Electronics Stores Face a Tough Challenge

Kevin May Director, GRS Group (310) 614-9329kmay@grs-global.com @kmay_grs

Kevin May
Director, GRS Group
(310) 614-9329
kmay@grs-global.com
@kmay_grs

Things are not going well for electronics retailers right now.

With the advent of online retailing, and the fact that consumers are now more comfortable buying products such as computers, televisions, smart phones and other devices on the Internet, the amount of electronics stores needed across the country has decreased. Additionally, in the brick-and-mortar world, several of these products can now be purchased anywhere, from Walmart to dollar and drug stores.

And now, many major chains in the space are closing stores. Following are just a few examples.

Best Buy

Probably the best-known specialty big-box electronics retailer in the country is Best Buy. It has had its own issues over the last few years. Best Buy has closed upwards of 100 stores since 2016. It was said that the chain was becoming more of showroom than a retail location, where consumers would look at products, leave, and then buy the goods somewhere else online. From an investment standpoint, Best Buy is improving lately, though. But on the other hand, it is also experiencing slightly lagging sales, even after a good quarter.

HHGregg

Only a couple years back HHGregg was in major expansion mode while other retailers were closing stores as a result of the Great Recession and it was taking advantage of inexpensive rents. Well, that has certainly changed for the worst for the big-box home-electronics retailer. HHGregg filed for bankruptcy earlier this year, was unable to fund a buyer, and has now closed all of its 220 stores. This is fallout from lagging sales for some time, and a poor performance during the holiday season.

GameStop

GameStop, the retailer primarily focused on selling video games, is also struggling due to more consumers playing online instead of buying DVDs. As a result, GameStop is closing nearly 200 stores. Now, the somewhat good news is that the retailer currently operates 4,400 stores in the United States, but dozens of location closings is still not welcome news for retail real estate landlords who will now look to fill those smaller spaces.

RadioShack

RadioShack is another electronics chain currently on the ropes. Contributing to another headache for retail real estate owners, RadioShack recently announced it is closing about 200 stores, as well as filing for bankruptcy, and this is not the first time similar scenarios have played out for the company. And reportedly even more stores are forecast to close in the near future. RadioShack also filed for bankruptcy in 2015, which resulted in the closure of roughly 2,400 units. The fate of the company is obviously very uncertain.

The Bright Spot? Apple.

Despite all of this, Apple does not seem to be having much of a problem with its retail locations. Apple Stores are opening all over the world. Even though almost all of what the company sells in its brick-and-mortar stores can be purchased online, Apple Stores, at least for the last few years, have consistently had the highest sales per square foot of any other U.S. retailer.

The reason for this is a phrase that is getting a bit overused, but is true: experiential retail.

Like a luxury department store or restaurant, Apple was able to crack the code and realize that customers are interested in more than a simple transaction and want a reason to go into a store and try out products.

This is certainly not easy in an environment of increased online retail sales, but what Apple, and a few other retail outlets have shown, is that it’s definitely possible.

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