Death of the Dinostore

From Distinction to Extinction

The old adage of “the bigger they are, the harder they fall” seems to be ringing true for consumer electronics behemoths like Best Buy, CompUSA, Ultimate Electronics and Circuit City. These traditional bricks-and-mortar retail giants are systematically being turned into showrooms, erased and replaced by their more evolved web-based and supermarket rivals.

A key factor to note in the demise of the Dinostore is the evolution of the consumer as well. They now control the shopping/buying process. They cannot be manipulated into purchases with in-aisle promotions like in the old days. Brands must offer facilitation throughout the consideration process instead – starting with the Zero Moment of Truth (ZMOT). Brands must be ready when consumers are most ready and likely to engage with your brand and you will not just survive…but thrive. (For more on this, check out A BRAND NEW DAY: The Mental Model of the Current Retail Consumer by GRA | MATR President Brian Handrigan.)

This unawareness of the shift in the locus of control (from marketer to consumer/responder), coupled with the inability to withstand brand imperfections AND compounded with the arrival of a perfect “marketing meteor storm,” spells eventual doom for the days of big box electronics domination. With stores like Sam’s Club, Walmart, Target and others devouring market-share, along with a multitude of etailers (most notably Amazon) selling technology wares at lower prices/ providing peer validation, garnering positive peer reviews and offering unmatchable stock variety, free delivery and more favorable return policies, the ways of the large electronics retailers seem prehistoric by comparison.

“Consumer electronics retailers now offer very few benefits to consumers,” said Canalys principal analyst Alastair Edwards. He said they appeal only to a “rapidly shrinking group of individuals that are unable or unwilling to jump on the web with credit card in hand, or to impulse buyers who want to pick up products immediately.”

Canalys said consumer electronics retailers “failed spectacularly to respond” to the warning signs of the last 15 years. “The window of opportunity has closed,” said Edwards, “they will never catch up with the others.” Just look to the different ways Barnes and Noble and Borders responded to the eReader attack of the Kindle – B&N embraced the Nook and Borders is gone…

Retailers did not want to “undercut store prices on the web and wrongly assumed the
‘touch-and-feel’ element that influenced older shoppers would safeguard them with younger generations,” he added. Forbes’ Larry Downes said “Although it still accounts for almost a third of all U.S. consumer electronics purchases, Best Buy remains a ripe target for more nimble competitors. Online competitors are certainly part of Best Buy’s problem, but not for the reasons it thinks.  What’s really going on is more basic. Best Buy just doesn’t understand its customers’ point of view.”

Downes goes on to say “Consumers easily adapt to alternative retail channels. Before the Internet, there was catalog shopping and home shopping from television. For consumers, buying online was just the next step in an obvious progression of more convenient ways to buy.”

For brick-and-mortar electronics retailers, however, the shift was jarring.  Moving online required new thinking, new management structures, and new strategies. The big, lumbering beasts started late, under-invested and could not build an experience anywhere close to what stores like Apple provide at their retail locations and Amazon provides online.

On the other hand, it truly is a case of “survival of the fittest” for companies such as Apple and Amazon. Downes says: “They both live and breathe the customer’s point-of-view. They completely engineer their business practices, their systems and their people to support it. When they make a mistake, they admit it and they fix it. Immediately.”

Downes adds “Companies like Best Buy could have done all of this years ago, and done it better. It had decades of experience in retail, in customer service, in distribution, in forecasting, in marketing and sales. It had, one presumes, computer systems that could have been upgraded to integrate with a new online front end. It had expertise in the electronic products it sells, and potent leverage over key manufacturers to ensure favorable terms and access.

He concludes: “But Best Buy squandered all of those assets. And now, along with many of its big box peers, the company is caught in a death spiral. Not because of new competitors who, fairly or unfairly, are eating its lunch. These wounds are mostly self-inflicted.”

So it is inevitable that we are witnessing the extinction of Dinostores like Best Buy, CompUSA, Ultimate Electronics and Circuit City and the dawn of a new domination by brands like Apple and Amazon.

What other industries do you see going the way of the Dinostore, what can they do to change? Where do you see positive examples of companies adapting so as not to die and connecting with consumers on their terms?

Posted by Jim Goodyear

Executive Creative Director