Electricals Retailing in Europe: Market Size, Retailer Strategies and Competitor Performance

Published by: Verdict Research Ltd

Published: Jul. 13, 2011 - 164 Pages

Table of Contents

OVERVIEW

Introduction

Summary

KEY FINDINGS

Electricals in the EU have suffered a decline as retailers face poor market conditions

Consumers are opting to cut back on electricals spending in favor of saving

Consumer spending on electricals is set to grow in 2011

The slowdown in technology innovation is a threat to retailers' sales

Opportunity for retailers lies in Central and Eastern Europe

A multichannel strategy captures all sales opportunities

Specialists have implemented new initiatives to drive sales and remain competitive

Media Saturn dominates specialist sales, while Best Buy has suffered in the UK market

STRATEGIC ACTION POINTS

Focus expansion on the Central and Eastern European region

In new markets, concentrate the store network in a single location to start

Roll out a successful concept in other markets

Offer consumers an innovative but logical store layout

Provide comprehensive instore customer service

Launch e-commerce operations

Offer consumers exclusive products

Develop and continually enhance private label propositions

Ensure promotions are timed to make the most impact

MARKET CONTEXT AND OUTLOOK

The sluggish recovery in the European housing market will pose challenges

Consumer spending on electricals has weakened due to the tough economic climate

Sales in specialist stores have suffered as consumers remain price-conscious

Specialists’ sales decreased by 6.3% across the EU in 2009, following a decline of 2.2% in 2008

STRATEGIC ISSUES

European retailers will look to Central and Eastern Europe to grow further

Computing and entertainment products will continue to drive the electricals market

The emergence of new technology is vital for growth in the electricals market

Innovation captures consumer interest in electronics

The technology pipeline will slow down during the coming years

Tablets is a growing market in the computing category, with Apple's iPad the market leader

3D TVs have the potential to drive sales in consumer electronics

Exclusivity will remain important for retailers

Small uncomplicated products are increasingly moving online

A focus on premium products helps traditional retailers to protect their margins

e-commerce has become an important channel in the electricals sector

Pureplay retailers have become established players

Traditional retailers are now rushing to benefit from the growth of e-commerce

Multi-format retailing will play a crucial role in retailer success

Retailers will introduce private label ranges to entice shoppers and provide differentiation

Private label products have a number of financial benefits

Private labels help retailers to differentiate their offering

Private labels often equate to exclusivity, which can strengthen the brand and foster loyalty

Retailers will look to introduce more innovative instore layouts

Retailers with physical stores must invest in environment to compete with online players

Retailers look to Apple for inspiration

Retailers can learn from manufacturers when it comes to theatrics

Retailers will continue to invest in customer services

Retailers offer advice and support to consumers as a means of enhancing their proposition

Retailers are improving their customer service offerings to compete with rivals

Employees can help consumers to trade up

COUNTRY FOCUS

Electricals retailing in Germany has been boosted by the strong economy

The German electronics market is the largest in Europe

Media Saturn remains dominant in the German electricals market

Recent developments and trends

The French electricals market is dominated by domestic players

Discounting and fickle consumer confidence have been the key challenges for the sector

Darty is the largest specialist in the French electricals market by store numbers

Recent developments and trends

Best Buy entered the UK electricals market in 2010

The UK electricals market is the second largest in Europe

Dixons Retail leads the UK electricals market, closely followed by Kesa

Recent developments and trends

Electricals specialists have focused on growing store networks in Italy

Italy has the fourth largest electronics market in Europe

The Italian electricals market is fragmented

Recent developments and trends

Dixons has exited the underperforming Spanish electricals market

Spain is the fifth largest European market in the electronics sector

Buying groups play a pivotal role in the Spanish electronics market

Recent developments and trends

The largest retailer in the Netherlands is a domestic player

Recovery in the Netherlands has been patchy

A number of large retailers are fighting for market share in the Netherlands

Key trends and developments: Media Saturn is committed to consolidate its position in the Netherlands

Krefel is the largest domestic player in the electricals retailing market in Belgium

The Belgian economy fared better than others during the economic downturn

Domestic companies and international players share control over the Belgian electricals market

Recent developments and trends

Poland has come out of recession strongly, but the electricals segment is shrinking

Media Saturn and domestic retailers are major players in the Polish electricals market

