Thursday, September 12, 2013

Is There A Future For Electronic Goods Retailing? Some Of My Thoughts

I recently read an article about the good health of Best Buy's Stocks. Surprisingly, even though the competition with online retailer becomes tougher and tougher, Best Buy succeded in delivering promising results. The question that this article ask, and the same that I ask to @tbayart , was if brick and mortard electronic goods retailer still have a future. 

Indeed, in this specific field, the competition of the Internet is very important. Most of the traditional store chains are not able to compete with prices, and the showrooming hype makes it even worse. The margin rates are historically low, and the price competition with online retailers which don't have the real estate cost makes it even tougher!

Some people even believe that traditionnal retailers are condamned to shut down eventually. Actually, I do not really agree with this version.

I may look like a trailblazer, but I have envision what is going on right now almost ten years ago: the show rooming trend. But at this time, I did not picture it as a bad thing, but actually a great opportunity to improve customer relationship, and the added value of the retailer. Here is sort of what I saw:

  • Stores would have very low stocks as people would tend more to buy goods to be delivered home.
  • There would be no cash desks, people would buy with cards and have automatic cash desks, which would lower the cost of cashing in.
  • There would be fewer products, to simplify customers' choices, but they would be presented in a manner that customers would be able to test them.
Of course, my vision now would have changed a little bit. Because the world has evolved a lot (at this time I could not see how mobile devices would change the world, nor what the competition landscape would have been), and also because I gained experience and expertise about retailing and marketing.

But I still believe there is a lot of room for brick & mortar retailers. And the main reason is that those kind of products requires a long decision making process, a high implication due to the cost, and a great knowledge of the products due to their complexities.

So I still believe there is room to develop a profitable business modell, which would actually be based on the showrooming trend which most of experts blame.

  • Maybe there would be less stores, and further from downtown: Maybe like Ikea with a big surface, which would help to show out the products.
  • Maybe there would be no stocks, or actually like ikea, on the opposite, there would be no warehouses the stocks being in the store.
  • People would buy on their sell phone their products, which would lower the cash desk cost.
  • Maybe there would be lower inventory (I believe that the market becoming mature, the product ranges start to be cut, which is a good thing), which will lower the cost of inventory.
I may not have all the information needed to develop the whole concept, but trust me, there is room.

Wednesday, September 11, 2013

Apple's Low Cost Strategy To Enter Emerging Markets

Apple launched yesterday its new Iphone range, composed by 2 devices: One enhanced version, with a better processor, and new features, and one low cost, which is sort of the same than the previous version.

I believe there are two goals in the fact that Apple launch a low cost device:
  1. Being able to compete on the second hand market: Apple can propose an old version new at a good price. Now that the smartphone markets become mature, the second hand market starts to count in the overal smartphone market, therefore there is room for growth on it. This is what Renault made in the car market by launching the low cost brand Dacia, with a certain success.
  2. Being able to compete in the emerging markets, where smartphone prices tends to be lower. This is the reason why its competitors excell, and take some market shares to Apple.
This is the second point I would like to discuss. Indeed, emering markets are very important for global companies as it is where growth is. The goal in this market is to set a presence that will secure a big market share, if possible a leading position, in order to generate long term profitability once the market matures.

But Apple have a dilemma: Indeed, even though they are not a luxury brand, they have a luxury branding strategy. And by trying to have an accessible price, they may alter this strategy. I believe they must have struggled with this move. And probably this is the reason why they have picked a targeted price of 500$ which is actually very close to the standard price of 600$.

But Apple must be able to get competitive in terms of pricing in order to generate new customers. Because if they don't they may not be able to compete soon with the other manufacturers like Samsung.

What do you think about it?