Retail strategy: at your service
Big-box stores turning to their smaller competitors' longtime advantage
When struggling home-electronics retailer Best Buy recently announced plans to reinvent itself with smaller stores and added emphasis on customer service, the chain’s new strategy sounded old to George Toma. The president of George Washington Toma in Weymouth has been operating that way for decades.
“It’s service, service, service,” said Toma, who along with his sister Donna Toma Lawlor runs the independent television and appliance store their father founded in 1953. “This is a tough business. Technology and quality keeps getting better, but prices keep dropping.”
That’s especially true of high-definition TVs — once a major source of profits for big chains and small independents, they are now sold at deep discounts as more models have flooded the market and flat-screen televisions have become standard in many homes. At the same time, more consumers have warmed up to shopping online for such major purchases, as well as for digital music and movies, using brick-and-mortar stores to browse, but not buy.
In some ways, independent home-electronics stores — yes, there are still some left — have been better positioned to survive these drastic changes. Their focus on service, as opposed to having the lowest prices, can be especially appealing to consumers overwhelmed by the staggering number of TV choices — from plasma to LED and LCD, 3D, Internet-ready, and “smart” sets.
Toma, whose business expanded to a second location in Brockton in 2008, invested heavily in advertising and marketing for the new store specifically because it is about half a mile from a Best Buy.
He figures his business might benefit from confused and frustrated shoppers at the nearby competitor.
David Brown, who co-owns Brown’s TV and Appliance in Northborough with his brother Frank, said he tries to stand out by focusing on product repair, and by offering free delivery and setup for televisions and other appliances. Responding quickly to customer requests is also crucial, he said.
Brown, whose showroom features stoves, washers, and grills along with TVs, is carrying on a business his father opened in 1960.
“Back then, there was profit in electronics even though there was also competition,” he said. “The big change happened with flat-screens. Manufacturers and big-box stores emphasized that price was the biggest consideration. That took the profit out of [selling] electronics.”
For Nantucket Sound in Hyannis, the secret to competing with Best Buy, which has a store less than a half-mile away, is spending a lot on advertising, offering a huge selection of TVs, and having a loyal sales staff.
How loyal? Jim Roberts, who cofounded Nantucket Sound with his wife, Eleanor, in 1969, said that most of the sales staff have been there 15 to 30 years. And they know their stuff.
“Our salespeople are sent to conferences and speak directly to the manufacturers’ representatives,” said Jim Roberts. “They know the products they are selling.”
Best Buy did not respond to requests for comment.
Big and small brick-and-mortar electronics retailers share at least one challenge to their futures: “showrooming,” which refers to shoppers who ask trained store staff about a product, but then buy it online, at a lower price.
“I’ll have people with smartphones who will search online for prices as I’m talking to them,” Toma said. “If a customer shows me a different price, at least we can talk about it. I can’t have that conversation if they leave and do it at home.”
Stephen Baker, vice president of industry analysis for market research firm NPD Group, said the fear of showrooming is overstated.
“The fact [customers] are coming in shows some level of dissatisfaction with what’s available online. You have to use that to your advantage,” he said.
To help bring their prices in line with those of larger retailers, many independent electronics stores join a buying group such as the New England Appliance & Electronics Group, based in Franklin.
“In our industry, many electronics have become commodities,” said Robert Balzano, electronics buyer for the organization. “The hardest thing is the goal of having the same price as Best Buy, but independents can offer a better shopping experience.”
Balzano said that approximately 40 to 50 of their 120 members sell electronics, furniture, appliances, and such household goods as generators. Product diversification allows for a steadier stream of revenue because “appliances and electronics are very volatile due to competition from stores and online.”
That volatility will probably mean continued upheaval at all levels of the sector. For instance, earlier this month Best Buy said it will lay off about 2,400 employees — 1.4 percent of the workforce — including 600 from the Geek Squad tech support division.
But not everyone has gone high-tech. According to NPD’s Consumer Technology Online Household Penetration Study, 68 percent of US households have flat-panel TVs, up from 63 percent in 2011.
That means there are still opportunities to win over customers, like Dan Cooney of Northborough. On a recent afternoon, Cooney was shopping for a new dishwasher at Brown’s.
“It was a bit more expensive here,” he said, “but I wanted to support a local business.” And a return visit could be on his calender.
“My TV died two weeks ago,” he said.