Comet Group plcREPORT ON THE UK ELECTRONIC GOODS RETAIL SECTOR

(TRENDS & DEVELOPMENTS, RIVALRY & RETAIL STRATEGY)

1. Executive summary

The main objectives of this report are to examine the changing retail environment within the

electronic goods sector, assess the present retail strategy of one of participants – in particular,

the Comet Group plc, identify the issues needed to be addressed by the company in the future

and suggest alternatives to the retail strategy.

The report first examines the External (Macro) Environment using PEST and SWOT analyses and

in addition Porter’s 5 Forces Model - to provides a brief assessment of the general trends and

developments in the retail sector. Then essential background information on Comet is provided

along with the identification of its main competitors at the market. Competitive analyses is

carried out applying Porter’s 5 Forces Model and SWOT analyses in relation to the retailer’s

performance on the market, to better understand its strong & weak points and identify

competitive advantages over rivals.

After understanding the background and position at the market, report evaluates the existing

retail strategy using 7-P’s framework, where each element is examined in details to get the

deep understanding of the retail strategy and how every particular element influences on

strategy implication. In the end, the conclusions are draws from the report findings and

essential recommendations give to the retailer

Various credible informational sources were used in this report, including academic textbooks

and journal articles; research reports and statistical data and numerous online resources. To

assess and understand the current trends and developments in the industry sector in general

and the role of a particular retailer in it, the Porter’s 5 Forces Model, PEST and SWOT analyses

were used.

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Contents List

CONTENTS PAGE NUMBERS

1. EXECUTIVE SUMMARY 1

2. INTRODUCTION 3

2.1 OBJECTIVES 3

3. METHODOLOGY 4

3.1. ASSUMPTIONS 4

3.2. LIMITATIONS 4

4. GENERAL TRENDS & DEVELOPMENTS IN RETAIL SECTOR 5-8

5. THE RETAILER 8

5.2 COMPETITORS 8-9

6. EVALUATION OF EXISTING RETAIL STRATEGY 9-15

5. CONCLUSIONS 15

6. RECOMMENDATIONS 16

7. APPENDICES 17-23

8. REFERENCES 23-25

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2. Introduction

The UK electronic goods retail sector is one of the most competitive in the country. The total

worth is difficult to estimate precisely, but is approximately £10 billion. Major market shares in

the segment are already divided between the well-established traditional retailers with long

retailing history and multimillion turnovers. In spite of this fact, market keeps attracting new

competitors, most recent and powerful of which are supermarkets and department stores who

after stagnation in food-sales sector decided to exploit new appetizing opportunities.

On the other side, after the relatively long period of prosperity the UK economics, substantially

affected by current global economic crisis is undergoing a recession stage with the GDP

decrease, growth in unemployment and uncertainty in future financial prospects for its citizens.

Consumer confidence has declined in line with the availability of credits/borrowing funds from

banks, which immediately resulted on the retail sector, with electricals being not an exception.

Sales started to fall rapidly, companies suffering financial loses and marketers thinking hard

how to deal with these unconventional obstacles and do not miss opening opportunities to beat

the rivals and bite the biggest piece from the pie of market share.

2.1 The main objectives of this report are:

To examine the changing retailing environment of the electronic goods retail sector

To assess the present retail strategy of the Comet Group plc (part of to KESA Electricals

plc)

To identify issues need to be addressed in the future and any alternations to existing

strategy that should be made by the chosen retailer.

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3. Methodology

Information used in this report was collected mainly using secondary research method and is

based on various academic sources such as marketing textbooks and marketing journal

publications; research reports and statistical data of respected private and government

agencies such as National Statistics, Mintel, Keynote; legal information & explanations from

different government bodies & bureaus. Some online resources, such as websites, news articles

from most respected national newspapers and online journals were also used. To assess and

understand the current trends and developments in the industry sector in general and the role

of a particular retailer in it, the Porter’s 5 Forces Model, PEST and SWOT analyses were used.

This report is not giving a broad overview on electricals retail market in the UK due to its

limitations, but can be used as a helpful tool in understanding the trends & developments of

the industry and relationship between its major players.

All sources of information used are stated in the References section of the report.

3.1. Assumptions:

Some statistical information can be slightly outdated but assumed to be ‘present’.

