Comet’s passing brings a brief celebration for rivals’ shares but the challenges they face haven’t gone away

 
Marc Sidwell
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COMETS are said to burn across the sky on the death of a prince. The passing of this Comet was marked instead by the rise of its rivals’ share prices, with Dixons Retail Group doing especially well on the assumption that its chains will pick up business.

But no one can pretend that kind of optimism burns especially bright. A diminishing number of retailers fighting over a diminishing market is a dispiriting prospect. And Comet burning out does nothing to change the two dominant trends of gloomy economic conditions cutting consumer spending and online shopping disrupting bricks and mortar business models.

It is true that Comet is not necessarily a bellwether for the sector. Turning such a deeply troubled retailer around was never going to be an easy task. Otherwise Kesa would not have got rid of it for just £2 last November – while agreeing to pay £50m itself and continue to take on the liability for its defined benefit pension scheme, almost £40m in deficit. Still, among those surviving retailers, the awkward question is not just what share of Comet’s customers can they divide up between them, but who is in the unenviable position of taking the troubled chain’s place as weakest of them all.

The answer shouldn’t be Dixons, which seems to have found something of a sweet spot between online and physical retail space with its PC World, Currys and Dixons brands. And the Home Retail Group, which owns Argos, also saw a share price bounce yesterday, and has just launched a new strategy for Argos that will see its trademark catalogue shrunk back in favour of a stronger tilt towards online. But while both groups’ share prices have been doing better of late, Dixons has not recaptured the levels it achieved before 2008, while Home Retail Group has some way to go to recover the losses it sustained in 2011.

The fundamental problem for the remaining electrical retailers with physical stores is that losing one competitor doesn’t really ease their competitive challenge. Consumers are still counting the pennies and competitors are still plentiful. The big online beasts like Amazon, with its huge volumes and efficient warehousing and delivery systems, are an ever-growing danger. But in the real world too, the expanding catalogues of the supermarkets create another inescapable pressure. Tesco is now the third biggest electrical retailer in the UK. The John Lewis Partnership, having the advantage of combining Waitrose and John Lewis, has seen strong electricals growth this year, bucking the sectoral trend. To avoid following on Comet’s coattails, those it leaves behind will need to overcome these increasingly intractable challenges.