The Battle for Growth in Consumer Electronics - Powering what's next - CloudBlue
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™
W H AT ’S N E X T F O R R E TA I L E R S
The Battle for
Growth in Consumer
Electronics
Powering what’s next
™
A RELENTLESS RACE TOWARD RECURRING RE VENUE
We’ve analyzed the strategies, offerings, innovations, acquisitions and relevant news from 24 top consumer
electronics retailers. These include 14 in EMEA (MediaMarkt-Saturn, Fnac-Darty, Euronics, Expert, Otto
Group, Dixons Carphone, Argos, Boulanger, Unieuro, ElectronicPartner, Cdiscount, Coolblue, Worten and
AO World) and 10 in North America (Costco, Sam’s Club, BestBuy, Target, Office Depot, Staples, GameStop,
Exchange, Fry’s and Newegg.com). Tech manufacturers that retail their own products have been excluded for
like-to-like comparison purposes.
Introduction
A few tech manufacturers dominate the consumer 1. Offering maximum convenience through
electronics market.1 These select few have extremely fast delivery times and any imaginable
both the innovation capacity and the financial combination of physical and digital resources,
muscle required to keep up with the speed at picking points and apps. Today, the omni-
which technology evolves. As a result, consumer channel purchase experience is a reality
electronics retailers end up all selling the same
products from the same manufacturers and at very 2. Increasing customer loyalty by delivering
similar prices. subscription-based services and solutions,
which increases order frequency
With so little differentiation in products and prices,
how do these companies compete? The battle for 3. Incrementing the average order value by
growth is fought on four fronts: shifting from selling products to solutions
4. Expanding their catalog through the addition
of third-party vendor solutions
More convenience, higher frequency, bigger baskets and a broader catalog are the goals to set your sights
on. Long before COVID-19, consumer electronics retailers had already embarked on a profound digital
transformation to be competitive in these four areas.
™ Convenience First, they digitized their own businesses with platforms capable of offering true omni-channel experiences on the customer side and delivering maximum convenience (and minimum delivery times) on the logistics side. This automation and digitization of processes allows retailers today to offer click & collect, drive-in, in-store online ordering—and every other imaginable combination of physical and digital resources—along the purchase journey. As a result, they can quickly serve demanding, 24/7-connected buyers who expect delivery the same day, sometimes even within an hour, to wherever they choose. Here’s a list of ways retailers are currently stepping up their “convenience game”: Target opened 100 new small-format stores in 2019. In 2020, they will open 36 micro-stores and add “drive up” to dozens more small-format stores. Walmart China invested in a crowd-sourced delivery platform, and customers now receive their merchandise within an hour. With Sam’s Club Scan & Go app, customers bypass the checkout line and pay for items on their mobile device. Target acquired Shipt in 2019 for $550M. The online platform offers same-day delivery and is better equipped to compete with Amazon.
™ The Fnac Darty group opened nearly a 100 new Darty stores between 2015-2018. In addition, they opened 14 “Périphérie Fnac” stores in 2018 and 79 stores in 2019. Coolblue has deployed a network of 35 electric bicycles to deliver the same day in urban areas and has invested in a massive 88,000m² warehouse in Tilburg. Argos Sainsbury opened a regional fulfilment center in Croydon last year to be able to deliver the same day to over 50% of the country. New mobile payment in-store was launched at Argos and Fnac to avoid lines. Many items at Staples are available for pickup today in just one hour. Online order pickup counters are located at the Staples EasyTech and customer service areas. Best Buy allows customers to pick up their orders at any UPS Access Point, including UPS stores, CVS pharmacies, Michaels arts and crafts stores, Advance Auto Parts and other stores. Newegg.com customers can choose to have their package held for pickup at one of more than 2,500 FedEx Corp. locations, including 1,800 FedEx retail stores. Both Costco and Sam’s Club have made efforts to evolve by offering click and collect capabilities, checking in-store availability and providing drive-up collection points. Throughout Costco’s warehouse space, Costco.com is promoted through signage. The company provides tablets on-site to allow customers to search and buy items unavailable in the store, instead of getting them delivered to their homes. Cdiscount has set a network of 18.000 collecting points. Otto Group is building new logistics hubs for the Hermes Germany subsidiary in a multi-year, €300 million investment program. Cdiscount opened a new warehouse of 80,000m² near Paris (Moissy) at the end of June 2018 AO World opened three new outbases in Telford, Coventry and Luton during 2020, taking the total number of outbases to 17.
