Is it all doom for the UK's electronic market?
During the pre-recession boom years, the electronic market in the UK was on the fast track to success. While many stores expanded, others merged to have a commanding share in the market. Sales were at an all time high and their shares were doing very well. However, this has not been the news in the recent past when the big boys of the retail chains have had to announce gloom and doom. If only we could back track to the years of boom and enjoy the current gadgetry boom – that only a few are enjoying because of the spending squeeze.
Most companies are doing poorly, posting losses – some for the first time in a decade – and their share prices aren't surviving the gloom either. Dixons Retail group shares for example has been on a downward tumble since May; Argos is not spared either. Many Analysts agree that this is inevitable because of the consumer spending squeeze – the ordinary consumer is already grappling with the effect of the ‘spending cuts'. This is not helped by the recent announcements by major utility companies such as Scottish Power, Southern Electric etc of their intention to increase the energy prices and also, the ever rising fuel costs means there is less cash to spend. This pushes the electronic retailers in a very unwelcome situation because they have a dual duty to their customers to sell good and affordable products within the competitive realms and to their shareholders to deliver profitability.
Already some of the major retailers are bearing the brunt of this squeeze as there are ‘talks' to offload Comet. Kesa Electricals, the owners of Comet have revealed it would shut 10 stores this year after reporting 7.7% fall in sales in the past year. Ironically, this is its first annual loss in 15 years. Comet posted £39.1m loss for the year to 30 April, while revenue fell 3% to 1.6bn. It is noteworthy that Kesa's French business Darty reported a 12% rise in profit to £132.9m and a 4.7% rise in revenue to 2.6bn for the year. This raises a pertinent question, Whys is Kesa doing well in France and poorly in the UK? I believe this questions have been raised, well analysed and answers given in the board room or frankly put, others might have seen the back of the boot.
‘Comet is not in this alone', a couple of months ago Dixons group announce a 3% dip in sales for like for like. John Browett, chief executive, says: "Market conditions have been challenging in many of our markets this year. Our businesses have responded to our customers needs enabling them to improve their market positions. Our focus on Value, Choice and particularly on Service have been at the heart of this delivery." In other words, give us more time, we are trying our level best and we hope things will turn in our favour. Argos also saw significant decline in consumer electronic purchases which it says was responsible for a 10% drop in sales. Carphone Warehouse which owns Best Buy UK is currently reassessing it recent initiative of rolling out its Best Buy UK megastores operation after posting a £62.6m loss in the division for the year. Amazon profits slump by a third despite Kindle sale and both Tesco and Sainsbury's also posted losses.
It is not all barbed wires around this electronic sector. To some, it has been a rosy year. Dell has beaten the odds and has witnessed sharp jumps in profits rising on the back of her corporate relationships. As others have had to deal with the consumer spending squeeze, Dell has had a stream of upgrades to deal with. Consequently, Dell is in cloud nine and her shares are responding well to this news. On the other end, the giant online retail market e-Bay is popping the cork of champagne. It is doing very well and her sales is up by 20% partly because of PayPal growth and also as it is with the groceries retail where people are turning to low end retailers like Aldi or Lidl, people are seeing e-Bay as the place for real time deals.
It is going to be a very difficult time ahead for the movers and shakers in this industry. But it is not all gloom; there is a ray of hope at the end of the tunnel. Such difficult times as this require extraordinary steps – a need to review and re-evaluate how a company trades and an in depth understanding of the consumer. The modern consumer is wise enough to see through the flashy online and TV adverts and to know what deal is a real deal. For example, if a consumer is looking for cheap laptops, they will scour the web using comparison tools to get the best buy laptop. The adverts are effective in driving them to the brands but not necessarily buying from the advertiser. So to the marketing executives, make the deals real deals without any string attached. Because of the spending squeeze, many consumers are resorting to buying refurbished electronics such as refurbished laptops, refurbished netbooks etc. So, it is sensible to have many in stock as alternatives to the new ones to carter for diversity in buying power. Finally, times have changed and the modern consumer enjoys to be seen as the cutting edge consumer. Very few people want to buy stuff that is already being phased out. Therefore, what you stock to a great degree defines your success.
