One year ago last week, gap intelligence’s Market Intelligence reports included an revealing that two thirds of all former Circuit City customers planned to go to Best Buy and Walmart for their future electronics purchases. An understandable, but still immense, 55 percent of Circuit City shoppers planned to make future purchases at Best Buy, while a respectable 11 percent of shoppers expected to direct future CE purchases to Walmart locations. Assuming that a similar portion of former CompUSA shoppers were already transitioning to Best Buy and Walmart, 2009 stood to be a banner year for the retail giants’ consumer electronics sales, regardless of the economy.
Although Best Buy and a number of other retailers certainly benefited from the recent channel consolidation, the redistribution of Circuit City and CompUSA’s sales has been far from one-to-one. It turns out that much of Circuit City’s $11.7 billion 2008 revenue and CompUSA’s $4 billion-plus 2006 revenue was also consolidated – leaving surviving retailers and CE manufacturers searching for where at least $5 billion in annual electronics sales went.
One could easily attribute 2009’s reduced electronics spending to the ongoing recession and they would be at least partially right. However, I believe Systemax CEO Gilbert Fiorentino has tracked down this missing electronics demand, and interestingly enough, it appears that it never left – it’s just not being addressed at the same rate as before. In a recent retailer roundtable discussion Mr. Fiorentino cracked open his Marketing 101 textbook and explained this phenomenon in the simplest terms. With the exit of CompUSA and Circuit City went $800 million in annual advertising, roughly 25,000 relatively knowledgeable sales associates, and nearly 800 retail locations, all of which in their own way spurred demand. To borrow Staples’s long-retired slogan “It’s that easy.”
The good news for CE manufacturers and retailers is that the potential electronics spending ceiling just increased significantly. It’s just a matter of creating a need in the minds of consumers, providing inviting and convenient locations to shop, and staffing these locations with a knowledgeable and incentivized sales staff. These are not new ideas and can certainly be done again.
So now the question is: is going to go out and make this happen?
“You know how important advertising is – people think they need what they are told they think they need. It wasn’t just pent-up demand in a world where a guy woke up in the morning and said, “I want to go buy a laptop” or “I want to go buy a TV.”
“The most important idea in advertising is “new.” It creates an itch. You simply put your product in there as a kind of calamine lotion.”
They are both right….