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CE Retail Facing Trying Times

Competitive pressure from low-margin discounters and accelerating product life cycles will continue to plague CE specialty retailers for the balance of the decade, forcing them to rethink their business practices.

That’s the word from Retail Forward, a management consulting and market research firm, here, that specializes in retail intelligence and strategies. In its recently released report, Consumer Electronics Industry Outlook, the group forecasts CE spending to grow 5.5 percent annually, or 15.8 percent after adjusting for persisting category deflation. However, the challenging environment for CE specialty stores means that nominal sales in this channel will grow at a slower 4.4 percent annual pace, the study says.

“Persisting economic weakness is exposing a new, tougher retail environment for CE store operators,” observed economist Stephen Spiwak, who penned the report. To boost sales and margins, he said, dealers will need to find new growth vehicles — other than price cuts — to stay ahead of life-cycled CE products and mass channel and online discounters. Counter-measures include:

  • Refocusing on the core business. A few of the major CE players are dumping assets unrelated to their core businesses, freeing up resources that can be used to develop and implement new growth strategies, build and upgrade stores, and invest in new technologies that can improve operations, optimize inventory management and streamline their supply chains.
  • Testing new store formats. A quickly maturing CE superstore format, along with rapid expansion by discount chains, has sparked tests of new CE prototype stores for new markets in an effort to boost sales and market share, the report notes.
    In addition, older stores are being relocated or renovated with improved adjacencies and displays that make it easier to respond to merchandise shifts and which simplify and enliven the shopping experience.
  • Getting more out of the store. In addition to revitalizing stores, enhanced customer retention strategies that differentiate the offer and squeeze out more sales will be a requirement for success going forward, the report says. Strategies include bolstering service levels, developing loyalty programs, making the shopping process more engaging and fun, installing the latest analytic solutions to optimize pricing and inventory management, and enhancing multi-channel capabilities, the report said.

Interestingly, many of these strategic tactics are currently being tested and deployed by channel leader Best Buy.