UK Electricals Retailers 2010

Introduction

Verdict Research: The onset of recession and a weak technology pipeline has seen electricals sales plummet over the last two years. At the same time, competition for market share is intensifying, as the likes of the grocers, online players, John Lewis and Best Buy expand. Consequently, retailers are having to formulate strategies to protect margins which are under unprecedented pressure.

Scope

*Market size, sales and growth rates to 2010 for the electricals market overall and for seven subcategories.

*Comprehensive profiles of all significant UK electricals retailers including Argos, Asda, Comet, DSGi, Game Group, Jessops, John Lewis and Tesco.

*2004-2009 market share data for all major sector participants.

*Space allocation data for all key retailers for 28 product categories.

Highlights

Electricals is set to be the second worst performing retail category in both 2009 (declining by 7.0%) and 2010 (declining by 3.5%), only outperforming furniture & floorcoverings. Moreover, with non-specialists and online players continuing to grow, the outlook for specialists is even tougher.

The video games market has now entered a massive decline, due to this life-cycle of consoles reaching maturity. Consequently brown goods have fallen to 51.8% of electricals spending in 2009, down from 52.7% in 2008, with white goods making a small recovery, due to a stabilisation of the housing market.

Retailers are developing their own brand lines, in an attempt to give them a point of difference. Another noticeable shift has seen specialists fostering closer links between their electricals and entertainment offers. PC World, Apple and HMV have been conspicuous proponents of this and it is likely to be a key component of Best Buy's strategy.

Reasons to Purchase

*Benchmark your performance against your competitors and compare future development plans.

*Establish how the market will perform over the next year, identifying the opportunities offered by individual product categories.

*Gain competitive advantage by understanding the strengths and weaknesses of all significant players in the UK electricals market.


