RETAIL 2020
THE CHANGING CONSUMER ELECTRONICS RETAIL LANDSCAPE Stephen Mears of research organisation Futuresource Consulting examines how the balance between vendor direct, multichannel and physical store retailing is changing, and how this will affect Consumer Electronics distribution in 2020
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ccording to Futuresource’s latest Consumer Electronics Retail Distribution report, around 10% of all global CE shipments were shipped through the vendor direct channel (i.e. through the vendor’s own physical or digital retail structure). This is driven primarily by the USA, UK and China, three retail landscapes where vendors are keen to control the consumer’s engagement with their products, manage upgrade cycles and drive upsell opportunities. This method of retail has supported Apple’s success since 2001, with the brand growing a strong retail business which accounted for 31% of net sales in its 2018/19 financial year. While other vendors have had a physical footprint for far longer, using their stores to showroom their products and raise brand awareness, the ever-changing retail landscape is posing challenges to established vendors and retailers and forcing a rethink in strategy.
COMPETITIVE CHALLENGE
are able to directly experience a product before they purchase it, which becomes an increasingly important part of the shopper journey towards the more premium end of the market. Moreover, in-store assistants are able to create upsell opportunities, either through warranties, other devices or services. As the consumer ‘Internet of Things’ (IoT) develops, and the ecosystem of connected devices in both personal and home electronics develops in line with the emergence of virtual assistants such as Alexa, Siri or Google, in-store engagement presents retailers with the perfect opportunity to demonstrate that the whole ecosystem is worth more than the sum of its parts. Finally, customer service more generally is a unique retailer advantage often only found in-store. Retailers are able to create environments where consumers can learn how to set up or best use their device (Apple’s Genius Bar is one example of this), as well as offering inhome consultation services such as is done by Best Buy.
Underlying this, of course, is the continuing competitive challenge between physical retailers and their online rivals, and the continuing emergence of multi-channel strategies as a USING THE IN-STORE means to combat e-commerce giants. The ADVANTAGES same Futuresource report highlights that 27% Demystifying technology and finding solutions of CE commerce flows through multi-channel bespoke to the customers’ needs are all things retail methods. This retail strategy has helped that in-store retail engagement can do well, and companies such as Best Buy survive and even it’s an advantage over pure-online retailers thrive in a retail landscape disrupted by that shouldn’t be squandered. While Amazon over the last decade or so, online retailers are continually while retailers that have failed developing algorithms and to adapt to the emergence services to negate their of e-commerce have “Consumers rely disadvantage and are struggled. on a host of checks able to leverage their The advantage that and balances before own vast competitive multi-channel retailers advantages in have over their puremaking a major purchase, price, logistics, and online counterparts such as product reviews, convenience, multiis threefold, all based word of mouth, social channel retailers are around the importance media influencers and equally expanding of their physical beyond.” their digital presence footprint. The first two to offer the best of both benefits centre around retail methods. To offset the ‘showrooming’ effect of the continuing threat of online a physical store. Consumers
retailers, multi-channel strategies need to centre on building a good customer profile both in-store and online, before improving their abilities to market to their customers in a bespoke fashion. Of course, a major concern here is that consumers leverage the best of both types of retail, with in-store engagement allowing them to receive expert service and advice before they then turn to online retailers for the best prices. Price matching mechanisms and promises may offset this somewhat, but there remains a general perception that online shopping is always cheaper, so multi-channel retailers need to find a clearer advantage elsewhere. The declining physical retail landscape does present a challenge for premium CE vendors, as it limits their ability to showroom their most premium devices and leverage the advantages
of in-store engagement. It is not, however, a wholly negative outlook. Consumers rely on a host of checks and balances before making a major purchase, such as product reviews, word of mouth, social media influencers and beyond. And, if the consumer does want to try before they buy, they can always go to their local Best Buy, Fnac Darty, Currys or other CE specialist stores. To counter the challenges of the modern retail landscape, CE companies can rely on and support their retail partners, especially those with an established multi-channel strategy. 2020 is expected to see CE retail continue to move towards pure-online and multi-channel retail methods, with vendors also increasingly leveraging a direct retail strategy to better control margins in mature markets. The continuing disruption to established retail is set to continue, and while it will continue to present challenges to vendors and retailers alike, it also presents opportunities to those willing to adapt.
JAN/FEB 2020
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