What has this year held in store for the nation’s retailers of computer, communication and consumer electronics products? Despite the economy registering higher growth than last year due to strong external demand, these retailers have struggled, due to online competitors and frugal consumers, and the results do not look good.
Action Electronics in a filing with the Taiwan Stock Exchange on Thursday said that it was closing its consumer electronics retail chain, Best Taiwan, and letting go the chain’s more than 100 employees after failing to find a reasonable alternative to help it stay afloat.
Best Taiwan has been operating for 25 years, but faces an increasing challenge from the nation’s aging population and the emergence of e-commerce platforms. This year, the chain cut its stores from 27 to 17 and put in place a recapitalization scheme to improve its finances.
However, the parent company has decided to liquidate its assets and close down its retail operations, citing stiff competition and difficulty reaching economies of scale, the filing said.
It is not the first time that a consumer electronics chain in Taiwan has decided to throw in the towel because of competition from e-commerce players.
In business since 1987, U-Lite 3C, a major appliance chain store operated by Sampo, shut down in October and is proceeding with the liquidation and dissolution process. In its heyday, U-Lite 3C operated up to 30 stores nationwide, but the latest developments indicate that rapid change in consumer behavior has become a massive strain on brick-and-mortar stores.
Best Taiwan tried to turn things around by participating in the government-backed “smart” commerce service pilot program. Taking advice from academics and specialists, the chain used new technology to integrate physical stores with its online platform and mobile app as it struggled to gain ground on e-commerce rivals.
However, despite increased investment, the chain was still challenged by the “see in store, buy online” habit of consumers, as well as operating costs like space rentals and employee wages.
Online platforms often offer lower prices than their brick-and-mortar counterparts, because they do not have the same overhead costs, but the chain’s efforts went to the wrong side of the business trend, as what is central to today’s retail business is customer service, rather than merchandise sales.
While retailers must provide consumers with a better in-store experience and businesses must develop omni-channel retailing beyond their stores to their Web sites and apps, the logical next step for physical stores is to appeal to consumers with differentiated services — including offering advice and counseling via face-to-face interactions, which remain a challenge for e-commerce businesses.
The so-called “experience economy,” which emphasizes the creation of positive user experiences, is hardly a magic wand for retail business these days, as many consumers still come to showrooms to browse and examine goods they favor and then purchase online.
Instead, establishing and maintaining an engaging retail environment is the key to success in today’s retail business. Skilled and attentive sales staff must convert Internet browsers into in-store buyers, despite it being the digital era.
Retailers must revisit their core values. Otherwise, Best Taiwan will not be the last retail chain to close stores and consumer electronics chains will not be the last brick-and-mortar businesses to get burnt by their e-commerce peers.
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