Electronics chains seek to fight back

05 September 2012

NEW YORK: Major retailers like Best Buy, RadioShack and GameStop are seeking to pursue new strategies, reflecting the impact of several trends that have reshaped the electronics sector.

Best Buy has faced considerable challenges this year. The departure of Brian Dunn, its CEO, in April, and rumours of a takeover by Richard Schulze, its founder, have compounded troubles related to falling sales.

The company is now reducing its number of big-box branches, and focusing on premium products, opening smaller outlets selling mobile phones and tablets, and strengthening its customer service credentials.

"We're balancing secular decline in the industry with capturing growth in the areas that are exploding," Mike Vitelli, president of Best Buy's US operations, told the Wall Street Journal.

The rise of ecommerce sites like Amazon, competition from bricks and mortar players including Walmart and Target, the commoditisation of many products and the ascension of Apple has also exerted pressures.

"The economics of the industry have evolved—and not to the benefit of most retailers," said Michael Lasser, a retail analyst at UBS.

RadioShack has experienced such trends first hand, as its share price has fallen by 75% this year. Profits dropped by 91% in the last three months, and like for like sales have contracted for eight quarters out of the last nine.

It is hoping to drive up sales of smartphones, which yielded 51% of its $4.4bn in sales last year, alongside warranties and accessories for these offerings. Having long been associated with cables and connectors, it is also relying on marketing to engage consumers.

"We need to rebuild consumers' knowledge of our brand," said Jim Gooch, RadioShack's chief executive.

For its part, GameStop has become a leading reseller of second hand devices made by Apple or powered by Google Android. It expects to make $200m from these products in 2012.

It previously pursued a similar strategy in repackaging used consoles and games, a category that supplied 27% of value sales and 47% of profits in 2011. The firm is also selling games via digital downloads

"There is a future for consumer electronics in retail," Paul Raines, the chief executive of GameStop, said. "But in order to survive, our internal rate of change has to be greater than the external rate of change."

Data sourced from Wall Street Journal; additional content by Warc staff