Report Highlights

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CHAPTER 1 EXECUTIVE SUMMARY 6
Key findings 6
The electricals sector has been though a difficult two years 7
The category has felt the full impact of the recession 7
A small recovery in white goods has seen the category declining less heavily than brown and grey goods 7
New technology has become a dampener, rather than a driver, of growth 8
The market is becoming increasingly competitive 8
Specialists continue to decline 8
It is increasingly difficult to differentiate 9
Online growth is slowing, but it continues to outperform other channels 9
The sector continues to move away from the high street 10
Margins continue to fall 10
CHAPTER 2 KEY ISSUES 11
Margins are falling 11
Costs have risen ... 12
... but falling demand has made it difficult to pass on higher costs 12
Consequently, margins have taken the hit 12
Retailers need to take decisive action 13
The impact of new technology is changing 14
Technology pipeline slowing 14
Advances that have been made have been much less dramatic 14
Technological convergence reduces demand 15
Retailers must now adapt 15
Online is growing in importance 16
Biggest online market 16
Electricals is one of the most robust online sectors 16
Online growth used to offset declining space 16
Looking forward, online share of white goods in particular should increase. 17
M-commerce will also take off ... 17
... but overall online electricals growth is now beginning to slow 17
Price becomes more important driver of online electricals spend 17
Electrical retailers need to improve delivery options 18
There is a move away from high street retailing 19
Out-of-town is better suited to electricals retailing 19
Indeed, out-of-town has proven more resilient in the downturn 19
Non-specialists and niche players are picking up what is left of high street spend 20
Comet is also trialling a high street format 20
However, the high street opportunities are temporary 20
Best Buy's arrival will shake-up the market 22
Providing that the market returns to growth, Best Buy seems set for success 22
Quality of service will be crucial 22
A conspicuos arrival to the UK would be highly beneficial 22
The model will depend on developing scale and presence to succeed 22
The retailer can learn much about the need for flexibility from Asda's experiences 22
Best Buy's first steps in the UK 23
Approximately eight store openings planned for 2010 23
Importing customer service approach 23
Initial trading for joint venture has been strong 23
Best Buy will try to bring a new approach to electricals retailing 24
Strong customer service 24
Using entertainment products to capture consumer imagination 25
Best Buy will place major emphasis on a multichannel approach 25
Some new ideas will be required 26
Space expansion strategy is flexible 27
Wireless World seems to be a preferred format 27
The growth of online will also affect store targets 28
Level of competition will also be an important determinant 28
Best Buy Europe has recruited some experienced UK retailers 29
An experienced marketing director will help generate interest in the brand 29
An ambitious chief executive will be determined to drive significant growth 29
Consequently some existing board members have been sidelined 29
Entertainment led product mix 29
Strong focus on own brand predicted 30
Best Buy will further increase competition in an already fierce market 30
The rise of the grocers is pressurising specialists 32
Boosted by the weak specialist channel and keen value positioning 32
Value players receive short-term boost 33
Retailers are differentiating through own brands 34
Developing own label is an intense process 34
However, if retailers can get it right, it is an attractive prospect 34
Own brands are also very relevant in environmentally friendly retailing 35
The 2010 World Cup will impact the market 36
New technology will receive a boost ... 36
... but not to the same extent as in 2006 36
Opportunities for cross-merchandising 37
CHAPTER 3 MARKET ANALYSIS 38
Market definition 38
Key drivers 40
Overview 42
Expenditure analysis by sub-sector 45
Brown goods: audio-visual equipment 47
Brown goods: games consoles & software 49
Brown goods: photographic & optical equipment 52
White goods: major household appliances 54
White goods: minor household appliances 56
Grey goods: information processing equipment 58
Grey goods: telephone & fax equipment 61
Electricals specialists 63
Channels of distribution 66
CHAPTER 4 COMPANY DATA ANALYSIS 68
Market Shares 68
Operating statistics 72
Space allocation 74
Advertising spend 77
CHAPTER 5 AMAZON 79
Innovation online sees gains continue 79
Recent key events 81
Dynamic player continuing to innovate 81
Group rolls out small range of own brand electronics 81
Prime service offers fast free delivery to loyal customers 81
Amazon innovates with Kindle 81
More third-party sellers on website, new brands search function 81
Takes advantage of weak pound 82
Digital downloads available for mp3s 82
Mobile offer 82
Fulfilment by Amazon 82
Proposition 83
Continues to grow offer, becoming online department store 83
Financials 84
Growth maturing but largely unaffected by recession 84
Sales growth impressive but gradually slowing 85
Sector performance - electricals 86
Growth moving from spectacular to solid 86
Market share gains continue as spend transfers online 87
Outlook 88
Bright future for a forward-looking company 88
Benefits from general migration of sales from high street 88
Moving away from entertainment roots 88
Kindle should boost electricals sales 88
White goods push remains a possibility 88
Amazon should be one of the biggest beneficiaries from M-commerce growth 89
