“Can Electronics Stores Survive?” asks the Wall Street Journal.
The future doesn’t look good with the liquidation of Circuit City in the United States and the exit of Australian giant Harvey Norman from the electronics markets.
Yet Apple Stores are growing and while it’s tempting to dismiss their sales training as brainwashing the truth is their staff are among the most profitable retail employees on the planet.
The real problem is the Big Box category killer store featuring wide product lines but poorly trained staff motivated only by commissions is a business model whose time has passed.
Customers can now go online, research website that are far more informative and honest than the staff at the megastore then get the appliance delivered and often installed for less than the shelf price at the mall.
The earliest industry this has affected is the computer sector – long ago companies like Dell and Gateway changed how people shopped for PCs.
Given the economics, it’s surprising the low margin big box stores survived as long as they could and the main reason they did was because appliances were an ideal channel for pushing profitable finance plans and extended warranties.
Often the store and sales assistant made more money out of the “interest free 72 months” deal, the three year warranty and the connector cables than they did from selling a top end laptop or plasma TV.
Now the easy credit era is over, those add-ons aren’t so profitable and with Amazon leading an army of e-commerce retailers changing customer expectations, those businesses locked into Big Box, easy credit way of doing things have to rethink how and what they are selling.
Harvey Norman’s founder Gerry Harvey said recently that people would still buy big items from his store. The reality is they are moving across to sites like Winning Appliances where they can choose the items, have them delivered installed and the old appliance taken off, a godsend when you’re dealing with a 50Kg washing machine or fridge.
Apple’s success shows retail does have a future. It just doesn’t lie in the low service, Big Box model that grew out of the easy credit and cheap energy economy of the late twentieth Century.