Call it Darwinism at work: The unspoken subtext of this year’s CES is the drastic shrinkage in the number of retail outlets for home electronics.
Circuit City, which operates more than 565 stores in the U.S., filed for bankruptcy in November and is on the block; if it doesn’t sell by January 16, it’ll be forced to liquidate. Smaller chains like Tweeter have been vanishing, too; that chain had 70 stores, all of which closed last month. Best Buy cut its store expansion plans last month, and today reported a drop in December same-store sales.
With fewer retail outlets where consumers can touch, see and hear new products, it could prove harder to push new entertainment technologies into the market. Retailers have proved key to helping introduce Blu-ray players, DVRs from TiVo and others, and portable media devices like the iPod.
“When you’re trying to sell sophisticated stuff, where one device is connected to another and consumers have millions of choices, a retail environment is really important,” says Steve Krampf, co-founder of Chestnut Hill Sound, a company that makes a high-end audio system for iPods. Tweeter was his biggest sales channel. “It’s a real problem.”
“The idea of buying something from Amazon, getting it home and trying to put it together yourself is not something consumers want,” says Will Richmond, an analyst with Broadband Directions. “Human contact is more important than ever, as technology gets more complicated.”
For its part, the Consumer Electronics Association, which organizes the annual CES show, seems relatively unconcerned. It forecasts just a small drop — 0.6 percent — in sales to dealers for 2009. (For 2008, it estimates that about $172 billion in consumer electronics were sold, a 5.4 percent jump from the prior year.)
Mark Finer, an entertainment industry consultant, takes a glass-half-full view. “New opportunities arise to replace those that depart the scene,” he says. “Apple and Sony have created their own customer touch points with the stores they operate. You have online retailers like Amazon and you have technology integrators like Geek Squad, which will go into your home and help set things up and connect them.”
Finer also says the electronics retailers that do survive will be more focused on “sales consultancy, explaining technology to users, and educating them.”