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In the UK, spending on electrical consumer goods represents about 3 per cent of total consumer expenditure, giving an annual spend of about |pounds~8 billion. Over half of this is spent on domestic appliances, such as refrigerators, washing machines, cookers, tumble driers, microwave ovens, dishwashers, vacuum cleaners, kettles, toasters -- i.e. white goods. The remainder is spent on brown goods, including televisions, video recorders, camcorders, home computers, keyboards, satellite TVs, portable radios, hi-fi and audio equipment. By any standards, the retailing and distribution of such an array of consumer durables is a major industry. And, given an ever-increasing rate of new product developments and growing demand, it also operates in a highly competitive marketplace.
But, how do you judge an industry which in recent years has enjoyed one of the most exciting periods of growth, and yet has failed to capitalize on its market in terms of profitability?
During the mid- to late 1980s electrical goods retailers focused on ambitious growth strategies to take advantage of the then booming trading conditions. Yet they did so at the expense of profitability and investment in the development of their "retail process". This period of high volume and low profitability has meant that many consumers, who would have been the customers of the early 1990s, are already in possession of electrical consumer durables bought in the 1980s. It seems that growth has been achieved by bringing forward purchases.
On reflection, the industry has much to learn from its actions during the mid- to late 1980s. This article is an attempt to map out those lessons which look to be of value in the 1990s.
The 1980s saw a period of real growth in consumer purchasing power|1~. It was a period of stable government and policies -- factors which served to increase the level of personal disposable income. As inflation was brought under control consumers became more willing to take on expenditure commitments, perhaps feeling confident that their future income streams were assured. This enhanced level of consumer confidence helped create a credit explosion in the mid-1980s which would, in turn, fuel consumer expenditure growth of 30 per cent in real terms|1~, far exceeding growth in personal disposable income. The mid- to late 1980s became a period of booming trading conditions.
This period of expenditure created a growth in the effective demand for electrical consumer durables. Whilst total consumer expenditure grew in real terms by 30 per cent, equivalent spending on electrical consumer durables grew by 108 per cent|2~. And, whilst increases in monetary purchasing power gave consumers greater leverage over retailers, this, in addition to the growing competitive pressures within the industry itself, drove electrical goods retailing (EGR) towards many new developments: the influence of design on the retailing environment and display was to become significant; niche concepts rose rapidly in prominence and fell from grace almost as quickly as they had grown.
The booming trading conditions of the mid-1980s also had an impact on shopping patterns, as well as shop capacity and location. Unrivalled levels of trade led to congestion and poor levels of accessibility within the high streets. Increasing occupancy costs and competition for rents from fashion retailers forced many of the bulky goods retailers out of the high street and into retail parks on the fringe of towns, or out of town. In those sites, occupancy rents at six or seven pounds per square foot, were around one tenth of the high street rent, and so the margin per square foot of selling space made the display of bulky electrical goods financially feasible.
THIS SHOPPING CONCEPT ALSO PROVIDED THE CONSUMER WITH BETTER ACCESSIBILITY
This shopping concept also provided the consumer with better accessibility and convenience. And increasing consumer mobility through higher levels of car ownership ensured the success of this new retailing format. Although many first-generation sites were badly located and serviced, the development of well-planned retail warehouse clusters has grown from three in 1985, to an estimated 80 in 1990. Indeed, the cumulative floorspace has grown from just 93,000 square feet in 1982, to around 26 million square feet in 1990.
During the 1980s significant advances were made in retail technology such as EPOS, EFTPOS and EDI. Retailers of electrical goods started to invest in those systems as the basis for improving stock management through just-in-time delivery, customer flow analysis, budgetary control, and price band analysis.