Electronics Retail Characteristics - 1

In this post I am outlining a few observations that I had made on ELECTRONICS Retail Characteristics, as part of a Client Consulting Project about 2 years back. As ELECTRONICS Retail gathers steam in India and is expected to be one of the Leading 'Organized' Specialty formats, it think this little summary is relevant. I have updated the items a bit as well.

Here goes:
The concept of “Retailing 9P’s” has been used to compile these Pointers unique to the Electronics format. (As expected of any exploratory exercise, the list would only be “indicative” and not completely exhaustive). The 9P’s of Retail are: Product, Place, Price, Promotion, People, Process, Positioning, Pulse and Parking.

The ELECTRONICS retail characteristics are:
1) Product:
> Products are usually technical and moderately complex to use and an average customer needs to be educated, enlightened and trained about what it can do and how to use it.
> Regular “feature” upgrades and price changes, through technology breakthroughs and innovation, are the norm of the day – requiring a regular re-visit of the Sales Process and Product Learning.
> Vendor “Brand” Matters, so it is difficult to create Private Labels in this space. Vendor “Brand Proposition” needs to be consistent with the ELECTRONICS Store proposition.
> “Brand” Loyalty is very High.
> After-Sales Service/Guidance/Information/Training is necessary on Most products.
> Mix of Long and Short PLC Products.
> Products usually tend to be “High Involvement” items.

2) Place:
> Needs 5000+ sq.feet of retail space, varying from small to large formats – because display SKUs tend to be large in size.
> Also, store layout needs to be spacious since customers would spend a “considerable” time on a certain item – learning about and checking out the product features.
> “Destination” store rather than “Neighborhood” store, considering its Specialty retail.
> Multi-channel presence is being pursued by leading players: Catalog and E-Business – and it works well because the products are essentially – “What you see is what you get” Packages. ELECTRONICS is one of the leading categories in the E-Commerce and Catalog space.

3) Price:
> Average Sales Ticket Prices are High.
> Personal Finance options are the norm these days and quite popular among customers.
> Generally speaking, product prices in this format keep declining over time as compared to the prices they were first launched at. But new products keep coming in at the same price points. So, while individual SKU prices may fall, the Average Selling Price (ASP) of the said category remains more or less the same.

4) Promotion:
> Promotion plays a very important differentiator vis-à-vis competition – as ELECTRONICS sales tend to be “Push” rather than “Pull”.
> Vendor “Brand” Products/Ranges are more or less the same across all retailers, so Promotion has to act as a driver to Push sales – usually through bundling of Freebies/Accessories/Complementary Products along with the Main items.
> Heavy “vendor advertising” means the retailer must ensure the availability of any new products and/or pricing schemes – just to maintain a status quo.
> The Trade-in Offer – exchange your old item for a new discounted one – is one of the unique schemes typical to this format.

5) People:
> Personal skills and Tech-savvy are much needed requirements.
> Continuous Training and Learning/Information on New Products is needed, so retailers usually have a well-structured and well-organized Training Program in place.

6) Process:
> “Home Delivery” (and Returns) Process is key to the success of this format.
> This format needs an Efficient “Cheque” Payment Process in place.
> Capturing complete customer requirements for “Home Delivery” items and “After-Sales Service” is essential to the business and this data can be then be mined for Analytics’ purposes (not yet begun in India though). Best Buy, however, uses this very data to customize every store based on 7 demographic types they have identified in customers.

7) Positioning:
> Retail positioning tends to be on any of these 4 variables – alone or in combination: Price, Range, Service and Experience.
> This sector is quite “organized” already with a host of small-time players having a “decent-shop” existence. A pan-country player has not yet emerged, though there are quite a few regional biggies.

8) Pulse (of Customer & Employees):
> ELECTRONICS stores must be at least on par, if not ahead, in gauging the aspirations of customers and product trends – since ELECTRONICS is an area where they tend to spend their disposable income first (after Food) and they would want the latest “version” of an item they are planning to purchase.
> Often, ELECTRONICS must be a driver of customer tastes and product trends rather than the other way around. Like Akio Morita had said about the Walkman – no amount of customer research would have told me that a Walkman is needed by customers and that its demand will explode like the way it has.
> It is moderately difficult to replace “tech-savvy” store personnel. Also, considering that the format tends to operate on “push” sales, the store staff is usually incentivized for sales performance.

9) Parking:
> Suitable to the store traffic requirements, while knowing that store is a “destination” store where people would not just walk-in and rush out.

Cheers.