As purchasers of technology products we’ve never had it so good. It’s possible to slip a new PC in with your weekly shop at retailers such as Tesco, Lidl and Dunnes Stores. You can pick up a new wide-screen plasma while renting a DVD at Xrtavision. Specialist retailers around the country stock an amazing array of accessories that enhance our digital lifestyle. And if you find you really have to that new gadget when suffering a bout of insomnia there’s a vast array of local and international online stores that will happily deliver to your door the next day.
SSIA maturity
All of this of course is due in large part to our tiger economy that means more and more of the population have disposable income that they are willing to spend on the latest consumer electronics. In fact with SSIAs coming to maturity at the moment, many retailers are rubbing their hands in expectation as shoppers get ready to splurge their government windfall on items that they wouldn’t otherwise be able to justify.
According to Geoffrey Peat, of Peats Wholesale, the increased number and variety of outlets stocking consumer electronics is largely due to the popularity of “digital lifestyle” products like MP3 players and digital cameras. His firm took on a distributorship for Creative’s media players and other products and has been amazed by the volume of sales which have been a double digit multiple of his expectation.
In chains
In fact Noel Donaldson of specialist distributors AV Import, who provide mid to high end equipment from plasma TVs to structured cabling to retailers and specialist installers, says that most of the growth he has seen in recent years is from the large chains. “The bigger boys are getting bigger,” he says citing Harvey Norman’s six store openings this year as evidence of the growth of the chains. “Five years ago in Dublin there was a great range of independently owned hi-fi stores but now there’s just Peats, Cloney Audio and Totterdells out in the suburbs.”
That big shake-up is no doubt partly due to the face that the audio and visual equipment has gone digital rapidly – totally changing the way people listen and watch. Gone are the days of two channel stereo components – your average music buff these days is more interested in downloading the latest music online to their digital music player and figuring out how best to be able to stream their massive library of tunes to every room in the house.
Custom install
In fact according to Donaldson one of the notable trends is the growth in custom installation companies such as Incontrol, Instacom and Cloney Audio who provide not only the equipment but will also handle all the installation issues such as wiring a home for multi-channel and multi-room sound and vision.
While the traditional hi-fi retailer has had to embrace digital to survive the popularity of these products that sit around the PC has also seen a new category emerge – ‘digital lifestyle’ shops. Probably the most high profile example are 3G, the chain which took over the Eircom stores in 2003, with the mantra “wired, wireless, whatever”.
Broadband enabled
According to Karen Madden, marketing manager with 3G, the chain’s strategy has been to make broadband tangible by stocking products that are enabled by broadband – everything from MP3 players to Apple Macbook’s.
“Three years ago when we launched the education around broadband was quite weak – it was all about getting a faster pipe but customers didn’t really understand that,” said Madden. “Our stores are very hands on and all about demonstrating the products.” As well as acquiring its stores 3G also sells Eircom’s broadband services which Madden says means it can provide bundles of products along with the necessary high speed connection to get the most out of them.
2000 and beyond
In contrast to 3G, Beyond 2000 is one of the venerable old names of the Irish retail scene – the company was founded in 1987 and has been trading out of its Chatham Street premises in Dublin city centre since 1991. Manager Martin Donohue says the typical buyer has changed significantly since those days when the market was split between teenagers looking for Commodore 64’s for games and business people who were after IBM compatible PCs.
Donohue says the advantage of a shop like Beyond 2000 is that it purely focuses on technology products. “You don’t have the same sales guy trying to sell you a VCR and a notebook computer,” said Donohue. “The problem with large retailers like PC World is that they are so vast that the staff don’t have experience in all areas.”
He also points to the relatively low staff turn over in Beyond 2000 – his current team have an average of three years service – something he does not feel the major chains enjoy, largely he thinks because of the long opening hours seven days a week. “Customers don’t want to see a different person every time they go into the shop,” said Donohue. “If they buy a PC and come back this year to buy a printer or web cam it’s good if they have the same staff to deal with.”
Move to retail
Cantec, founded in the north east of the country in 1997, is a good example of a reseller that focused on the business to business market but subsequently moved into retail. It has just opened its seventh store in Ashbourne, Co Meath and according to managing director Maurice Muldoon, focuses on fulfilling the needs of tech shoppers in fast growing provincial towns. “The objective in our retail business is to provide the same cost products as people can get in the large cities,” explained Muldoon. He says the move into retail was dictated by customer demand for products that its office supplies division was not carrying.
