Breaking the chain?
Following Comet's sad but predictable demise, are the days of big-brand tech retailers numbered? Sam Trendall examines what they need to do to survive
The collapse of Comet comes at the end of a harrowing year for the UK high street. In the past 12 months big names including JJB Sports, Clinton Cards, Game, Peacocks, Barratts, La Senza and Focus DIY have all entered administration, with each employing between 2,500 and 10,000 staff at the time of their demise.
Aside from Game and Comet, in the past 15 years, nationwide technology retailers including Rumbelows, Tandy, The Computer Shop and the short-lived UK operation of Best Buy have all bitten the dust. Do big tech retailers have any future in this country?
One only has to look at Apple's results to know that not all tech stores are struggling. But Jeremy Davies, founder of analyst Context, asserted that few other IT brands could successfully adopt a similar model, adding that the future for big retail park tech shops appears bleak.
"There are two roads into the future. One is the premium, upscale store such as Apple. Whether any other brand apart from Sony could pull this off, however, is the question. Lenovo? Samsung? They are not in the same league - yet," he said.
"The other is a strong online presence backed up by smaller, local shopfronts. People want to buy online, but it seems they also like to have a look at an actual product first, and perhaps collect it as well, at their leisure. What is clear, however, is that the days of the warehouse-size, out-of-town retail outlet are over."
The performance of Apple clearly bucks the trend of the unyielding IT retail climate. According to a representative from one of the vendor's Premium Resellers (APRs), the uniqueness of Apple's products and its brand strength give the channel an edge over more wide-ranging retailers. But APRs are not immune to the slowdown, he asserted, with Apple's ubiquity sometimes a disadvantage in selling to increasingly clued-up consumers.
"There has been a slowdown on the high street, it is very tough out there; most of the APRs are looking at a 15 per cent downturn year on year," he said. "Also, people are very conscious of the life cycle of Apple products. In the run-up to the iPad mini coming out, our iPad sales fell through the floor."
The APR representative expressed his doubts that warehouse-style chain retailers could survive, and claimed that "the John Lewis model" of focusing more on service levels than low prices is the only viable approach for nationwide retailers.
"They focus on customer service and making sure they have a good range of products available," he said. "If you have that, customers will happily come in and spend that bit more on a laptop."
Bertie Stephens, chief executive of consumer deal website Flubit, suggested that retailers should not throw the baby out with the bathwater
and can lean on their physical scale to kick-start online sales success.
"Bricks-and-mortar only is not a viable strategy in IT retail, but that does not mean online-only is the answer," he said. "Traditional retailers need to
maintain their natural advantages - such as hands-on product experiences and immediacy of gratification - while taking advantage of the expanding online market.
"Many of the costs associated with bricks-and-mortar sales, such as logistics and on-hand stock, provide capacity that can be turned into online wins. The key is not ‘go online-native or bust'. The key is using the strengths already paid for to win in new ways."
Show and tell
Making sure you get the right mix of hands-on retail and the ease of e-tail would seem to be the key. Mark Needham, chairman of distributor Widget, argued that the last remaining nationwide big-box retailer is getting it right in this regard.
"It is well known that e-tail is still gaining ground on bricks and mortar, but people who can get online and physical together in one package are doing very well," he said. "Dixons is getting it together on the internet and that is enabling it to fight back against Amazon."
Venda is also an e-commerce specialist, but its chief executive Eric Abensur is another to believe that "the demise of Comet certainly is not proof that bricks-and-mortar retail is an unworkable model for IT".
"Online-only is risky for IT retailers with the dominance of the big players such as Amazon. For IT retailers there is something to be said for having a physical store, or a retail showroom, such as Apple," he said.
Richard Holway, chairman of analyst TechMarketView, also claimed that an Apple Store-style showroom approach could help multi-brand retailers fuel online and physical sales, and argued "maybe this could be funded by suppliers".
"This requires quite a mind change for suppliers who have not in the past been used to paying for floor space," he added. "If that does not work, should we really be surprised or disappointed if stores such as Currys, Argos, PC World and the like disappear? It would certainly require a brave or foolish investor to shore up a retail model which is now fatally flawed."