Despite Clive Coombes’ attempts to rescue Comet last year, his plan to return to the high street with 80 ‘Meridian Comet’ stores remains surprising.
The electricals sector is tough, even in retail terms. There were plenty of things Comet could have done to give itself a better chance of survival, firstly as part of the Kesa group and, latterly, under the control of Opcapita; but it was not poor strategy alone that drove the business under.
The market contracted by a painful 16.2% over 2007 to 2012, as consumers spent less on certain technologies and stopped buying as many big ticket white goods. With margins already pretty thin, and non-specialists eating into share, this shift was always going to create casualties.
So what opportunity has Clive Coombes spotted in a sector that has already claimed victims as high profile as Jessops and proved too hot to handle for a global giant like Best Buy?
Well the strategy apparently consists of putting together a portfolio of high street stores, small at 3,000sq ft, but driving plenty of footfall through a welcoming environment that will include free soft drinks, areas for playing games consoles and high levels of customer service. Costs will be reduced by stores carrying minimal stock, with orders fulfilled centrally, but the retailer will offer free delivery and 60-minute slots for shoppers who order in store or over the phone. The fact the Comet name is being used also suggests there will be some emphasis on price competitiveness in the brand positioning.
However, it is extremely difficult to see this being sufficient for the fledgling business to establish itself. There is no ‘gap’ left by Comet’s previous departure. The specialist was squeezed out by its rivals and its share 7.1% in 2011) was soon gobbled up the same players that had pushed it towards its demise. Dixons (19.7% in 2012), Argos (11.3%), Amazon (5.5%), John Lewis (5.3%) and even Apple (6.5%) all took a piece of the action and none will be willing to give it up again without one hell of a fight.
Each offers their own strengths and each has become accustomed to battling for every pound; any new boy trying to muscle in is going to have to bring something pretty special in order to stand a chance.
Yes, the high street may be less crowded than it used to be but, again, it is wrong to call this a ‘gap’. It is a new balance. When consumers buy electricals nowadays they are spending more online, in the supermarkets and at out-of-town specialists.
They just don’t want to do as much shopping on the high street as they used to, particularly for white goods. Market leader Dixons hasn’t overhauled its whole store portfolio, closing high street outlets and opening megastores, on a whim; it has done so because it is reflecting how consumers want to shop and it has been rewarded by much improved performance.
So, with no plans for a transactional online offer, the new Comet is putting all of its eggs into one, pretty dubious, basket. By sticking to certain regions and carefully picking locations it may be able to carve out a niche, but lack of scale, and buying power, brings a whole other raft of problems.
We believe the electricals market is now in recovery, but the uplift won’t be sufficient to carry all electrical players along with it; only the best will benefit and the new Comet, like the old one, will struggle to make this group.
- Matt Piner is research director at Conlumino