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Specialist electrical retailers fight back

Electrical retailers have been forced to scale back their reliance on manufacturer brands and invest heavily in private label and own brand ranges in response to non specialists eating away at both their market share and margins finds Verdict.

GENERAL MERCHANDISE

Specialist electrical retailers fight back

Electrical retailers have been forced to scale back their reliance on manufacturer brands and invest heavily in private label and own brand ranges in response to non specialists eating away at both their market share and margins finds Verdict.


Research from the 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 like supermarkets and online only retailers.
 

Natalia Grabov, analyst at Verdict, said: “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 from 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 Currys in the UK.
 
“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, 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 ranges 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 a private label is a success rewards can be significant for retailers.
 
However non-specialists like Tesco and Amazon have launched private label ranges too. Importantly though, specialists have the edge, particularly in development of products. Not only are electricals 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 example a specialist can ensure its own brand lines are energy efficient like in the case of Dixon’s Advent Eco PC.
 
Ms Grabov added: “Specialist electrical retailers will need to continue to invest in private label ranges and ensure that they establish a price structure that consumers understand. Importantly to continue to win market share back from the non specialists, retailers will need to continue to add value by offering extras. For example non specialists often aren’t able to offer add on’s like 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.”

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