Potential for electricals manufacturers to sell through Amazon third party 89
Fulfilment solutions will help the retailer gain more small businesses 89
Own-brand expansion to be expected 90
CHAPTER 6 APPLE 91
Gains in market share through brand strength 91
Recent key events 93
Specialist capitalises on brand success in entertainment 93
Launches plans to add to its retail stores across Europe 93
Continued innovation and strong branding drives footfall and sales in tough market 93
Thoroughly integrated with the online sphere 93
End to exclusivity deal will provide a huge fillip to growth 94
'Black Friday sale' comes to the UK 94
Proposition 95
An unclutterred display 95
Financials 97
Consistently high growth rates 97
Space 99
Few stores, in prime locations 99
Sector performance - electricals 100
Steady climb upwards 100
Market share steadily increasing 101
Outlook 102
Cause for optimism in a challenging market 102
Adeptly coping with the a harsh economic environment for electricals 102
Maintaining a high standard of customer service is key for Apple 102
Personalised service above and beyond normal retail environment 102
iTunes is in a great position for music downloads 102
CHAPTER 7 ARGOS 104
Argos must differentiate to stand out 104
Recent key events 105
Capitalises on multichannel credentials 105
Electricals is the top performing category 105
Growing product offer 105
Rising costs force up price points 105
Bush and Alba acquisition 105
Multichannel offer developed 106
Continual development of fulfilment 106
Looks to improve customer service and feedback channels 106
Major rebranding set for Spring/Summer 2010 107
Proposition 108
Multichannel model 108
Financials 109
Growth stutters in 2009 but Argos should remain focused 109
Space 114
Argos estate gradually expanding 114
Space allocation 116
Sector performance - electricals 117
Low price points keep sales resilient through harsh conditions 117
Market share marches upwards 118
Outlook 119
Needs to secure its place on the high street and defend itself from supermarkets' low prices 119
Argos will need to stay in touch with latest developments in electricals 119
Argos' reputation for value will be a key point of difference 119
Developing premium and own brand offers more choice to customers 119
Argos must keep a watchful eye on Tesco and Asda as these supermarkets continue to expand their electricals offer 119
In listening to its customers, Argos will boost service 120
Weighting its product mix to suit the economic trend 120
CHAPTER 8 ASDA 121
Benefits from keen price positioning and struggling specialists 121
Recent key events 122
Onset of recession leads to less of an emphasis on discretionary electricals category 122
Asda emerges as one of the main winners through the recession 122
Electricals has been less of a focus during the past year 122
Asda's electricals sub-brands gradually disappear from shelves 122
Electricals proposition is boosted by the launch of Asda Direct 122
In an attempt to stimulate demand, increased emphasis has been placed on value 123
Slowing space expansion set to impact store based non-food growth 123
Social networking aims to improve business transparency 123
Store innovations will increase competitiveness 123
New CEO for Wal-Mart 124
Asda reshuffles with new COO 124
Proposition 125
Every day value and convenience key 125
Financials 126
Sales growth accelerates during downturn 126
Space 130
Space expansion and rising densities both help growth 130
Space allocation 132
Sector performance - electricals 134
Continues to drive impressive year-on-year uplifts 134
Market share gains continue unabated 135
Outlook 136
Must regain focus if share gains are to continue 136
Asda is well positioned to make further market share gains 136
However, the imminent arrival of Best Buy will serve to foster a more competitive landscape 136
It is thus essential that the grocer seeks to raise in-store standards in regard to its electricals category 136
The phasing out of its electricals sub-brands was a surprising move and one which we think Asda should reconsider 137
Space expansion has slowed noticeably over the past few years and looks set to lag behind that of competitors going forward 137
Asda Direct will thus become an increasingly important facet through which to drive non-food growth 137
Asda Living also provides significant opportunities 137
CHAPTER 9 COMET 139
Service & online are key for Comet in an intensifying market 139
Recent key events 141
Retailer attempting to modernise 141
Comet enhances usability of its website 141
Comet prepares for M-commerce 141
Store expansion plans go against the trend 141
Signs first large TV sponsorship deal 142
Trials white goods scrappage scheme 142
Proposition 143
Needs to enforce its credentials in consumer electricals 143
Financials 144
Comet feels impact of weak demand in white goods 144
Space 148
Maximizes existing space returns as it rightsizes its estate 148
Space allocation 149
Sector performance - electricals 150
Decline in sales slows 150
Market share increases in challenging market 151
Outlook 152
Set to benefit from white goods recovery 152
Needs to decide on a strategy 152
Exposure to white goods and housing market leaves Comet susceptible to factors beyond its control 152
Focusing on service will be key for Comet 152
Comet will face a challenging year from numerous angles 152
Online offers opportunities for growth 153
CHAPTER 10 DSGI 154
Market leader on the wane 154
Recent key events 156
Progress made but still much work to do 156
Group moves to segment brands 156
Overhaul of store portfolio continues 156
Debt worries relieved 157
