Supermarkets used to be minor players in the electricals sector, but as non-food sales become more important, the situation is changing. Currently, electricals form about 16% of Asda’s non-food offering - the highest single category. They are also now a key part of Tesco’s strategy to achieve 40% of its sales from non-food purchases.
So how far can they grow the category? And will consumers ever see supermarkets as destination stores for such goods?
Supermarkets are typically selling a limited range of electronic products and small domestic appliances such as toasters, coffee makers, vacuum cleaners and microwave ovens.
Red Red Media retail expert Eddy Pratt says: “A brown goods display in a hypermarket could comprise a range of DVD players, usually sub-£50, a small selection of mini hi-fis, a few flatscreen CRTs (Cathode Ray Tube) from the likes of Panasonic, Philips and Sony, and a couple of LCD TVs - 26in and 15in seem popular. At my local hypermarket, the LCDs are branded ‘Sonnix’ - the 26in retails for £499.”
The price point is all and when it comes to buying electricals, supermarket customers are less brand-conscious than shoppers in Dixons or Comet, says Andy Myring, brand and experience director of strategic design agency The Brewery.
“Consumers are prepared to buy obscure electrical brands from the supermarkets because price points are low, the environment is familiar, the buying process is immediate and the store name is a trusted one.”
The multiples could create destination stores, says Pratt, “but only in the specialist non-food stores Asda and Tesco are experimenting with”.
He explains: “Supermarkets don’t sell - they make it as easy as possible for customers to buy. They want them to buy things that can easily be picked up and carried off to the checkout along with the week’s groceries. A pile of 20in CRTs at £69.99 or DVD players at £29.99 is, typically, the first thing a shopper will see on entering a supermarket - that’s the approach.
“Look at the typical range of electricals displayed. Apart from the larger CRTs, they are all easily transportable. Even the 26in Sonnix LCD TVs are piled in boxes ready for ‘lift-off’. Supermarkets want customers to buy electricals on impulse - the same as they do food.”
Supermarkets make it easy for consumers to pick up cheap TVs and DVD players, but what about more advanced products such as digital radios, laptops and MP3 players? These types of gadget need to be demonstrated and sold by salespeople with specialist knowledge and an understanding of the products. Could supermarkets ever challenge the specialist electrical retailers when it comes to selling hi-tech gear?
Cyrus Richardson, sales general manager, national accounts, Sony UK, believes they could. “If a supermarket provided the same environment, store staff and knowledge as a specialist retailer, then why not? It comes down to whether any of the UK grocers are prepared to make the investment - does it factor within their strategy for non-food?
“As anyone in the consumer electronics industry knows, to eke out a profit in the current environment is not easy, no matter who you are.”
Pratt disagrees. “Supermarkets don’t want specialist staff or bodies at the point of sale,” he says. “People won’t go into supermarkets specifically to buy electrical goods. They will just buy them on impulse, rather like a tin of beans. There is always a need for specialist advice and service - supermarkets can’t offer that.”
DAB digital radio is a good example of new electronics technology that is being sold by the supermarkets but, according to Leslie Burrage, chief executive of Roberts Radio, it is being done very badly.
“There are DAB products being sold through the supermarkets, but they’re mainly from secondary and tertiary brands,” he says.
“They’re not being properly displayed and, unless you’re in the consumer electronics industry, you wouldn’t know if the products being sold were DAB or not. If you ask the staff, they don’t know whether the radio is mains or battery-operated or whether it’s digital or analogue. The product can’t just be stuck on-shelf - the retail staff need to be able to answer customers’ questions.”
According to a 2001 Verdict report, supermarkets can never have the product authority of electrical specialists. However, they are an effective channel for consumer electronics manufacturers to reach women, who make 70% of supermarket purchases, but who can find the male-orientated atmosphere of electrical specialists off-putting.
Nevertheless, the multiples are unlikely to go so far as creating destination stores specialising in electricals, says Burrage. “There’s too much investment required. In view of the margins they like to operate on, supermarkets wouldn’t see adequate returns to pay for that investment.”
He adds: “It’s contrary to their selling philosophy. Major supermarkets have become successful by piling it high and selling it cheap.”
In other words, the multiples may be challenging electrical retailers at the commodity end of the spectrum, but when it comes to high-value items that require a knowledgeable sales force, the specialists still have the upper hand.
Burrage says: “The reality is that, in the past year, independent dealers have increased their share of the electrical retailing market by 5%. That indicates the power of specialist knowledge. The independent retailers have three main advantages - service, service and service.”“People won’t go to supermarkets specifically to buy electrical goods. They will just buy them on impulse, rather like a tin of beans. There is always a need for specialist advice and service - supermarkets can’t offer that”