Recent developments and trends

Domestic retailers Expert and Dixons Retail play leading roles in the Nordic countries

The largest Nordic countries fared better during the recession than Western European markets

Elkjøp is the largest retailer in the Nordic region

The Norwegian electricals market is concentrated in the hands of Expert and Elkjøp

The Swedish electricals market is fragmented

A domestic player is one of top three electricals retailers in Denmark

Expert and Kesko are the largest players in the Finnish electricals sector

Recent developments and trends

In Austria, Media Saturn competes with domestic specialist Niedermeyer

The Austrian government has introduced various austerity measures to get the economy back on track

The Austrian electronics market is led by Media Saturn's Media Markt and Saturn banners

Recent developments and trends

Instability in the Portuguese economy has led to a lack of growth opportunities

Portugal has suffered due to high unemployment levels and political instability

The Portuguese electricals market is dominated by specialists

Recent developments and trends

Czech electricals retail sales declined in 2010, leading to heavy discounting

Czech consumers minimized spending on electricals in 2010

Okay Electronics is a key domestic specialist in the Czech electricals market

Recent developments and trends

Media Markt leads the Hungarian market, but Euronics has the largest store network

Hungary was issued a sizable bailout package in 2008 to aid recovery

Dixons Retail exited the Hungarian market in 2009

E-shop.gr dominates the online channel in the Greek electricals sector

The Greek economy is set for further contraction in 2011

The Greek electricals market is led by Dixons Retail's Kotsovolos chain

Recent developments and trends

Dixons Retail and Harvey Norman are struggling in the difficult Irish market

Ireland received a bailout package from the IMF and EU at the end of 2010

The Irish electricals sector is dominated by Expert

Recent developments and trends

eMag has taken control of the online electricals retail segment in Romania

Romania sought help from the IMF to recover from the global economic downturn

The Romanian electricals market is dominated by domestic retailers

Recent developments and trends

Slovakia has been infiltrated by international electronics chains as well as non-specialists

The Slovakian economy is threatened by rising unemployment levels

Domestic player NAY operates across the Slovakian market and recently celebrated its 20th anniversary

Recent developments and trends

The Bulgarian consumer electronics retail sector is dominated by domestic players

The Bulgarian electricals market suffered from a sharp decline in credit sales

The two largest domestic players account for the majority of the electricals market

Recent developments and trends

The Slovenian electricals retail market will change considerably if Merkur cannot recover

Rising unemployment levels continue to stunt growth in Slovenia

Merkur Group is having to restructure due to debt

Recent developments and trends

The Baltic States were badly hit by the economic downturn

Following the recession Lithuania experienced consolidation in the electricals retail sector

Euronics has made a greater commitment to the Lithuanian market

Recent developments and trends

The Latvian economy was in turmoil but is now recovering

The electricals retail market is fragmented and dominated by small domestic players

Recent developments and trends

The Estonian economy was hit by the recent recession, and the market is still feeling the impact

Euronics and Expert are both present in Estonia

Recent developments and trends

COMPANY COMPARISONS

Key operating statistics

KESA ELECTRICALS

Company overview: Kesa is a key European player, with France as its largest market

Kesa operates under five key brands

Kesa has two private label ranges

Kesa seeks to develop a multichannel offering

Recent key developments: the retailer is investing heavily in e-commerce

Kesa has been investing in online and mobile channels

There have been a number of management changes at Kesa

The retailer's UK brand has been relaunched

Trading record: Kesa's financial performance has been volatile

In 2007-11 Kesa's finances were negatively affected by international expansion

Store portfolio: Kesa has been focusing on expansion beyond its core markets

Outlook: Kesa needs to make the UK and other international operations profitable

DIXONS RETAIL

Company overview: Dixons Retail derives almost half of its revenues from the UK and Ireland

Dixons Retail is Europe's second largest electricals retailer

Dixons Retail trades under a variety of different brands

The majority of the retailer's international stores are large out-of-town formats

In the UK, Dixons Retail has a joint venture agreement in place with mobile phone retailer Phones 4u

The group has scaled back its private label offering

Dixons Retail is faced with an increasingly competitive environment

The company is focused on developing its multichannel offering further

e-retailer PIXmania operates across 26 countries, with 17 European stores

Recent key developments: the group has launched new store formatsThe retailer has embarked on a major transformation project