Some conclusions and estimations are made by the author based on available

information and are assumed to be right and appropriate

Author may lack knowledge on certain areas but is assumed to be an ‘expert’ and able

to give relevant recommendations to company

3.2 Limitations:

Report is limited by the size (word count) and therefore cannot comprise all relevant

information.

It is difficult to find information on certain areas because of limited access.

Not all secondary resources can provide correct data and information.

o Some available information can be outdated.

o Some informational sources can be biased and not always objective.

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4. General Trends & Developments in the Retail Sector

In this section, the report will assess the External (Macro) Environment for the electronic goods

market sector to understand which factors influence on its developments and outline current

trends.

(See Appendix 1for the SWOT analysis)

(See Appendix 2 for the Porter’s 5 Forces models)

The PEST analysis will be used to assess the External (Macro) Environment of the retail sector.

Political/ Legal Factors

The United Kingdom is a constitutional monarchy with Queen Elizabeth II as the head of

state and Gordon Brown as the Prime Minister of the parliament. The overall political

environment in the country is stable.

There are no special restrictions to sell electronics in the UK, however there are some

laws/directives that can directly and indirectly affect manufacturer, distributors,

retailers and consumers in various ways (for more information see Appendix 4):

o EC Directive on Waste Electrical and Electronic Equipment (WEEE)

o The Restriction of Hazardous Substances (RoHS) Directive

o Batteries and Accumulators Directive 2006/66/EC

o The Electrical Equipment (Safety) Regulations 1994

o The Supply of Extended Warranties on Domestic Electrical Goods Order 2005

o Sunday Trading Under the Sunday Trading Act 1994

Economic Factors

The total worth of industry is over £10 billion (Keynote, 2009)

The UK entered in recession in the second half of 2008:

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o Gross Domestic Product (GDP) has decreased by 1.5 % in the fourth quarter of

2008 and from 3.0 % to 0.7% for the whole year. (ONS, 2009)

o The employment rate is 74.1%; the unemployment rate is 6.3%: up 1.1% over

the last year(ONS, 2009)

o The claimant count reached 1.23 million (highest since 1999), along with the

redundancies level of 259,000 (highest since 1995) (ONS, 2009)

Consumer Prices Index (CPI) annual inflation was 3.0% in January 2009, decreased by

0.1% from December 2008 and reached the Government's target measure. (ONS, 2009)

Retail sales volume rose by 3.2% over the year with the 4.6% increase for household

goods stores sales (the largest rise since August 2007) (ONS, 2009)

The average weekly pay for full-time employees was £479 in April 2008, a 4.6% growth

for the year. (ONS, 2009)

Sociological factors

The population of the UK was 60,975,000 in mid-2007. (ONS, 2009)

52% of UK population are feeling the economic downturn

o 11% (or 5 million) adults are ‘Hard Hit’ and are seriously struggling to get by

o 16% are ’ Fearing for the future' (Mintel, 2008)

Relatively high 21% of UK adults feel 'Comfortable and Confident' (Mintel, 2008)

About 60% of adults said they would try to reduce borrowing and increase savings in the

coming year (Mintel, 2008)

Decline in consumer confidence and slow consumer spending growth is forecasted to hit

hard areas of discretionary spending such as electricals. (Mintel, 2008)

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There is a tendency to re-establish the home as central to the family and social life

(Keynote, 2008)

Technological

Digital switchover

o UK plans to completely switch from analogue television to digital by 2012, with

overall penetration of digital television reaching 86.7% of all households already

(Keynote, 2009).

o In general, there is a trend to switch away from analogue formats towards

digital, especially in brown goods sector.

o The digital switchover and current trends on the market will clearly drive sales of

digital receiving equipment in future (Keynote, 2007)

The market is to a large extent driven by constant technological innovations &

improvements leading to continuous supply of new goods, increase of product range,

help to keep the consumer interest always high and stimulate replacement sales.

The Internet has emerged and established as an important channel of distribution for

electricals

o The UK has the largest and most developed online retail market in Europe with

online sales worth €18.5 billion (Mintel, 2008)

o A negative effect upon pricing and is putting the store-based retailers under

pressure. (Mintel, 2008)

o Major retailers have adjusted to new market conditions/opportunities and have

already established their own online stores.