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Frequency and order value
Subscription-based services are offering retailers the ability to transform one-off purchases into a
commitment for several future transactions. Repair insurances and tech-support memberships are the
foundation of their current offering. Here’s how retailers are working to increase how often customers order as
well as the amount of their purchases:
• BestBuy launched their Total Tech Support • Most companies offer protection plans, many
program in 2019, which for $199/year provides of them through external partners such as
24/7 support for all of a customer’s technology. SquareTrade, but mostly through a one-off, upfront
By the end of 2019, the program had more than payment.
one million members.
• BestBuy offers Geek Squad with every technology
• Both Costco and Sam’s Club increase the value purchase. The program provides an extended
of their annual membership by providing exclusive warranty service along with a dedicated support
prices on home, personal, business and travel team of 20.000 technology experts.
services offered by third-party party vendors.
Some of these services are subscription-based. • Worten acquired iServices, a smartphones repair
company in 2019 with 15 shops.
• Staples launched a Premium Membership program
for companies with 20+ employees that provides • Dixons stated that the company’s repair services
access to special prices and dedicated services. subsidiary, Team Knowhow, is a key area for their
future growth.
• GameStop U.S. loyalty program, called PowerUp
had approximately 42.0 million members as • FNAC acquired WeFix in late 2018 to internalize
of February 1, 2020, including 5 million paying repair services with more than 59 repair points in
members. France.
™
However, to ready themselves for the much-proclaimed solution-selling versus product-selling approach—
that is expected to dramatically increase their average basket value—they must be able to offer much more.
The true challenge is not only bundling products with installation, support and insurance services, but also
with third-party vertical solutions (for designers, productivity, security, etc), which are often subscription-
based.
Let’s explore two scenes to illustrate the benefits of this transformation for both businesses and end
consumers:
SCENE 1: PRODUCT SALE
Eve smiles as she marches back home, her brand-new laptop in a plastic bag hanging on her arm. Her mind
projecting all the incredible items she’ll design for the new client she just signed. “How helpful was Jim, the
shop assistant,” she thinks. ”He provided everything I needed to crush this project, even knowing before I
asked that I would need an SSD hard disk and a dedicated graphics accelerator.”
Business KPls Pending Efforts by Eve Eve’s Risks
Transactions: • OS initial setup – hour • Accidental damage,
• Laptop: $800 (20% margin) • Backup and transfer of files to replacement: $800
• Cross-sale value: $0 the new laptop – 3 hours • Data transfer malfunction,
• Installing all productivity project delays: $600
• Client data: unknown
applications – 1 hour • Losing the new client: $6,000
• Frequency: 1 • Installing antivirus, security Total risk value: $6,900
Basket value: $800 Total revenue: and backup solutions – 3 hours
$800 Customer Lifetime Value: $40 Total: 8 hours
™
SCENE 2: SOLUTION SALE
Eve smiles as she marches back home. Her brand-new laptop in a plastic bag hanging on her arm, her old
laptop in her backpack. Her mind projecting all the incredible items she’ll design for the new client she just
signed. “How helpful was Jim, the shop assistant, offering me the Designer Bundle with a great discount,” she
realizes. “All my files were quickly transferred, and all the applications I need are already installed and ready to
use. I may have saved about 8 hours, if not more. Plus, now I have insurance if anything goes wrong that I can
comfortably pay on a monthly basis.”
She remembers how she lost her last client, after not being able to deliver the project on time when her laptop
unexpectedly slipped through her hands and broke. “Now I truly have everything I need to crush this project,”
she acknowledges.
Business KPls Pending Efforts by Eve
Transactions: • None
• Laptop $800 (20% margin) = $40 Total: 0 hours
• Insurance: $8/month (40% margin,18 months average) = $57.60
• Productivity and security apps subscriptions: $120/month (20%
margin, 18 months average) = $432
• Warranty extension + tech support: $50
Client data: all stored for future promotions and cross-selling
Frequency: 1 time a month, 18 months average
Eve’s Risks
Basket value: $978
Total revenue: $3,154 • None
Customer Lifetime Value (average 18 months): $579.60 Total risk value: $0
™
The first scene produces $40 of gross margin of procurement flows for third-party solutions
value for the business via an anonymous receipt (productivity and security apps, insurance and
the company can’t leverage for future promotions. services), and the capability of bundling, billing and
And it leaves the consumer with pending tasks and delivering all these products and services to their
thousands of dollars in direct and indirect risks. consumers seamlessly.