The group has recently launched a new brand offering repair and maintenance services

The retailer has recently divested a number of its unprofitable international operations

Trading record: the Nordic region and e-commerce have helped drive group sales

Store portfolio: the group has opted to reduce its store numbers

Outlook: the group faces the challenge of transforming its recent restructuring into financial gains

MEDIA SATURN

Company overview: Media Saturn operates the Media Markt and Saturn brands

Media Saturn's owner Metro Group is primarily focused on grocery products and electricals

Media Saturn relies on decentralized management

Media Markt has a larger retail network than Saturn

Recent key developments: Media Saturn has recently expanded into China

A new CEO was appointed

Media Saturn has divested its French operations, and is committed to expansion in growth markets

Media Saturn has been increasing its commitment to the development of the online channel

Media Saturn has developed its private label offering

Trading record: the group's recent financial performance was strong, with the exception of Q4 2010

The retailer has recorded strong trading results across 2005-10

Growth in sales was driven by new store openings

The retailer's stores in the Netherlands, Switzerland, and Belgium generate the highest sales per store

Store portfolio: almost 45% of the retailer's stores are located in Germany

Outlook: the group's decentralized structure threatens the success of its corporate plans

FNAC

Company overview: Fnac is owned by French giant PPR

Fnac is PPR's largest business

Recent key developments: PPR has started to divest its electricals businesses

Trading record: Fnac remains heavily dependent on the French market

Fnac was significantly affected by the economic downturn, but has since recovered

France is Fnac's largest market, but its importance has been diminishing in recent years

The personal computers category is Fnac's key revenue stream

Recent trading: three months to March 30, 2011

Store portfolio: Fnac has invested in its retail network

Fnac has significantly expanded its retail network across France, Spain, Portugal, and Brazil

Outlook: PPR’s decision to focus on luxury goods poses a threat to Fnac's future

CONFORAMA

Company overview: PPR has recently divested the Conforama chain

Conforama is now owned by Steinhoff International Holdings

Recent key developments: Conforama has focused on new store formats and private labels

Conforama has launched two new store formats

Conforama acquired an online and mail order specialist

Conforama launched a private label range

Conforama has focused on enhancing its customer service

Trading record: Conforama's trading is improving after a period of sustained poor performance

Conforama's dependence on the French market has been growing

The electricals category's share of revenue declined only marginally between 2005 and 2010

Store portfolio: Conforama has been growing its store network

Outlook: Conforama will benefit from being part of Steinhoff International Holdings

AMAZON

Company overview: Amazon dominates European online electricals sales

Amazon looks set to further dominate the European online electronics market

BEST BUY UK

Company overview: Best Buy UK has not made the impact it expected to in the UK

Best Buy will need to evaluate its UK strategy in order to compete with established rivals

ELECTRICALS BUYING GROUPS IN EUROPE

Overview: electricals buying groups allow smaller players to compete with large retailers

There are a number of powerful buying groups in the European electricals sector

Euronics International is the largest European buying group

Expert has an extensive global reach

EDA leaves considerable autonomy for its members

ElectronicPartner has recently suffered from disputes within the owner family

Outlook: future opportunities lie in Central and Eastern Europe and online

APPENDIX

Methodology

Further reading

Ask the analyst

Global Retail FreeView

Verdict consulting

Disclaimer

Abstract

• Benchmark your company's performance by accessing profiles of leading electricals retailers including key operating details and market shares.
• Make informed country-specific investment decisions with forecasted electricals expenditure to 2013 and in depth country profiles.
• Ensure distribution and channel strategies are aligned or superior to those of other market players by uncovering competitor activity in e-commerce.
• Enhance shopper satisfaction by uncovering customer service strategies and instore services being used by European electricals retailers.
• Make informed pitches to potential electricals partners by gaining insights into their store networks, shares, and current and future strategies.

• Which European markets hold the most potential for the electricals sector and should I invest in them? Which markets are in decline?
• What is historic and forecasted expenditure on electricals across the EU27 countries and what level of sales have specialist retailers achieved?
• How is my company performing relative to other retailers in the European electricals market and what is an achievable market share objective?
• How did players such as Kesa, Dixons Retail, Amazon and Best Buy perform last year? Where do they have stores and online operations?
• Who are the European electricals buying groups and how are they performing?

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