Attention: Big Box Consumer Electronics Retail Industry…Go Small. Go Big. (Examples: RadioShack and Best Buy)

Attention:  Big Box Consumer Electronics Retail Industry

We all know the day, month, year or even the decade of the Big Box Consumer Electronics Retail Industry is closer to an end as we know it.  Here are some examples of industry carnage you may remember:  Incredible Universe, Circuit City, CompUSA, Ultimate Electronics, Macduff, Federated, Highland Superstores and many more.  So the question all of the surviving stores are asking is how we survive in this highly competitive industry.  We will discuss two current business models out there with strategies for each.

Business Model:  “Footprint for Rent”Best Buy renting out large amounts premium floor space to manufacturers staffed with their experts (example: Samsung Experience).

Problem:  “Footprint for Rent”
Best Buy is widely known to the general public as the “window shopping” store.  People will go there to see, touch and experience the product they have already researched, to narrow down options or see what is available in the market; but ultimately purchase it online.

Strategy #1:  Promote heavily you are the only place where you can see, touch and experience the products you want to buy.  Use the negative market perception to your advantage by accepting consumers “window shop” your store but have less buyer’s remorse because the 360° expectations were met vs. buying it on the sites of the world with a shot in the dark satisfaction of the purchased product.  Think infomercials…so many times the 30 minute ultra-positive and packed with proof the new product will solve all your problems often times ends up woefully not meeting the promised expectations due to quality, functionality, true appearance which added up equal a much higher percentage of buyer’s remorse.

Strategy #2:  Cut your losses by shrinking the stores to a footprint between 10-20K and only showcasing high margin and/or latest technology items; while sinking big money into ecommerce and unleashing the hounds of advertising to promote it.  With the savings, pricing should be closer to Amazon with fair amount of loss leaders at first for initial market penetration push.  Sublet the remaining balance of the store footprint to Samsung to give them their own “Apple Store” showcasing all their products with ease of access between the two stores and an outside entrance (think Starbucks in Barnes and Noble).  Samsung wants to be Apple so help them get one step closer by having their own stores, just connected to Best Buy locations.  It will be a win-win for both parties.

Business Model:  “Eggs in a Basket”RadioShack refocusing heavily on one single business segment, mobile phones, therefore putting all their eggs in one basket hoping they don’t trip.

Problem:  “Eggs in a Basket”
RadioShack has survived many battles over the years of market shifts; however this one we affectionately call the internet isn’t going away.  They recently tried to stop the hemorrhaging by focusing heavily on mobile with the hopes it will save the sinking ship.  Cash reserves are running out, market share is decreasing, stock price is worthy of shareholder mutiny, executive wing has revolving door and there is nothing to differentiate them from any competitors.

Strategy #1:  Shift to an hybrid business model.  Shut down within 30 days all under performing stores and phase out the others (including franchises); leaving only key over performing stores to be marked as regional locations.  Franchises would convert to an online presence using the company ecommerce business model where orders were filled in the distribution center; however sales generated from the franchise website would be earmarked for them.  Invest in advanced distribution centers strategically placed throughout the world and pass on the costs savings to the consumer.  Leverage whatever legacy knowledge can be used in today’s market place to your advantage and kick the rest to the curb.  Advertise with re-branded tag lines like “This isn’t your Grandfather’s RadioShack or Look out Amazon, Shack is Back.”  This will be a tough pill to swallow in the halls of the executive wing down to the store; but if RadioShack doesn’t make a drastic change it will soon be added to the list stated in the first paragraph.

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