Exposure to poor grey goods sales 157
Proposition 159
Multiple brands still conflicting 159
Financials 165
2008/09 sees sales plummet 165
Space 171
Expansion has continued but is now likely to reverse 171
Space allocation 174
Sector performance - electricals 176
Group facing huge challenge to stem declines 176
Long-term decline continues 177
Outlook 180
Group needs to be more ruthless in its re-invention to survive 180
DSGi's UK sales and market share look set to decline further 180
DSGi's biggest challenge is to turn around PC World 180
DSGi must modernise its offer and further clarify brands 181
DSGi needs to re-format as many stores as possible 181
Online growth also needs fresh impetus 181
CHAPTER 11 GAME 183
Specialist suffers from massive downturn in core market 183
Recent key events 184
Many factors at play in turbulent market 184
Woolworths and Zavvi collapse provides timely boost 184
New customers proving more willing to cut back 184
2009 software releases fail to match 2008 185
Gamestation acquisition brings further cost savings 185
Significant increases in deflation 185
Growth in pre-owned boosts margins 185
New products and services hint at digital future 186
Proposition 187
Specialist able to capitalise on market leading credentials 187
Financials 188
2008/09 is a towering peak 188
Space 191
Acqusition helps more than double UK space over two years 191
Space allocation 193
Sector performance - electricals 196
Q4 will be crucial to offset poor 2009 196
Market share gains are moderating 197
Outlook 198
In the long-term GAME will need to re-invent itself 198
Profits will fall in 2009/10 198
New hardware in late 2010 is an exciting opportunity 198
UK space growth has reached a turning point 198
Digital distribution presents massive challenge 198
CHAPTER 12 JOHN LEWIS 200
Strong reputation for quality and service boosts share 200
Recent key events 202
Focus on growing electricals continues 202
Opens store in Cardiff 202
Looks to new store formats to expand geographical reach 202
Strengthens price credentials with launches of value range 203
Bolsters own-label range with launch of John Lewis branded televisions 203
Proposition 205
Reinforcing the value and quality message 205
Financials 206
Feels the impact of the recession 206
Space 209
Looks to alternative formats as development pipeline slows 209
Space allocation 211
Sector performance - electricals 213
Strong proposition, reputation and brand ensures market share gains 213
Share gains picking up again 214
Outlook 215
Value credentials remain at the fore 215
John Lewis' core strengths will see it do well 215
Value range will succeed, but must not dilute the brand 215
John Lewis Direct will be major driver of growth 215
John Lewis is being forced to scale back its expansion 215
New home store format a long-term bet 216
CHAPTER 13 TESCO 218
Market share gains continue unabated as specialists falter 218
Recent key events 220
Electricals a key driver of non-food growth 220
Despite slowing non-food growth, Tesco has enjoyed gains in electricals 220
Tesco is slowly improving its in-store electricals offer 220
Improving service credentials is increasingly becoming a priority 220
Tesco is driving impressive growth through its direct proposition 221
Relaunch refreshes Clubcard attraction 221
Board benefits from experienced members 221
Proposition 222
Strengthening price architecture a major focus 222
Financials 223
Trading performance shows ability to defy recession 223
Considerable growth across sales and profit 224
Space 227
Sustains space growth despite recession 227
Space allocation 229
Sector performance - electricals 231
Electricals outperforming total non-food 231
Market share gains continue 232
Outlook 233
Tesco must up its game to offset mounting competitive threats 233
Tesco is set enjoy further market share gains 233
However, Tesco is facing increased competitive threats 233
It is thus essential that Tesco seeks to improve its electricals proposition 233
Strengthening price architecture should continue to be a focus 233
An expansion of its white good offer represents significant growth potential 234
Tesco Direct will become an increasingly important avenue through which to drive non-food growth 234
Questions remain over the future expansion of the Homeplus format 234
CHAPTER 14 MAIL ORDER & ONLINE PLAYERS 235
Dabs (www.dabs.com) 235
eBay 237
Play.com 239
Shop Direct Group 241
CHAPTER 15 MANUFACTURER RETAILERS 244
Overview 244
Bang & Olufsen 246
Panasonic 246
Sony 247
CHAPTER 16 MOBILE PHONE RETAILERS 250
Overview 250
Carphone Warehouse 251
Phones4U 252
Network Operator Stores 253
Outlook 256
Applications will increasingly become a source of revenue 256
Mobile retailers face fierce competition to attract new custom 256
'T-Orange' merger will shape future landscape 256
Network coverage becomes key differentiator 257
CHAPTER 17 SMALLER ELECTRICALS SPECIALISTS 258
Jessops 258
Market share hit by intense competition and lack of demand 259
Jessops' performance deteriorates 259
Strategic review beginning to pay off 259
Jessops seeks to differentiate by focusing on premium 260
Expansion strategy focused on 'Heartland' and 'Lite' stores 260
Sales growth resting on D&P and online operations 260
Despite securing financial future, Jessops faces many challenges in difficult market 261
Maplin 262
Maplin continues to build market share 263
Niche proposition and multichannel offer boosts sales performance 263
Operating profits increase following tighter cost control measures 264
Maplin focuses expansion plans on more affluent southern regions 264
Richer Sounds 264
Builds market share as competition in prime locations dwindles 265