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5. The Retailer

Comet is one of the UK's largest electrical retailers operating on the market since 1933. It

belongs to KESA Electricals plc, Europe’s third largest retailing group which runs its businesses

in 12 countries. The Comet has 252 stores nationwide with total selling space of 274,000 square

metres. It employs around 10,000 people and has achieved total sales of £1,731.6 million in

2007/2008 with the retail profit of £44.2 million. (KESA official website, 2009)

The retailer offers a wide range of electronic products all at ‘Every Day Low Prices’, when

competitors’ prices are checked weekly and own are lowered to match.

Comet runs a website - Comet.co.uk – which offers easy and convenient way of shopping: ‘click

and collect service’ allows customers to reserve online and collect in store later. Additionally,

customers can shop over phone.

In overall, Comet claims to offer ‘a unique all-round shopping experience with a range of

services’. (Comet official website, 2009)

Comet's logo is presented as the company’s name with the falling star above in orange print

against black background and slogan "We live electricals" underneath.

5.2 Competitors

Electronic goods market is highly competitive with a large number of potential rivals.

Comet’s competitors lie in three retailer groups who have the same physical, marketing and

financial capabilities: mass merchandisers, other electrical multiples and department stores.

Independent retailers can compete only in terms providing better knowledge and advising to

customers, while losing to retailing giant in terms of retailing space size, number and availability

of outlets, turnover, bargaining power over suppliers, prices and product ranges, etc ->

therefore are not considered as real rivals.

From online retailers only Amazon.co.uk and Tesco.com (Tesco Direct/Extra) are considered to

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be rivals. All others are assumed in this report as not rivals because of the differences in retail

marketing strategies and inability to match the full range of the services Comet provide.

After conducting a relevant research, following potential Comet rivals were identified:

Currys, PC World, Dixons or/and Currys.digital (all owned by DSG International plc)

Argos (owned by Home Retail Group)

Tesco Direct

John Lewis department stores

From which the closest rival in terms of similar customer retail marketing strategy, market

share, sales& turnover, target market, etc is Currys who operates about 350 branches, employs

slightly more people and is a bit ahead of Comet in terms of market share. (Keynote, 2009)

To identify advantages and disadvantages of chosen retailer over his main rivals SWOAT

analysis and Porter’s 5 Forces model were used (see Appendix 4 and 5)

6. Evaluation of Existing Retail Strategy: Comet

Retail marketing strategy consists of many variables (see Appendix 6). Unfortunately,

information on some variables is limited or restricted. Therefore, existing Comet marketing

strategy will be evaluated using extended marketing mix framework of 7-Ps which stands for:

product, price, place, promotion, people, process and physical evidence.

Segmenting, Targeting, Positioning

Comet sells a large variety of goods produced by different brands covering all electronic

categories. Retail outlets are ultimately targeted at everyone and therefore all from

segmentation variables (behavioural, psychographic and profile segmentation) can be applied

to segment particular interesting market(s). In terms of targeting, the company clearly adopts

differentiating marketing strategy when specific marketing mixes are developed to all or some

of the segments (Jobber, 2007) In author’s opinion, Comet is using all 8 generic factors to

position its products: top of the range, service, value of money, reliability, attractiveness,

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country of origin, brand name, selectivity (blankson & kalafatis, 2004) However, some products

may be difficult to dislodge since the already have a distinctive position in the mind of the

customer. (ries and trout, 2001)

Comet’s positioning statement ‘We live electricals’ is clear, has been used consistently over

many years, is credible because company possess with great experience & knowledge in selling

electricals, and is competitive since it positions the brand as superior to its rivals.

Product

All retailers of KESA Electricals plc Group share the trading philosophy which is based on three

principles: best price, best choice and best service.

In accordance with company’s philosophy, Comet does his best to provide customers with the

widest choice to satisfy individual needs. It offers numerous product lines and mixes: over 7,000

products that represent almost 300 various brands ranging from low-priced to premiums and

covering all electrical categories. For instance, Comet sells own low-priced products named

ProLine in small electricals category, while its 'premier collection' includes such well-known

brands as Dyson, Sony, Apple, Panasonic, Phillips, Samsung and many more.

All products are available at company’s online store, while product variety in outlets depends

on one of 3 types of store layout used by Comet.

Comet offers a comprehensive range of pre and after-purchasing services for its products, from

advising & helping customers to choose, to delivery, installation, repairs and recycling.

All products have manufacturer guarantee with additional product covers available for

purchase. Every purchase can be returned for refund or exchange within 28 days of purchase.