The second scene produces $579.60 of gross Successful retailers will be able to draw on a
margin value for the business (14.5 times the first continually expanding solutions portfolio, and
one). Plus, a registered client profile with whom to efficiently and intelligently bundle all sorts of
establish a long-lasting relationship to create cross- applications to fulfill their customers’ demands.
selling and promotion opportunities. It also leaves
the consumer with a solution covering all her setup Our client MediaMarkt, the German retail giant,
needs and minimizing most of her potential risks. The boosted the adoption of insurance and protection
value delivered to both parties is significantly higher, plans for technology devices by two digits. They
thanks to the efficiencies created by automation. accomplished this by simply eliminating the initial
price barrier by transforming device insurances
Products and prices will no longer be at the core from a one-off initial payment to very small, monthly
of the value proposition. Services that eliminate installments. v
consumers’ risks and hassle, together with third-
party applications, will be the key differentiators and The CloudBlue platform allowed them to smoothly
drivers for an increased lifetime value. and accurately handle a huge monthly volume of
small installments, providing them with unparalleled
In the wake of COVID-19, the need for solution scalability and a strong competitive advantage.
selling has dramatically increased with physical
stores now subject to stricter safety and capacity
policies. The necessity to quickly comprehend
customers’ different requirements, offer solution
bundles and most importantly, automate all the
necessary processes has become even more
imperative. To become true solution sellers,
now more than ever, retailers need technology
platforms providing them with complete automation™ Catalog Giant multi-category players such as Amazon, has been logical: If we don’t have all the products, Alibaba, Rakuten or even Walmart still hold one but we do have the customer, why not open up competitive advantage over smaller and niche our marketplace to external vendors, and offer our players: they offer a broader assortment. They’ve platform and services in exchange for a commission achieved this advantage by acting as open like the big players do? marketplaces, where third-party vendors can Opening their online marketplaces to third-party onboard their catalogs and end customers benefit vendors maximizes the value of their customer base from the same advantages, support and coverage by letting external vendors onboard their products services offered by the platform. and leverage the organization’s existing services and The recent reaction of consumer electronics retailers capabilities. Thus, Fnac-Darty, Cdiscount and Worten launched their open marketplaces in the last couple of years in Europe. Target did the same last year in the US and MediaMarkt will follow in 2021. • Newegg operates as a global marketplace platform • GameStop announced their plans to build a and advertises as the #1 global tech marketplace, platform for gamers, including products and reaching over 40 million customers in 20 countries. services from third- party vendors. • In February 2019, Target announced its • Fnac Darty now runs a marketplace with 36 millions third-party marketplace called Target+ to grow its customers. online portfolio in areas like home, toys,electronics • Today, 12,000 professional sellers use the and sporting goods. Cdiscount marketplace. • Sam’s Club parent company Walmart sells • Worten launched its marketplace platform in 2019. 40 million third-party products through their marketplace. The CloudBlue platform enables retailers to grow seamlessly and transform their e-commerce shops into marketplace ecosystems. It handles all the ordering, fulfillment, subscription management and billing flows— including managing multi-tier reseller levels—so retail companies can seamlessly manage a catalog of third- party vendor solutions to be offered through their own marketplace, and deliver their own products by way of multiple third-party marketplaces in any language, currency and geography. CloudBlue enables retailers to become better problem solvers for their end customers, anticipate risks and hassles and proactively offer creative solutions. The company’s end-to-end cloud software and services platform helps retailers bundle, scale and monetize devices and digital services for an ever-more complex decade. As the demands of digital transformation are passed on from customers to the go-to experts they depend on, CloudBlue equips these trusted advisors—the retailers of the future—to transform today’s limitations into tomorrow’s opportunities. References: 1. “Share of personal computer (PC) market revenue by vendor worldwide in 2018 and 2019,” ITCandor, March 2020.
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