Electrical retailers face bleak future
LOCATING the source of Kesa’s woes is fraught with difficulty, but its problems aren’t particularly new.
Electrical retailers have been trading on wafer-thin margins for many years now, a fact that was disguised by the boom years when the property bubble meant TVs and white goods sold by the lorry load.
When the crisis hit, the likes of Comet and Dixons, owned by DSG, suffered along with other retailers, but they were offered a short-term reprieve by the World Cup and changes in the VAT rate, which prompted customers to bring purchases of big-ticket items forward.
Now, however, a combination of factors have conspired to make life almost impossible for electrical retailers.
First, more competition. Best Buy, the recent joint venture between Carphone Warehouse and the eponymous US firm, has opened 10 UK stores while Tesco, along with other supermarkets, is also selling more electrical goods. They too have suffered in recent months, although they are well-diversified enough to soak up the pain.
Then there is the biggest squeeze on real incomes since the 1930s: meals out and big-ticket items like TVs are the first to go.
And of course there are the online players like Amazon, which is famously secretive about how much kit it sells in the UK (although we can be sure it is a lot and growing).
Less remarked upon is a shift in consumer behaviour. Those who do have the disposable income aren’t buying flat-screen TVs, but iPhones, iPads and netbooks.
Because most of these consumers already know what they want, they don’t need to browse in a high street store. Instead, they’re obsessed with getting the best price – and they certainly won’t find it in a branch of Comet.