Highstreet electronic retailers face a bleak future

Channel News

Canalys warns it will look very different by 2020

Consumer electronics (CE) retailers could face a similar future to the doomed Surcouf, Best Buy Europe, CompUSA and Circuit City and disappear from the highstreet, Canalys has said.

The market research company has said the predicted dismal future of these retailers is as a result of “strategic failure” of the CE retailing model. It said if similar retailers wanted to remain in the market they had to learn quickly from the mistakes of the fallen.

Canalys CEO, Steve Brazier, said the likes of Best Buy and Surcouf had been hit by a perfect storm of competition from the internet and supermarkets.

“They lost too much business to competitors undercutting them on price and failed to respond to the many attractions of Amazon’s online approach, such as its vast stock ranges, peer reviews, recommendations, free delivery and excellent returns services,” he added.

It’s not just online retail that’s causing trouble. Canalys points out that supermarkets have proved adept at running promotions for low-end products. These were often willing to sacrifice margins to bring customers to their stores as well as having location and parking benefits.

Ironically, technology itself is proving to be a menace in the CE world.  Canalys thinks that their content businesses have collapsed. Most have seen their vinyl, film, film processing, CD and now DVD businesses disappear, while Kindle and iPad apps were removing opportunities in books and magazines, it said.
Software applications and gaming are transferring to online and download businesses too.

As a result the research company said that CE retailers offered very few benefits to consumers and only appealed to the “rapidly shrinking proportion” of people who were unable or unwilling to shop online. It added that although they also drove impulse buying and let people  pick up a product immediately, rather than the next day, that was “about all.”

And if retailers thought they could catch up they are sorely mistaken, with Canalys claiming that “the window of opportunity has closed.” It said they would never catch up with the internet specialists as a result of starting late, being under-invested and unable to build a culture to excite talented programmers.

“They wrongly assumed the benefits of “touch and feel” would continue to protect them, but a new generation of consumers has grown up with a different way of thinking. The success of online fashion retailing is a strong indicator that no category is safe from this change in behaviour; other retailers should take note,” Canalys said.

However, there is some advice for the flagging industry. Canalys suggests that some may explore becoming genuine showrooms – that demonstrate but do not sell. However, it pointed out this would need funding from vendors. It also pointed out that Apple’s store approach was a good role model, however its success also hinged on the iconic products rather than the retail outlets themselves. ChannelBiz UK said the same.

As a result it concluded that by 2020, many city centres would look quite different from today, with many famous retailers disappearing.

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