Independents' day
Is power shifting back to the indie PC shops that once ruled the market?
When the supermarkets began stocking PCs alongside pork and parsnips in the last decade, there were concerns that independent IT retailers would be squeezed out in the same way local butchers and greengrocers have been.
With their enormous purchasing power and stack ‘em high, sell ‘em cheap mentality, the likes of Tesco, Asda and Sainsbury's would quickly come to dominate the market and leave small PC shops unable to compete on price, it was feared.
Those concerns have proved wide of the mark. While the indies are still thriving, Tesco is reducing its exposure to the electricals sector, while some other large chains, including Comet, have vanished completely.
What's more, recent research suggests that despite their small stature, local PC shops have not only remained price competitive with their superstore rivals, but are beating them on price on most small-ticket items.
Distributor Target Components compared the average pricing offered by 102 indies with a range of chains on a basket of 60 common IT products and services. This included Windows software, DVD rewriters, internal hard drives and laptop memory.
On the 52 comparable products PC World stocked, the Dixons Retail-owned brand came out 11 per cent dearer than the indies. Asda and Tesco were 12 and seven per cent more expensive, while Staples came out 28 per cent dearer, the research found.
Despite this, separate research from the distributor found that only 28 per cent of the general public believe the indies offer better pricing and value for money than the chains.
"The latest price survey confirms last year's findings that the opposite is true -independents are lower priced on average than their major chain rivals," said Paul Cubbage, managing director of Target.
Cubbage said consumers were still being "conned" by the marketing and advertising pumped out by the market giants, and their ability to take a hit on "loss leaders" such as cheap laptops before making their money on accessories.
The average price of a DVI adapter and SVGA cable across the indies was ￡5.70 and ￡6.98 respectively. This compared with ￡12.99 and ￡14.99 at PC World.
"Perhaps people shouldn't be surprised at the results because the margin required by multiples is typically much higher than most indies would dare to put on - they are chasing 40 to 80 points margin," Cubbage said.
Phil Griffiths, owner of Chesterfield-based independent retailer Chips Computers, said his basket of 39 comparable products came out at ￡748.80, with PC World at ￡933.41.
"Everyone thinks the larger stores are always cheaper but this is definitely not the case, especially on services," he said. "On the 39 lines we did which were the same as PC World, we were cheaper on 24 items."
Garry Stonehouse, owner of Cleveland-based PC shop Gbiz IT Computers, said his basket of products came out at an average of 17 per cent cheaper than PC World, Argos, Tesco and Asda in Target's research.
Stonehouse claimed that indies are beginning to make a comeback against their superstore rivals.
"I don't think things will ever go back to the early days of computing when independents were the only place to go," he said. "But people are beginning to mistrust the chains. They have had enough of being sold warranties that turn out to be useless or additional products they don't need and over-priced accessories."
He added: "The big chains cannot offer the advice on whether the device works with all their other devices in the home, which is the next big thing. Because we are geeks, and have this sort of stuff ourselves, people can come in and see it for themselves."
Graham Tilley, owner of independent IT retailer Coventry Laptop Clinic, said: "There's a general perception that if you go to a big store it will be cheaper. They can probably undercut us on laptops as they sell them on such wafer-thin margins but they make their money on peripheral and leads, which is where can undercut them."
The independents have had to compete against the chains selling laptops as loss leaders for ten years, and have as a result become stronger, said Cubbage.
"That's why most of the independents are now multi-faceted," he said. They're not just selling but repairing, doing home visits, online sales through eBay or Amazon and are looking after local businesses. They have gone through the mill and have become much better."
Tilley added: "If people want more of a personal touch they will come to us."
In a statement, Dixons Retail said highly competitive pricing is "central to its multichannel strategy" and that it tracks 30,000 prices at 20 key competitors daily.
"We will continue our relentless drive to sharpen our prices against multichannel and indeed online competition," it said.
Cubbage said that, if anything, the research was biased towards the multiples as it took their cheapest online price, compared with the typical in-store price offered by independents.