Price

Comet ‘best price’ philosophy resulted in adoption of marketing-oriented policy called ‘Every

Day Low Prices’ in 1999. It implies the concept of ‘Price Checking’: wherever they find lower

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prices they lower their own to match/beat rival’s. Special teams are on daily basis investigating

competitors’ prices in stores and online with over 30,000 prices checked every week. These

teams are then capable to lower a ticket price of any product in store, nationally or regionally,

overnight through special price setting system.

Comet backs this concept up with the ‘Price Guarantee’: if a customer finds the same product

at a lower price on sale at another store locally (within 10 miles) or online, then Comet will not

only match this price but also beat it by 10%. However, they do not match internet or mail

order companies with no physical stores, warehouse outlets, mail order clubs or voucher

promotions. This guarantee can be used at the time of or within 14 days after purchase.

The retailer also allows discounts for multi-purchases, seasonal/holiday sales, etc In addition,

Comet is actively using its online store, offering many products on special ‘online only’ prices or

free basic delivery.

Promotion

High marketing budged allows Comet to use various promotional tools to position the company

clearly and distinctively in the market place and in the mind of consumers. Integrated

marketing communications concept is used to coordinate marketing communications tools to

fulfill this objective. (Jobber, 2007)

Usually, Comet is using conventional media, such as Television, to built company personality

and create awareness about products they sell and services they offer. All major advertising

campaigns are also well covered in press and radio, through Internet, print brochures, sales

letters, etc.

In August 2005, Kesa Group decided to make a shift in strategic direction and change the

perception of Comet. Company undertook a £20 million re-branding campaign to re-align its

business to a customer service driven model and to differentiate itself from competitors.

Campaign was highly successful, the retailer substantially improved its image and perception by

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customers and differentiated itself from competitors in terms of service package provided and

visual appearance.

Comet’s website is used for direct contact with customers (customer-care programmes, info &

various services), for corporate communications, advertising and sales. In addition, retailer

employs `paid-for search' and display advertising (banners, sponsorships, tenancies, displays

within e-mails, etc) to penetrate online market, increase revenue and sales. In charge of

Comet’s internet advertising activity is LBI International AB. (Keynote, 2007)

Most recent TV advertising campaign was launched in October 2008, featuring the strapline

"We Deal in your Ideal” - specially designed to reflect Comet’s strong service and deep

specialist knowledge. In line with TV advertising, the campaign was also translated into press

and incorporated strong online presence.

The voice of Edith Bowman, a Scottish music critic and presenter of radio and television, is used

in the television and radio adverts for Comet since 2005.

On controversy, Comet was blamed and punished several times for misleading advertising.

(ofcom.gov.uk, 2000) However, such practice is common for the majority of electrical retailers.

Place

Since Comet is electrical retailer, it is a channel intermediary itself, playing an important role in

goods manufacturers supply chain and being part of their channel of distribution. Each

manufacturer produces large quantity but of limited range of products, whilst consumers want

only a limited quantity out of a wide range of products. Therefore, retailers are purchasing

goods from various manufacturers and bring them under one roof, offering consumers a great

range to choose from, thus satisfying both manufacturer’ & consumers’ needs.

Producers in their turn can use various consumer channels to deliver/distribute their product to

retailer and then customers:

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Producer -> Retailer -> Consumer; or

Producer -> Wholesaler -> Retailer-> Consumer; or

Producer -> Agent -> Wholesaler -> Retailer-> Consumer (Jobber, 2007)

However, in terms of Comet, retailer is not only dealing with major brands but searches

necessary products itself through special sourcing teams.

To be both cheaper and more efficient, Comet’s physical distribution operations (i.e. stocking

and moving products from manufacturers to the retail stores) are out-sourced to Wincanton

and DHL. In overall, the retailer has 3 Regional Distribution Centres (RDC): in Skelmersdale,

Westbury and Harlow; and a National Distribution Centre (NDC) in Corby, Northamptonshire.

Professionalism and reputation of two large logistic companies ensure that all 252Comet stores

nationwide will be supplied in time & sefely.

To provide a great customer service in term of order processing and delivery the Comet Home

Delivery service is operating - with 13 home delivery platforms and over 650 people employed

it completes around 1.3 million deliveries annually.