Price essential
According to Declan Ronayne, general manager of DSG Retail Ireland which operates the PC World, Dixons and Curry’s shops in Ireland, the essence of technology retailing is price – by having low prices you ensure stock moves and can be replaced quickly by new technologies. He says that the entire stock in a PC World outlet changes every 8 weeks and he will sell products at a loss in order to get them out the door.
Online age
Although Cantec has an online store for its business customers it does not offer a similar service for individual consumers. Muldoon puts this down to a lack of broadband availability (“dial-up is like a black and white TV”) and the fact that the average customer buying technology for his/her family comes from a generation that was not exposed to technology themselves at an early age.
“The average age of people buying a PC for their child now is late 30’s and early 40’s and they missed the computer era when they were in school by three or four years, so they are not as comfortable buying online,” says Muldoon. “Irish people like to come in and get the feeling that they have got a bargain.”
Bricks and mortar
Beyond 2000 also doesn’t have an online store – largely says Donohue because customers aren’t comfortable buying big ticket items from a web site. “Personally I wouldn’t buy online because of the warranty and guarantee issues – it is going to be handled over the phone and you’ll have to ship the product back which can be very expensive,” says Donohue. “If you’re spending EUR*1,000 – EUR*1,500 you want the reassurance of dealing face to face.”
That’s backed up by the experience of 3G which has an online presence as part of the Buy 4 Now shopping site (www.buy4now.ie/3g). Madden says the site is popular for smaller purchases such as pre-paid and sim-free mobile phones but for purchases over EUR*400 customers prefer to come in store. “Looking at the page views it’s clear that customers are using the site to research purchases. But having a site is very important because it ensures we have 100% national coverage even in the areas where we don’t have a store.”
Ronayne’s analysis of the page views to purchases on PC World’s Irish and UK sites shows that Irish consumers are less likely to buy online than their British counterparts. Instead he says we use the web for research before buying in-store.
Broadband ok
Menno Cadel of online store Komplett (www.komplett.ie) does not believe lack of broadband availability is an issue in Ireland any longer. Although initially business on Komplett.ie was mostly from hardware enthusiasts and gamers purchasing graphic cards, cases and other components to modify their PCs, he said buying online is now a mainstream activity.
But Cadel, rejects the notion that online retailers are just a source of products at rock-bottom prices. “Price is just one of the things we are competing on – and it’s not the major thing,” said Cadel. “It’s also reliability – we provide next day delivery because we have our own warehouse in Holland. We keep most of our products there. We are not sourcing them from the manufacturer first. Nowadays if people see a product online and it’s in stock people want it next day and not in two weeks time.”
Service competition
With the large international retail chains able to deal directly with manufacturers to ensure they get the best price the smaller retailers have to compete on service. For example, Cantec has a service and repair centre in each of the stores. While this ensures there is always someone on hand should a customer have a deeply technical question, Muldoon says it is very reassuring for customers buying products. Instead of having to ship all faulty products back to the manufacturer, he estimates that eight out of ten problems are solved in-store without having to return the product.
Stock range
With the breadth of products available online and in the larger stores smaller outlets are also having to stock a greater range of products and accessories. “Now more than ever it’s important to offer the breadth and depth of products, as well as being knowledgeable and able to offer assistance,” says Peat. “Retailers have to update to provide the ‘digital lifestyle’ and some of them can struggle to understand it. But the retailers who have upgraded are getting the business through.”
According to distributors even though you may feel you are paying a fair price for your gadgets the amount of money that makes its way to the retailer has actually fallen in recent years. The margin that they make on a core product such as an Ipod or a PC can be as little as 5-6% and even the big players who deal directly with the manufacturers are doing well if they can make twice that.
Low end
While the supermarkets seem to be focusing on the low-end and products that they can move in volume, at least initially, the specialist retailers or focusing on the higher value products. “The lower-end of the PC market has died,” said Muldoon. “Most of our customers buy mid to high-end products for gaming and educational use.”
All in all the many and varied outlets that make up the Irish retail technology seem to be in rude health and events like the failure of the Compustore chain in 2004 seem like a distant memory. The future also looks bright.
While Ronayne says that there is still “not a great awareness” of the impending launch of Windows Vista amongst customers, he expects it to provide a boost for sales early next years as both enthusiasts and the casual shopper opt for the latest technology. Already Madden reports that 3G has seen an uplift from the first tranche of SSIAs maturing. Even when that windfall starts to dry up at the end of next year, it seems that unless there is a significant downturn in the economy shoppers will be continued to be spoilt for choices as to where to buy their electronic goodies.
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