First Research US Industry Profile

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Consumer Electronics & Appliances Stores
SIC Codes: 5045, 5064, 5065, 5722, 5731, 5734, 5946
NAICS Codes: 4431
Last Quarterly Update: 8/5/2019
Companies in this industry sell household appliances, cameras, computers, and other electronic goods. Major companies include Best Buy, Conn’s, Fry's Electronics, GameStop, and the retail operations of Apple (all based in the US), as well as Dixons Carphone (UK), Fnac Darty (Belgium), GOME (China), the CECONOMY-owned Media Markt and Saturn brands (Germany), and Yamada Denki (Japan).
Global consumer electronics sales topped $150 billion in 2018, up 6% versus the previous year, according to market research firm GfK. The market is recovering from slow growth between 2011 and 2013. The resurgence is being driven by strong performance in China and India and consumer demand for emerging technologies such as smart speakers and smart home products. While sales of smartphones have slowed due to market saturation, the debut of 5G models in 2019 is expected to boost sales, according to the Consumer Technology Association.
The US consumer electronics and appliances store industry includes about 40,500 stores with combined annual revenue of about $100 billion.
Competitive Landscape
The competitive landscape for US consumer electronics (CE) retailers has changed dramatically over the past decade amid rapidly evolving technology and the growth of e-commerce. Of the 2006 Top 100 CE retailers, some 20% are no longer in business, including Circuit City, which ranked third at the time. Others, including market leader Best Buy, have struggled. Video game seller GameStop is closing stores and has put itself up for sale after a shift to digital downloads and streaming led to a steep decline in store sales. While Best Buy remains the nation’s top consumer electronics retailer, online giant Amazon (ranked No. 18 in 2006) is a close second, with more than $35 billion in CE sales, according to the latest annual rankings from TWICE. Rounding out the top five are Walmart, Apple, and Costco. Competition from alternative retail channels has contributed to the 7% decline in sales for electronics and appliances stores since 2008.
Profitability for individual companies depends on the ability to generate store traffic and repeat business, as well as effective merchandising. Large companies enjoy economies of scale in purchasing and marketing. Small companies can compete effectively by offering specialized products or superior customer service. The US industry is concentrated: the 20 largest companies account for about two-thirds of sales.
The escalating trade war between the US and China and the Trump administration's threat to levy tariffs on $200 billion of Chinese-made goods threatens to raise prices on electronics, such as iPhones. Appliances have already taken a hit: The imposition of a 20% tariff on imported washing machines in early 2018 increased prices of washers and dryers by 12% each in the first half of 2018, according to a study by economists at the University of Chicago.
Competitive Advantages:
Omni-Channel Business Model -- As consumers migrate online, retailers that successfully merge their in-store and digital operations to offer speedy home delivery and in-store pickup for items ordered online will come out ahead, especially among younger, tech-savvy consumers. By seamlessly melding in-store and online operations, CE retailers have been able to beat back showrooming -- where consumers try out products on store shelves only to purchase them online (often from Amazon) -- and recapture lost sales.
Ship-From-Store Fulfillment -- The ability for retailers to ship products purchased online directly from a nearby store improves product availability and delivery times for customers. Brick-and-mortar CE retailers like Best Buy leverage their national store networks to beat even Amazon on delivery times employing the strategy. As consumers come to expect next- and even same-day delivery of online purchases, retailers who can deliver goods fastest will have a competitive edge.
Compelling In-Store Experience -- To drive traffic to physical stores in the digital age, CE chains are focusing on creating compelling hands-on experiences that can't be matched online. Apple was an early innovator, drawing huge crowds to its stores, where consumers can try out and purchase products and get technical support from experts.
Highly Trained Employees -- As technology and devices become more sophisticated, consumers increasingly are relying on highly trained store employees to explain products in detail and even repair them.
Companies to Watch:
Fresh off a five-year turnaround plan, market leader Best Buy is making the case for brick-and-mortar retail in the digital age, while embracing online and mobile technology to survive. After years of losing sales to Amazon and discounters like Walmart, the company's revenue jumped 7% in fiscal 2018 (although revenue growth slowed to less than 2% the following year). To revive its business and fend off Amazon, Best Buy has invested in price-matching, partnering with suppliers, faster delivery, improving the search function on its website, updating its mobile app, and improving customer service to draw shoppers to its stores and website.
Amazon is poised to topple Best Buy as the top retailer of consumer electronics. The e-commerce giant's CE sales grew by more than 18.5% or more than $5.3 billion in 2017, according to RetailDive. Its growing CE might -- buoyed by more than 100 million loyal Prime members -- helped put Circuit City, HHGregg, and RadioShack out of business. Best Buy, however, is proving a more formidable competitor. As more CE retailers succeed at being both brick-and-mortar and online sellers, Amazon's double-digit growth in annual CE sales may slow somewhat.
Video game retailer GameStop is stuck in a prolonged sales slump as video game sales move to digital downloads and streaming and consumers delay console purchases ahead of new releases for Sony's PlayStation and Microsoft's Xbox. The company, which recently hired its fifth leader in less than two years and has closed hundreds of stores amid declining sales, is attempting to diversify its revenue by expanding into new merchandise categories, including genre-related figures and apparel. As game makers Sony, Nintendo, and Microsoft shift to delivering game content digitally, GameStop stores risk becoming irrelevant, much like now-defunct Blockbuster Video stores.
Dixons Carphone, a leading consumer electronics and telecommunications retailer in Europe, is struggling amid changing consumer habits and softness in the UK mobile phone market as consumers hold on to their handsets longer. The company is tweaking its merchandising mix as consumers move away from products like digital cameras in favor of using their phones to take photographs. Dixons has been losing sales to Amazon and other online retailers as European consumers shift their buying online.
Products, Operations & Technology
Major product segments include computers and peripherals (about 25% of industry revenue); telephones (15%); major household appliances (15%); and TVs (10%). ... plus:
Sales & Marketing
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Finance & Regulation
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Regional & International Issues
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Human Resources
Also includes the following chapters:
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Industry Indicators
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Business Challenges
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Trends and Opportunities
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Call Preparation Questions
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Financial Information
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Industry Forecast
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Industry Websites
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Glossary of Acronyms

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