Search
Close this search box.

Comet: where low prices haven’t made up for online shortcomings

This is an archived article - we have removed images and other assets but have left the text unchanged for your reference

When OpCapita bought Comet for £2 back in Februrary, it pledged a return to its 1980s roots, saying that the key to success for the electricals business lay in low prices.

“The opportunity,” said John Clare, the veteran electrical retailer and former Dixons boss as he took on the job of Comet chairman, “is for Comet to get back to its core proposition, I’ve known this business since the 1980s and giving value to customers is what’s embedded in its roots.”

Today as the retailer looks to be days away from going into administration, many commentators say that the problem was not only in pricing – and the solution not in a return to the 1980s. Rather its approach to online and multichannel retail was to blame.


Even at the time of its acquisition by OpCapita, analysts such as UBS’ Adam Cochrane said that the company had to put the emphasis on online retail. “Customers want to order more cheaply and get delivery quicker,” said Cochrane at the time. “Making people choose your internet site will be the key battleground going forwards.”

Today, it seems, not enough people did choose the Comet website – or stores. It’s reported that OpCapita has notified the administrators at Deloitte that they will be called in next week. Meanwhile, 6,500 retail jobs hang in the balance. Visitors to the Comet website today were met with the message: “Sorry, comet.co.uk is currently unavailable. Please try again later.”

Jon Copestake of the Economist Intelligence Unit said the news from Comet would be “little surprise given weak sentiment and the shift towards online channels for consumer electronics.”

He added: “Not only has Comet has faced deflationary pressures thanks to stiff competition and cheaper production costs but core audio visual products are being undermined by combined platforms on smartphones and tablet computers. The fact that OpCapita obtained the chain for a nominal £2 last year highlights the challenges faced by specialist electronics retailers..”

Dan Wagner, of Powa Technologies, told the BBC that the failure of Comet was an “accident waiting to happen,” given management failure to understand the online world.

Comet is the UK’s second largest electricals retailer and shares in its main competitor Dixons Retail Group have today been boosted by the news. On many retail parks across the UK, Comet and Dixons’ businesses Currys and PC World outlets trade alongside each other. Dixons is the one of the two that has made great play of its investment both in customer service and multichannel retail models. But this, says Copestake, is not enough to make it profitable. “Even the recent improvements for market leader, Dixons Retail, cannot gloss over pre-tax losses in three of the last four financial years,” he said.

Comet is not the first to fail to adapt quickly enough to new and merging models of retailing. Earlier in the year the UK’s leading gaming retailer Game went into administration because it had not moved quickly enough to keep up with the consumer move towards digital and online ways of gaming. It was bought out of administration by OpCapita vehicle Baker Acquisitions. Time only will tell if this venture proves more of a success for the private equity house.

Our view: My own abiding memory of Comet will remain the journey to our local retail park to see a cooker that we planned to buy some years ago. We’d done some research online but wanted to check that it was as good as it seemed before we parted with our money. We had a few questions for a sales assistant, and waited for around 20 minutes to attract their attention. Once we had it, this particular assistant’s only insight was to read the information label sitting beside the range cooker to us. We did buy the cooker – but haven’t been back since.

Why bother when better information than this is available online, in the form of more detailed product specifications and other people’s opinions, expressed through reviews and recommendations? The journey to the store is simply to see what it looks like in the flesh. That that’s important is why Dixons Retail sees better results from its multichannel operations than from Dixons.co.uk, the pureplay operation it’s just closed down. But as a shopper, I really don’t want to go back to the 1980s model so lauded by John Clare – and it seems many agree with me.

 

Read More

Register for Newsletter

Group 4 Copy 3Created with Sketch.

Receive 3 newsletters per week

Group 3Created with Sketch.

Gain access to all Top500 research

Group 4Created with Sketch.

Personalise your experience on IR.net