Extended Marketing Mix

People

Providing best service is fundamental to Comet’s trading philosophy, with people being the

core of this principle. Comet claims that its goal is ’to ensure that our staff are helpful and

knowledgeable’. This is one of the major points from which the electrical retailer differentiates

itself from competitors, since anyone who comes in contact with customers leaves an

impression and affects on the total satisfaction (positively or negatively). Appropriately

selected, trained, well motivated and with the right attitude staff can enhance the company

image and its perception in the eyes of consumer and give an important edge over the

competition.

The ultimate aim of the company is therefore to provide the professional and stimulating

working environment for its employees so that service standards were constantly maintained at

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the high level to meet consumers’ expectations and benefit to the company image.

Corresponding philosophy helps to attract and retain the workforce and ensures company’s

ability to provide customers with a great service before, during and after the sale.

Process & Physical Evidence

Comet re-branding project 2005 was labeled the new Comet “Vision” - the vision to become

Britain's most trusted electrical specialist, with customer trust and staff training at its core.

Campaign included change of company’s logo, development of new signage/banners for over

250 sites, Comet website redesign, the shift to new black and gold uniforms for 8,000

employees, launch of a new brand TV campaign, introduction and installation of e-learning

systems in all stores, introduction & improvement of customer services, staff re-training, etc

New logos and store designs have helped to clearly visually differentiate the company from

competitors, especially Currys, with which it was often confused. Staff was retrained to focus on

assisting & advising people with attention to what they actually sell, instead of just trying to

reach sales plans.

Some innovations to store design & layout were also made, with a new ‘destination’ store

introduction. In overall, Comet uses 3 types of store layouts:

The 'high street' store layout implies presenting mainly small domestic appliances such

as brown & grey goods on display cases

The 'core' store is usually bigger sized and sited in strong geographical location. It offers

a larger range of goods including white goods.

The 'destination' store is big and interactive, offering nearly the whole range of products

Comet sells

Mentioned changes have helped to significantly improve the process of giving the service, the

behaviour of those who are delivering it and the place where it happens. All these aspects

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contributed to the overall performance of company and gave it additional competitive edges

over rivals.

7. Conclusions

From the research made in this report, several conclusions can be drawn regarding Comet’s

retail strategy and competitors’ activity:

The retail environment of the electronic goods sector is very dynamic: highly completive

it still attracts new players to the market. Developments in the sector are controversial –

technology innovations ensure constant demand for new products, while a fierce

competition between retailers drives the prices down which results in lower profit

margins from products. Trends are also ambiguous: on one hand there are factors which

should benefit retailers, on the other – have a negative impact on.

Comet has been constantly working on and gradually improving its retail strategy

carefully tailoring all 7-P elements to finally change the perception of the company in

eyes of customers and differentiate it from competitors.

Present retail strategy can be evaluated as very successful: in recent years company

sales and revenues have been steadily increasing and the gap with the closest rival

Currys shrinking.

However, UK economy downturn and global economic crisis resulted in decline in

consumers’ confidence and spending and therefore heavily affected on the electrical

retail sector: Comet sales have substantially sloped down in last quarters of 2008. The

financial loss is not yet dramatic, but it indicates that changes have to be done to adjust

to new market and economic conditions.

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8. Recommendations

Taking into account all finding of the report the following recommendations can be given to

Comet Group plc:

Since supermarkets and department stores are now involved into the market

competition and actively exploiting such niche markets as own-labeled small domestic

electricals, it is recommended to the company to invest into the further development of

low-cost electricals under the own brand ProLine to oppose rivals.

New customer service driven business model adopted by Comet since 2005 seems to

perform well and smoothly adds to the company’s trading philosophy of ‘best price,

best choice and best service’. Therefore, recommendations are given to maintain and

develop the customer-focused approach.

Whilst company suffers financial loses, marketing budget can be limited.

Recommendations are given to invest in building customer loyalty rather than spending

huge sums on big advertising campaigns, since campaigns may not be as resultative due

to economic conditions but built loyalty will definitely pay back after the harsh times.

Keep investing into the official website and develop the e-commerce and related

services, since it is a major competitive edge over rivals.

‘Destination’ store layout played a significant role in differentiating company from

competitors; therefore advice is to work further on introducing/improving/developing

customer friendly designs and solutions keeping in mind application of great customer

services.

