Electricals need circuit training

No one could accuse the electrical retail sector of excessive dynamism, but it’s certainly had its fair share of excitement recently. Thorn has rolled the shutters down on Rumbelows and Fona, Clydesdale collapsed a while ago, one of the privatised electrical retail joint ventures, Homepower, is in severe trouble and Comet, embroiled in the corporate malaise afflicting Kingfisher, faces an uncertain future.

There are, of course, some “ineluctable” market forces at work, but it is hard to escape the conclusion that retailers have mostly themselves to blame.

Let’s start, however, with overcapacity, the sector’s main preoccupation. What’s certain is that the closure of Rumbelows, worth about £250m in annual sales, will do little to bring relief. British Retail Consortium figures, divulged to Marketing Week, show electrical sales down six per cent in January over the previous year. The total market is worth £10bn. That gives the real measure of over-capacity.

So whether Homepower disappears from the scene, or is rationalised by PowerStores, makes little odds to the dire general situation. There will have to be many further restructures and closures.

More critical will be the fate of Comet, number two in the market if we exclude the combined market share of the privatised electrical companies (RECs). Its low-prices strategy has so far failed. The decision to rehire Comet veteran Eddie Styring as chairman and the exodus of high-profile, highly-paid executives such as Nigel Whittaker and Tim Breene from the parent company are undeniable indications of change. But in which direction? Does Kingfisher (despite having acquired Darty) see its future in electrical retailing? Will Styring plump up Comet for sale?

Dixons, meanwhile, has little room for complacency as market leader. True, it has turned in some decent Christmas trading figures and seems to have tuned the positioning of its two main chains harmoniously. But profits still seem over-reliant on expensive warranties, whose virtues in terms of customer value are debatable.

In fact, if retailers had applied themselves a little more assiduously to genuine customer service improvements, they might be faring rather better than they are. They complain, accurately enough, of low consumer confidence, but seem incapable of accepting that their own lack of foresight and their inability to nurture more than promotional interest has contributed heavily to it.

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