Wednesday 28 January 2009

Electrical Retailer short circuits...

Yesterday’s London Paper, shortly followed by the Retail Week site, are reporting tabloid uproar at Comet’s decision to implementing a listing fee of up to £15,431 for manufacturers to be stocked across their 250 retail outlets. While retailers have been playing this game for many years, the current outrage highlights a deeper industry issue around the cost and value of channels. How can retailers like Comet – already very successful online – continue to justify the immense expense of operating physical outlets?

So, Comet, has decided that as a means of generating extra revenue at this particularly challenging time, it’s to charge manufacturers up to £15,431 if they want to put a new product on display in it's 250 stores. Yep, that's right, with all the wealth of distribution options that the internet presents to these manufacturers, Comet thinks it can charge £61.72 per store for carrying the new product.

Now, I may be wrong here but I can't imagine that the manufacturers are going to be delighted at this prospect, in fact if some of the comments on Retail Weeks’ site are to go by then it’s fair to say they are outraged.

It’ll be interesting if the manufacturers simply comply with this or if they start to leverage the wealth of distribution options available through the web and challenge the traditional models of Manufacturer & Retailer.

I can’t help but think that if this scenario plays out, and the manufacturers refuse to pay these new fees then surely Comet is accelerating it’s own downfall?

Think about it from a customer perspective, Jane has convinced the Bob that they just have to have the latest new shiny washing machine, so Bob has a look at Comet.co.uk - no new shiny machine there, but a little click away is Tesco Direct / Argos / Kelkoo / etc etc and there it is in all it’s shiny glory ready to be bought from Comets' competitors!

Alternatively, Bob goes in-store and the delightful, helpful customer assistant say's 'Oh I'm sorry Bob, but brand X didn't want to pay £15,400 for us to put their new washing machine in our 250 beautiful retail environments, so that you can buy it here, helped by me, your happy, friendly knowledgeable assistant." Bob doesn’t think to himself "Those pesky tight fisted manufactures', how dare they not pay for me to buy my washing machine in this wonderful shopping environment" he's more likely to be a bit perplexed and irritated that Comet don't have the product he wants at the price he wants to pay for it and trot off to the nearest store that does.

I wish the very best of luck to both Comet and the Manufacturers. It is indeed a challenging time and I’ll watch with interest to see if the Manufacturers take the opportunity to reinvent themselves and challenge old models. And if retailers such as Comet will move away from draconian quick fixes that are so short term. What would be great is to see them put the customer back in the heart of they are doing and enable them to buy the right product, at the right price, through the channel they would prefer – just a thought.

 
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