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9. AppendicesAppendix 1 – The SWOT analysis of industry

Strengths

The industry is well-established, with certain companies operated in the market for many years and gained a significant share of the market, customer loyalty, reputation and trust.

Electronic goods have a high level of household penetration, with many of them seen as commodity goods and ‘must have’ by the household and therefore forming an essential part of everyday life.

The electronic goods market caters for a wide variety of consumers, providing budget and premium options.

Constant technological innovation & improvements lead to continuous supply of new goods, increase in product range and helps to keep the consumer interest always high.

Weaknesses

The retail market for electronic goods is extremely competitive with 5 main retail groups fighting for the market share

Market is perfectly competitive, very profitable, and has low entrance barriers: it attracts too many participants that in turn results in tougher competition and decline of overall revenues gained.

Industry is highly dependable on economic conditions in the country: level of disposable income people have, mortgages interests, average earnings, overall price level/inflations level, availability of loans/borrowing funds to consumers, level of consumer confidence, etc.

Constant pressure from consumers and competitors forces retailers to drive down the prices of goods, continuously invest in new products & promotion, making the business less profitable, suffering losses and even going out of business.

Opportunities

There is a tendency to re-establish the home as central to the family and social life, with the growing demand for new entertainment options including various electronic goods & gadgets.

Most of new purchases are replacements for older goods, therefore industry is quite cyclical.

Number of households is predicted to rise steadily in following years, so does the number of new homes built.

Despite the worsening economic situation the retail sales volume has demonstrated a surprising increase of 3.2% in 2008 with the 4.6% increase for household goods stores sales.

Threats

The market becomes increasingly reliant on prices but not services as a key driver of sales, with a growing tendency to choose online retailers instead of traditional

Global ‘Credit Crunch’ and general financial instability made banks and other financial institutions to cut the availability of loans & borrowing funds to consumers, who can find it difficult to buy an expensive electricals from their own savings.

Uncertainty in future financial prospects forced many people to reconsider and adjust their budgets to the current economic situation, cut their expenditure on certain goods & activities and increase saving.

State economic downturn in terms of GDP decrease, rise in unemployment, relatively high prices& inflation rate and other economic issues resulted in the decline in consumer confidence.

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Competitive Rivalry within an IndustryThe retail market for electronic goods is extremely competitive with 5 main retail groups fighting for the market share

Bargaining power of customers/consumersCustomers are in constant search of new products, are not tight to any retailer and looking for better deals. This forces retailers to provide customers with innovative and better products, larger variety of choice at lower prices.Considering also a fierce competition at the marketplace, this generally helps to drive down the cost of many electrical appliances.

Bargaining power of suppliersBargain power of suppliers depends directly on the purchasing power of retailers. Mass merchandisers, electrical multiple retail chains and department stores all have huge purchasing power, therefore can allow to bargain and make suppliers to sell them products on lower prices due to the size of orders, quantities and money involved.

Whereas independent (specialist) retailers and majority of online merchandisers have to take the prices as given and have low bargain power over suppliers.

Threat of new entrantsThe threat of new entrants is high. The market is perfectly competitive and has low entrance barriers. It is relatively easy to enter the market but substantial investments are required to outstand from the other participants and gain a significant market share, which the majority of new entrants cannot afford and thereby operate in their own niche. Main threat comes from:Mass merchandisers, such as Tesco and ASDA, which had recently switched to non-food areas to attract new customers and increase revenue, with electricals being one of those sectors. Due to enormous buying power this retailers can offer a variety of products at lower prices (such as TVs, PCs, DVDs, etc) and own-brand electronics ranging from low-priced commodity items (irons, kettles, etc) to high-end products, such as plasma televisions, etc.Online stores (such as Amazon, etc) which can offer a larger variety of electronic products at lower prices.

Threat of SubstitutionSince the market of electronic goods has become increasingly reliant on prices as a key driver of sales, two major trends evolved:

Customers move away from the traditional independent retailers towards the large electrical multiples, major supermarkets and department stores which can offer larger variety at lower prices and in one place.Constant developments and innovations in e-commerce, emergence of price-comparison websites and availability of product information and reviews online, made it easier to search for better deals, product info and reviews online, allowing customers to order products at lower prices from homes and get them delivered to the doorsteps. Key advantages of traditional retailers in terms of advising /consulting are becoming less important while online sales are booming.

Decline in consumer confidence and slow consumer spending growth is forecasted to hit hard areas of discretionary spending such as electricals.