Operating margin comes under pressure 265
Focuses on maximising existing space 266
Competing on price boosts demand from frugal consumers 266
Broadens product mix and drives growth by purchasing Empire Direct 266
Ideally positioned to make further share gains 267
CHAPTER 18 GLOSSARY 268
Terminology 268
Abbreviations 269
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List of Tables
Table 1: Electricals specialists out-of-town store numbers, 2004-2009 19
Table 2: Electricals market definition, 2009 38
Table 3: Electricals market - key drivers, 2009/10 41
Table 4: Total consumer expenditure on electrical goods, 1999-2010e 42
Table 5: Audio-visual equipment expenditure, 2004-2010e 47
Table 6: Games consoles & software expenditure, 2004-2010e 49
Table 7: Photographic & optical equipment expenditure, 2004-2010e 52
Table 8: Major household appliances expenditure, 2004-2010e 54
Table 9: Minor household appliances expenditure, 2004-2010e 56
Table 10: Information processing expenditure, 2004-2010e 58
Table 11: Telephone & fax expenditure, 2004-2010e 61
Table 12: Electricals specialists sales, stores and space, 2004-2010e 63
Table 13: Electricals channels of distribution, 2004 and 2009e 66
Table 14: Electricals retailers' market shares, 2004-2009e 68
Table 15: Electricals retailers key operating statistics - trading 2008/09 72
Table 16: Electricals retailers key operating statistics - stores 2008/09 73
Table 17: Electricals specialists space allocation to brown, grey and white goods (Comet, Currys & PC World), 2008 74
Table 18: Electricals specialists space allocation to brown, grey and white goods (Game, Jessops & John Lewis), 2009 75
Table 19: DSGi and Comet advertising spend, 2005-2008 77
Table 20: DSGi and Comet advertising spend by media, 2008 78
Table 21: Amazon company overview, 2009 79
Table 22: Amazon retail proposition, 2009 83
Table 23: Amazon UK key operating statistics summary, 2004-2009e 84
Table 24: Apple company overview, 2009 91
Table 25: Apple retail proposition, 2009 95
Table 26: Apple UK key operating statistics summary, 2005-2009e 97
Table 27: Apple store portfolio, 2005-2009e 99
Table 28: Argos company overview, 2009 104
Table 29: Argos retail proposition, 2009 108
Table 30: Argos key operating statistics summary, 2004-2009e 109
Table 31: Argos trading record, 1999-2009 110
Table 32: Argos store portfolio, 1999-2009 114
Table 33: Argos space allocation (Autumn/Winter catalogue), 2009 116
Table 34: Asda company overview, 2009 121
Table 35: Asda retail proposition, 2009 125
Table 36: Asda UK key operating statistics summary, 2004-2009e 126
Table 37: Asda trading record, 1999-2009e 127
Table 38: Asda store portfolio, 1999-2009 130
Table 39: Asda Wal-Mart Supercentre space allocation, 2009 132
Table 40: Comet company overview, 2009 139
Table 41: Comet retail proposition, 2009 143
Table 42: Comet UK key operating statistics summary, 2004-2009e 144
Table 43: Comet trading record, 1999-2009 145
Table 44: Comet store portfolio, 1999-2009e 148
Table 45: Comet space allocation, 2009 149
Table 46: DSGi company overview, 2009 154
Table 47: Currys retail proposition, 2009 159
Table 48: Currys.digital retail proposition, 2009 161
Table 49: Dixons retail proposition, 2009 162
Table 50: PC World retail proposition, 2009 163
Table 51: DSGi UK key operating statistics summary, 2004-2009 165
Table 52: DSGi stores turnover record, 1999-2009 166
Table 53: UK electricals divisions turnover record, 1999-2009 167
Table 54: UK computing division (PC World) turnover record, 2004-2009 167
Table 55: Estimated UK ecommerce turnover record, 2006-2009 168
Table 56: Total DSGi UK store portfolio, 1999-2009 171
Table 57: DSGi UK electricals store portfolio 1999-2009 172
Table 58: PC World store portfolio, 1999-2009 173
Table 59: Electricals specialists space allocation to brown, grey and white goods (DSG fascias), 2009 174
Table 60: GAME company overview, 2009 183
Table 61: GAME Group retail proposition, 2009 187
Table 62: GAME Group UK and Ireland key operating statistics summary, 2004-2009 188
Table 63: GAME Group trading record, 1998-2009 189
Table 64: GAME Group store portfolio, 1999-2009 191
Table 65: GAME Group store numbers, 1999-2009 191
Table 66: GAME and Gamestation space allocation to brown, grey and white goods, 2009 193
Table 67: GAME game/console space allocation, 2009 194
Table 68: Gamestation game/console space allocation, 2009 194
Table 69: John Lewis company overview, 2009 200
Table 70: John Lewis retail proposition 2009 205
Table 71: John Lewis key operating statistics, 2004-2009e 206
Table 72: John Lewis trading record, 1999-2009e 207
Table 73: John Lewis store portfolio, 1999-2010e 209
Table 74: John Lewis department store opening/relocation plans, 2009-2014 210
Table 75: John Lewis space allocation, 2009 211
Table 76: John Lewis space allocation, 2009 212
Table 77: Tesco company overview, 2009 218
Table 78: Tesco retail proposition, 2009 222
Table 79: Tesco UK key operating statistics summary, 2004-2009 223
Table 80: Tesco UK trading record, 1999-2009 224
Table 81: Tesco store portfolio, 1999-2009 227
Table 82: Tesco Extra space allocation, 2009 229
Table 83: Dabs key operating statistics, 2004-2009e 235
Table 84: eBay key operating statistics, 2004-2009e 237
Table 85: Play.com key operating statistics, 2004e-2009e 239
Table 86: Shop Direct key operating statistics, 2004-2009e 241
Table 87: SWOT analysis of manufacturer-branded stores, 2009 245
Table 88: Jessops key operating statistics, 2004-2009e 258
Table 89: Maplin key operating statistics, 2004-2009e 262
Table 90: Richer Sounds key operating statistics, 2004-2009 264
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