Will more famous retailers vanish?

With market analyst firm Canalys predicting that more consumer electronics retailers will disappear from the market, what can regional power retailers do to avoid following in the footsteps of their high street peers who are disappearing fast in Europe and the United States?

Tags: Jacky's ElectronicsPromate Technologies Ltd (www.promate.net)
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Will more famous retailers vanish? Having an online presence is critical for any retailers, says ALkaar.
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By  Manda Banda Published  June 11, 2012

With market analyst firm Canalys predicting that more consumer electronics retailers will disappear from the market, what can regional power retailers do to avoid following in the footsteps of their high street peers who are disappearing fast in Europe and the United States?

Market analyst firm Canalys has predicted that many more consumer electronics (CE) retailers will follow in the footsteps of Surcouf, Best Buy Europe, CompUSA and Circuit City and disappear from the high streets of Europe and the United States. It describes this as a result of the ‘strategic failure’ of the CE retailing model and warns retail chains in other segments to learn quickly from the mistakes of the fallen.

“They were hit by a perfect storm of competition from the Internet and supermarkets. They lost too much business to competitors undercutting them on price, and failed to respond to the many attractions of Amazon’s online approach, such as its vast stock ranges, peer reviews, recommendations, free delivery and excellent returns services,” said Canalys CEO, Steve Brazier. “Today’s consumers are even willing to browse for a book in a local store then order it from Amazon at a higher price simply because they want Amazon to understand their entire library, to optimise future recommendations.”

Brazier added that: “The window of opportunity has closed; they will never catch up with the Internet specialists. They started late, under-invested and could not build a culture to excite talented programmers. The success of online fashion retailing is a strong indicator that no category is safe from this change in behaviour; other retailers should take note.”

Ashish Panjabi, COO, at power retailer Jacky’s Group, said retailing in the UAE and certainly in the region is quite different to that in Europe and North America. “We are in an environment where most retail outlets are in shopping malls and not on the high street or standalone locations. Being within a mall, you work off the footfall and traffic that a mall generates and the idea is to be where the consumer is at the end of the day and not expect a customer to come to you,” he said.

Panjabi said with the saturation of malls in Dubai meaning retailers can be closer to customers, the convenience of shopping is probably higher than it is in most other parts of the world.

Having said that, Panjabi said most retailers need to rationalise their retail operations. “You can’t be in every mall and you need to consider what sort of presence you commit to in each mall that you’re in. We’ve seen several retailers commit recently to locations or areas that just don’t make sense and this will over the period have to be rationalised as the margins just don’t exist in the channel to justify such growth,” he said.

He said the UAE has traditionally been a market that works on volume but you need to find the right mix between volume, margins, shop size and rents paid. If you get one component wrong, then it could mean that particular location gets shuttered over the long term, said Panjabi. “This is probably where a lot of retailers in Europe and the US got things wrong, it is an area that we rationalised ourselves during the leaner years and it is something that a lot of other retailers will have to look at over the next few years,” he said.

As well as online competition, Brazier said supermarkets have proved adept at running promotions for low-end products, and are often willing to sacrifice margins to bring customers to their stores.

Panjabi agreed and said: “We also need to be aware that there is more choice available to a consumer today whether it be online or in malls. This means that as retailers if you don’t have a strategy to adopt this, you need to counter it. This is obviously what led to a lot of retailers in Europe and the United States seeing declines in their business and is something that we all need to be wary of in this region as well.”

Canalys says the growth of Internet shopping should not have come as a surprise to the retailers; the threat has been building for 15 years or more.

Yasir ALkaar, director, Promate Technologies, agreed and said having online presence is critical for any retailer in this day and age. “Even if you don’t sell your products on-line, it’s critical to have web presence,” he said.

ALkaar said it is crucial for retailers in the region to find ways to identify and eliminate customers who cost them money. There’s no doubt that profitability can be enhanced with good information. “The challenge that most retailers face is obtaining the right information and then making decisions that enhance goodwill while reducing losses,” he said. “It might make sense to eliminate some customers from the preferred customer mailing list if they haven’t purchased in your store in the last 6 to 12 months.”

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