Appendix 2: The Porter’s 5 Forces Model for industry

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Threat of SubstitutionComet does its best to prevent customers from switching to other retailers. However, electricals retailing sector cannot count much on customer loyalty. In fact, statistics say that on average a person visits 2.5 retail stores before making a purchase

With the growing impact of Internet on our life, e-commerce becomes a significant threat of substitution for the traditional retailers. However, Comet managed to adjust to the changing market conditions and launched own online store which is now one of the leading retail online stores in UK offering not only low prices but also great customer services in term of flexible delivery, help, etc.Another threat comes from supermarkets since they had a great success in establishing certain customer loyalty in food reatailing and now exploiting new opportunities in electricals sector.

Appendix 3: Additional information on Political/Legal FactorsEC Directive on Waste Electrical and Electronic Equipment (WEEE)The WEEE Directive came into full force in the UK on 1st July 2007. The general aim is to encourage re-use and recycling of electrical and electronic goods to reduce the amount of WEEE going to landfill and minimise negative environmental impact.

Under this legislation manufacturers and retailers of electronic goods are made responsible for financing the e-waste programs: manufacturers have to fund recycling (collection, treatment and recovery) schemes while retailers/distributors are obliged to allow the free take-back services to consumers or help fund the expansion of a network of WEEE collection points

This means that some percentage of the total recycling costs of the electrical and electronic equipment is now has to be paid by its manufacturers and retailers, in accordance with how much they sell or produce.

The Restriction of Hazardous Substances (RoHS) DirectiveThe RoHS Directive and the UK RoHS regulations were enforced on 1 July 2006. It is related to the previous directive, since it aims to minimise the impact of waste electrical and electronic equipment (WEEE) on environment by ’reducing the amount of four heavy metals and two brominated flame retardants’ in products.All relevant products placed on the EU market after the mentioned above date should meet these requirements. The Directive primarily applies to manufacturers, importers to the EU countries, exporters within European Union and those who re-brand equipment produced by others

Batteries and Accumulators Directive 2006/66/EC

Directive’s aim is to reduce the amount of hazardous and non hazardous waste coming from batteries and accumulators to the environment and to improve the activities of all economic operators involved in the product life cycle (producers, distributors and end users).

It will make producers (mostly) and retailers (to some extent) financially responsible for the collection, recycling and treatment of spent batteries and accumulators. The first set of directive regarding the internal market provisions came into force in September 2008. A second regulatory set implementing the recycle activities (collection, treatment and recycling) for waste batteries is expected to be enforced next year.

The Electrical Equipment (Safety) Regulations 1994

These require electrical equipment to be safe and to conform to certain essentialsafety requirements. Manufacturers must affix a CE (European Conformity) mark to theirappliances indicating that they conform to the health and safety regulationsset out in European directives.

The Supply of Extended Warranties on Domestic Electrical Goods Order 2005

Rules came into effect in the UK in April 2005.The new rules are an attempt to clamp down on electrical retailers and other shops using high-pressure tactics to boost sales of extended warranties, by giving consumers more time to consider whether to buy an extended warranty and the option to cancel the insurance during the policy’s life.

Sunday Trading

Under the Sunday Trading Act 1994, the limits on shop opening hours are:

small shops (less than 280 square metres [sq m]/3,000 square feet [sq ft]) — no restrictions on opening

large shops (more than 280 sq m/3,000 sq ft) — Monday to Saturday, no restrictions; Sunday, opening for 6 hours only, between 10am and 6pm

Easter Sunday and Christmas Day (when on a Sunday) — shops must be closed.

Appendix 4: The Porter’s 5 Forces Model for retailerAppendix 5: The SWOT analysis for the retailer

Strengths

Company employs a customer service driven business

Weaknesses

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model and is committed to provide its customers with the widest choice of products and comprehensive range of services

#2 retailer in the sector with just few percentages of market share behind the leader, demonstrating substantially better performance in the recent time

‘Every Day Low Prices’ baked up with the ‘Price Guarantee’ concept ensures the retailer can always offer lowest prices to customers and makes it difficult for rivals to compete.

Re-branding campaign 2005 was highly successful and helped the retailer substantially improve its image and perception by customers and differentiated itself from competitors.

High marketing budged allows Comet to use various promotional tools to position the company clearly and distinctively in the market place and in the mind of consumers.

