In the past there were several big box electronics retailers. Best Buy, Circuit City, and Ultimate Electronics topped the list, but of those three only one remains. Circuit City went first into chapter 7 followed by Ultimate Electronics, a couple years later. So what is happening in consumer electronics retailers and how is Target possibly making its move into the arena?
Shifting electronics sales, online over in-line
There is a big shift in purchasing habits for electronics customers. Many are moving towards internet sales, especially those utilizing Amazon.com, EBay, and other online retailers. These sites offer lower priced electronics and services that many big box stores offer. Buying a TV on Amazon versus in a Best Buy could mean a difference of $100 or more. No matter how much brick and mortar retailers discount their products they may never be able to reach and maintain the discounts of these online sellers. The cost of logistics, employees, and retail space is one of the biggest reasons for this. Another issue is that online retailers are able to carry a wider selection of products then brick and mortar retailers. This means giving customers not only a huge price advantage but also an extensive array of choices. Ultimately this is what brought down locations like Circuit City and Ultimate Electronics.
The next shift is towards much smaller brick and mortar locations with expert services. Think Apple stores and Apple Genius’. Consumers are looking for their shopping experience to be geared around their needs with tailored services- product training, solution sales, and product maintenance/upgrading. You may buy your items online but how will you fix it, add to it, or learn how to use it? Many big box retailers have started this shift- Best Buy has its Geek Squad, but the issue is still large costs in retail space and an extensive payroll cost due to employee coverage in a large store.
The situation may have already caught up with Best Buy, they have been seeing lower and lower profits over the past couple of years and this Forbes article points out, they might go extinct like their competitors if there aren’t drastic changes made.
Store within a store
The shift towards smaller stores with sales/tech experts to guide customers makes room for entrepreneurs and small box stores. There are also opportunities for big box stores to enter this movement. Target has seen this transition and found a unique way to utilize their size and customer base to their advantage through partnerships. The first endeavor with a “store within a store” concept is with SCK Wireless, AKA RadioShack. The locations are within the electronics department but the sales associates manning the posts are RadioShack trained and paid employees. RadioShack is known for its expert sales associates and has been running- successfully- small electronics locations for decades. This partnership allows Target to gain high margin mobile phone sales while providing quality sales experts within a large store. This means that Target can concentrate on what they’re good at while moving into the change in the consumer electronics market that has yet to be fully tapped into.
Target isn’t just sticking to mobile phone sales with the SCK Wireless concept. Target has recently confirmed that they will be working with Apple to create a boutique style Apple Store within most Target stores. See more here.
What it all means
Internet retailers will most likely continue to be the front runners when it comes to consumer electronic sales. But, retailers like Target will be able to pick up where Best Buy is leaving off. The trend is moving back towards small boutique locations with sales experts- concentrating on services rather than sales. This not only leaves opportunity for retailers like Target but also for mom and pop stores to re-enter the market. The days of large foot print electronics retail stores has most likely gone the way of the Dodo.