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Posted by Tom Cheesewright on

Why Electronics Stores Are as Dead as the DVD

If you sell electronics on the high street, stop. It’s over.

Tesco is pulling out of consumer electronics because the margins don’t justify the shelf space. Do you have Tesco’s buying power? Thought not.

The reality is that the price of consumer electronics is now so low that the costs of high street rents and high street staff make selling them face to face — profitably — near impossible. You can eke out a business with scale (DSG — benefiting from the death of all its main high street competitors) or with clever buying (independents importing no-name brands direct from China). But other than that the action is online. This situation is only going to worsen as the older consumers who want their hand holding die out and are replaced with younger, more savvy buyers.

So what do you do with your retail space? That lease you can’t get out of?

Two ideas:

1. Become a Tech Fashion Retailer

What business dominates the high street selling low value goods in high volumes on a fairly thin margin? Fashion. Technology is becoming so cheap and so disposable that it resembles nothing more closely than fashion.

The next few years will see the lines between the two begin to blur as falling costs and new materials science see clothes becoming increasingly connected. Expect displays, speakers, solar cells and other forms of generating technology first. Alongside a variety of smart sensors for motion, temperature, air pressure and more.

Create a goto brand for integrated fashions and with the right timing you could have an international business on your hands.

2. Become a Showroom

I want to buy a gadget today. What do I do? I go to the high street. I play with everything. I use your salesman’s valuable time. Then I buy it online to save 10%. Consumers are fickle like that. Most of the time.

There are two responses to this.

One is the Apple response. You make the brand so attractive and the in-store experience so good, that people will pay the extra 10%. It works for them, but an experience like that requires a brand like Apple’s. And that takes years and billions to create. Out of the reach of most retailers.

Most brands can’t afford to do what Apple does. But the smart ones know that their online sales will suffer if people can’t at least see their goods offline. So they will pay you to showcase their products in a compelling fashion, on the high street or in the retail park, knowing full well that you may not be the person who ultimately makes the sale.

How this will be funded will vary. Some will pay you a simple co-marketing fund. Some will give you greatly enhanced revenue share for providing a premium customer experience. Others might implement some form of customer tracking to reward you for conversions.

Whatever route you choose, good luck. You’re going to need it.

Tom Cheesewright