Most companies are doing poorly, posting losses – some for the first time in a decade – and their share prices aren't surviving the gloom either. Dixons Retail group shares for example has been on a downward tumble since May; Argos is not spared either. Many Analysts agree that this is inevitable because of the consumer spending squeeze – the ordinary consumer is already grappling with the effect of the ‘spending cuts'. This is not helped by the recent announcements by major utility companies such as Scottish Power, Southern Electric etc of their intention to increase the energy prices and also, the ever rising fuel costs means there is less cash to spend. This pushes the electronic retailers in a very unwelcome situation because they have a dual duty to their customers to sell good and affordable products within the competitive realms and to their shareholders to deliver profitability.
Already some of the major retailers are bearing the brunt of this squeeze as there are ‘talks' to offload Comet. Kesa Electricals, the owners of Comet have revealed it would shut 10 stores this year after reporting 7.7% fall in sales in the past year. Ironically, this is its first annual loss in 15 years. Comet posted £39.1m loss for the year to 30 April, while revenue fell 3% to 1.6bn. It is noteworthy that Kesa's French business Darty reported a 12% rise in profit to £132.9m and a 4.7% rise in revenue to 2.6bn for the year. This raises a pertinent question, Whys is Kesa doing well in France and poorly in the UK? I believe this questions have been raised, well analysed and answers given in the board room or frankly put, others might have seen the back of the boot.
‘Comet is not in this alone', a couple of months ago Dixons group announce a 3% dip in sales for like for like. John Browett, chief executive, says: "Market conditions have been challenging in many of our markets this year. Our businesses have responded to our customers needs enabling them to improve their market positions. Our focus on Value, Choice and particularly on Service have been at the heart of this delivery." In other words, give us more time, we are trying our level best and we hope things will turn in our favour. Argos also saw significant decline in consumer electronic purchases which it says was responsible for a 10% drop in sales. Carphone Warehouse which owns Best Buy UK is currently reassessing it recent initiative of rolling out its Best Buy UK megastores operation after posting a £62.6m loss in the division for the year. Amazon profits slump by a third despite Kindle sale and both Tesco and Sainsbury's also posted losses.
It is not all barbed wires around this electronic sector. To some, it has been a rosy year. Dell has beaten the odds and has witnessed sharp jumps in profits rising on the back of her corporate relationships. As others have had to deal with the consumer spending squeeze, Dell has had a stream of upgrades to deal with. Consequently, Dell is in cloud nine and her shares are responding well to this news. On the other end, the giant online retail market e-Bay is popping the cork of champagne. It is doing very well and her sales is up by 20% partly because of PayPal growth and also as it is with the groceries retail where people are turning to low end retailers like Aldi or Lidl, people are seeing e-Bay as the place for real time deals.
It is going to be a very difficult time ahead for the movers and shakers in this industry. But it is not all gloom; there is a ray of hope at the end of the tunnel. Such difficult times as this require extraordinary steps – a need to review and re-evaluate how a company trades and an in depth understanding of the consumer. The modern consumer is wise enough to see through the flashy online and TV adverts and to know what deal is a real deal. For example, if a consumer is looking for cheap laptops, they will scour the web using comparison tools to get the best buy laptop. The adverts are effective in driving them to the brands but not necessarily buying from the advertiser. So to the marketing executives, make the deals real deals without any string attached. Because of the spending squeeze, many consumers are resorting to buying refurbished electronics such as refurbished laptops, refurbished netbooks etc. So, it is sensible to have many in stock as alternatives to the new ones to carter for diversity in buying power. Finally, times have changed and the modern consumer enjoys to be seen as the cutting edge consumer. Very few people want to buy stuff that is already being phased out. Therefore, what you stock to a great degree defines your success.