Comet has been left teetering on the brink of administration after credit insurers pulled cover on the embattled electricals retailer. Retail Week takes a look at what went wrong.
But it was always going to be difficult for Comet to get the full confidence of its supply chain in a market that is under huge pressure to slash prices as specialists, etailers and supermarkets compete for sales.
But although Comet has looked somewhat wobbly for some time, observers have been surprised by Comet’s downfall, or at least the timing of it.
It seemed the new management team had made progress under chairman John Clare, who told Retail Week in July that he expected Comet to be back in the black by the end of the financial year.
A confident Clare said costs were being cut out of the business and it was looking to exploit its value proposition, offering new brands and a store space where customers could touch and feel the products.
But its seems there was too much to do in a short space of time, and its credit insurers had the final say.
Conlumino analyst Matt Piner said: “The reports that Comet had been trading better, as well as commitments made last year to keep the business running for “at least 18 months”, make this pre-Christmas collapse a bolt from the blue. However, with the withdrawal of insurance meaning a considerable cash injection would be required, OpCapita has decided to cut its losses.
“Unfortunately this result was always a strong possibility. The electricals market is extremely competitive and the idea that a struggling retailer like Comet could improve its appeal to consumers while simultaneously cutting costs and axing staff just didn’t look realistic.”
Comet has struggled to keep its proposition attractive to shoppers, trading head-to-head with PC World and Currys owner Dixons, which dramatically improved its customer service offer over the past three years under the leadership of former boss John Browett. Comet just couldn’t keep up.
Supermarkets, department stores including John Lewis and multichannel retailer Argos have all piled the pressure on electricals specialists, trying to take market share by offering hard-to-rival prices despite the inevitable hit to profits. Falling electricals prices are continuously being reported by the British Retail Consortium on its shop price index.
Online retailers have also changed the market immesurably, offering knock-down prices store-based businesss cannot rival. Global etailer Amazon has become a huge retailer of electricals in its own right, with an estimated share of 6.7% in the UK, according to analyst Verdict.
Clare had been confident that the stores were an advantage and he wanted to keep the number of shops at the current level of 240, although he was keen to downsize some of the larger shops.
The fate of US electricals giant Best Buy brings into sharp focus the difficulties of setting up shop in the competetive electricals market. It quit the UK almost a year ago, shutting its 11 big box stores little more than a year after opening.
Despite the lifeline Comet was offered with the acquisition by OpCapita just days after Best Buy’s decision to scrap its UK stores, it seems it had too much to do on product, prices and service in too short a time.
All Comet stores to close today as losses hit £230m and Vince Cable steps in
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Analysis: What went wrong at Comet?