant retailers.
But you’ve tried, you say, and nobody listened. I’m sure you did, including the fact that what you used to do brought you great success. But that was then and we’re talking now, and of greater importance, tomorrow. More than any other business you can name, yours is now unquestionably different, 10,000 percent different than in the past, and if you haven’t made the mandatory changes …
No one, including me, can tell you how to run your business. You are called independents for a reason, and the things that make you so mean one size does not fit all. However, I can provide a suggested framework for change that you can use as a template for reinventing your business. You can call or email me and I’ll be happy to send it at no cost or obligation to you.