Electronics retailers have been forced to scale back their reliance on manufacturer brands while investing heavily in private label and own brand ranges in response to non-specialists eating away at both their market share and margins, according to Verdict Research.
Research from an independent retail analyst has found that many specialist electrical retailers are using private label and own brands to re-position them as the place to go to for value electricals rather than non-specialists such as supermarkets and online only retailers.
Natalia Grabov, analyst, Verdict, says, “Specialist electrical retailers have suffered over the last few years as increasingly cash strapped consumers have shopped at supermarkets and online only retailers who are able to buy in bigger quantities and offer lower prices.”
In a bid to compete, margins have been squeezed, and specialist retailers have been left searching for ways to both differentiate their products and to encourage customer loyalty. Retailers have, therefore, been actively looking to increase the proportion of sales form private label and this is forming the core of many retailer’s plans for the next year. One retailer who is leading the way is UK’s Currys.
Although the specialist retailer has had private label ranges for some time, this year it has taken it one step further and launched an essentials range under its retail brand. US specialist Best Buy is yet to go as far as Currys, in terms of using its shop brand, as it too ensures that the cheapest products in their stores are private labels.
Best Buy has numerous private labels including Insignia and has gone as far as to recruit design engineers from manufacturing companies to quickly turn goods ideas into products.
Launching private label allows specialists to take greater ownership of the production process, which eases pressure on margins, and with an emphasis on value for money, it also attracts customers. Therefore, many retailers are actively looking to increase the proportion of sales from private label. If the private label brand is a success, rewards can be significant for retailers.
However non-specialists, such as Tesco and Amazon, have also launched private label ranges. Importantly though, specialists have the edge, particularly in development of products. Not only are consumer durables their speciality, they also have greater understanding of what their customers want and can spot gaps in the market more easily.
This is a key advantage when it comes to capitalising on consumer trends such as environmental concerns. For instance, a specialist can ensure its own brand lines are energy efficient like in the case of Dixon’s Advent Eco PC.
Grabov adds, “Specialist consumer durable retailers will need to continue to invest in private label ranges and ensure that they establish a price structure that consumers understand. In roder to win market share back from the non-specialists, retailers need to add value by offering extras. For example, non-specialists often aren’t able to offer add on’s such as offering free repair services, and extended warranties.”
“Over the next few years, we will see far stronger private label electrical ranges in specialist retailers and those who invest most heavily in terms of innovation and packaging will reap the rewards,” notes Grabov.
— IndiaRetailing Bureau