Come.co.uk is one of the leading websites for electronics in the UK

‘Every Day Low Prices’ pricing policy can lead to fierce rivalry with the competitors and significantly lower the profit margins.

The decision to charge producers up to 15,000 pounds for places on display cases may result in worse relationships with some well-known brands and make them switch/provide better deals to rivals (ref)

Customer service driven business demand constant monitoring of staff and general performance to ensure high standard of service is always maintained. Might be cost/time consuming.

Opportunities

There is a tendency to re-establish the home as central to the family and social life, with the growing demand for new entertainment options including various electronic goods & gadgets.

Number of households is predicted to rise steadily in following years, so does the number of new homes built.

Despite the worsening economic situation the retail sales volume has demonstrated a surprising increase of 3.2% in 2008 with the 4.6% increase for household goods stores sales.

Threats

The market becomes increasingly reliant on prices but not services as a key driver of sales, forcing retailers to bid down prices a thus set a new industry price standards which might lead to great loses and reconsidering of marketing strategy in future.

Economic downturn and financial instability resulted in the decline in consumer confidence: according to KESA Electricals plc Half Year Report 2008/09, for the six months to 31 October 2008 Comet has managed to achieve only £723.3m revenues with the retail loss of £8.1m (-11.6%), whilst in the last quarter of 2008 sales dropped by 13 % – the worst performance in its 75-year history.

Decline in consumer confidence and decreasing purchasing power may hit hard areas of discretionary spending such as electricals with many people delaying their purchasing, preferring repairing or buy used, and generally are ready to spend less money.

Appendix 6: Retail Marketing Strategy elements

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10. References

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Blankson, C. and Kalafatis, S. (2004): The development and validations of a scale measuring consumer/customer derived generic typology of positioning strategies, Journal of Marketing Management 20 (1), 5-43

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Comet Official Website, Available From: http://comet.co.uk (accessed 15/03/2009)

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Blythe, J. (2006) Principles & Practice of Marketing, Thompson.

Jobber, D. (2007) Principles and Practice of Marketing, 5th Edition McGraw-Hill, LondonKESA Electricals plc official website, Available From: http://www.kesaelectricals.com (accessed 15/03/2009)

Keynote Report: Home Entertainment 2008

Keynote Report: Household Appliance (Brown Goods) (2008)

Keynote Report: Household Appliance (White Goods) (2008)

Keynote Report: Internet Advertising (2009)

Keynote Report: Leisure at Home (2008)

Keynote Report: Own Brands (2007)

Keynote Report: Small Domestic Electrical Appliances (2007)

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Mintel Press Release (2008): ‘Christmas spending habits: Resilient Brits still managed to splash out’, Mintel, Available From: http://reports.mintel.com/sinatra/reports/view&name=press_releases//display/id=437504&anchor=a437504 (accessed 15/03/2009)

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Mintel Press Release (2008): ‘Consumer Attitudes to Debt’, Mintel, Available From: http://reports.mintel.com/sinatra/reports/press_releases/view=press_view&levels=1324,5530/press_display/id=382508 (accessed 15/03/2009)

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Mintel Press Release (2008): ‘Unsecured Personal Loan: Brits bank on budgeting to see them through tougher times’ Mintel, Available From: http://reports.mintel.com/sinatra/reports/press_releases/view=press_view&levels=1324,4964/press_display/id=421290 (accessed 15/03/2009)

Mintel Press Release (2009): ‘Consumer Reaction to the Credit Crunch’, Mintel, Available From: http://reports.mintel.com/sinatra/reports/view&name=press_releases//display/id=437509&anchor=a437509 (accessed 15/03/2009)

Mintel Reports: Electrical Retailing in Europe (2008)

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National Statistics: Inflation, Available From: http://www.statistics.gov.uk/CCI/nugget.asp?ID=19(accessed 15/03/2009)

National Statistics: Population estimates (2009), Available From: http://www.statistics.gov.uk/CCI/nugget.asp?ID=6(accessed 15/03/2009)

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Ofcom.gov.uk (2000),’ Television advertising complaints’, Available From: http://www.ofcom.org.uk/static/archive/itc/uploads/Advertising_Complaints_June_2000.doc (accessed 15/03/2009)

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Ries, Al and Trout, Jack (2001) Positioning: The Battle for Your Mind, New York: McGraw-Hill

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