AV Retailers

8/4/2019 AV Retailers

1/23

2 Aot this Inst

2 Industry Denition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Inst at a Glance

4 Inst Peomance

4 Eecutive Summary

4 Key Eternal Drivers

5 Current Perormance

7 Industry Outlook

9 Industry Lie Cycle

11 Pocts & Makets

11 Supply Chain

11 Products & Services

12 Major Markets

13 Globalisation & Trade

14 Business Locations

16 Competitive Lanscape

16 Market Share Concentration

16 Key Success Factors

16 Cost Structure Benchmarks

17 Barriers to Entry

18 Majo Companies

18 Richer Sounds plc

19 Opeating Conitions

19 Capital Intensity

21 Ke Statistics

21 Industry Data

21 Annual Change

21 Key Ratios

22 Jagon & Glossa

IBISWorld Industry Report G47.430Specialised Audio and VideoEquipment Retailers in the UKJne 2011 Caig Shlman

Loud and clear: Retailers have moved online tokeep up with rapid changes in technology

.iisol.co.k | 020 3008 6568 | [email protected]


2/23

www.IbISwOrLd.CO.uK Specialise Aio an Vieo Eqipment retailes in the uK June 2011 2

Companies in this industry retail electricalequipment such as stereo systems, TVs,portable music devices and other hi-

products. Retailers in this industry differfrom department stores as they specialisein selling these products only.

The pima activities o this inst ae

Sale o audio equipment

Sale o video and TV equipment

Inst defnition

Main Activities

Simila Insties

Aitional resoces

IBISWorld writes 100s of UKindustry reports, which are updated

up to four times a year. To see allreports, go towww.ibisworld.co.uk

The majo pocts an sevices in this inst ae

Digital video players

Headphones

Portable music players

Speakers

Stereo systems

TVs

Aot this Inst

G47.410 retail o Compte an Gaming Pocts in Specialise Stoes in the uK

With the roles o computer systems and home entertainment systems increasingly converging, computer

and gaming products are becoming more relevant to audio and video equipment consumers.

G47.540 Electical Hosehol Appliance retail in the uK

These retailers specialise in other household electrical products such as whitegoods and small appliances.

G47.591 Msical Instment retailes in the uK

This industry deals in musical instruments and equipment, which are oten complementary to audio

equipment.

Fo aitional inomation on this inst

.statistics.gov.k

Oce or National Statistics

.sonanvisionmag.com

Sound & Vision Magazine

.hathif.com

What Hi-Fi


3/23


Maket Shae

Richer Sounds plc

8.2%

Ke Extenal divesreal hosehol

isposale income

Competition om

epatment stoes

IT an

telecommnications

aoption

Leise time availailit

Ke StatisticsSnapshot

Inst at a GlanceSpecialise Aio an Vieo Eqipment retailes in 2011-12

revene

1.4nPoft

75.9mwages

136.8mbsinesses

1,267

Annal Goth 12-17

2.6%Annal Goth 07-12

-3.4%

Inst Stcte Lie Cycle Stage MatureRevenue Volatility Medium

Capital Intensity Low

Industry Assistance Low

Concentration Level Low

Regulation Level Light

Technology Change Low

Barriers to Entry Medium

Industry Globalisation Low

Competition Level High

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIx ON PAGE 21

%c

hange

3.0

3.0

1.5

0.0

1.5

1806 08 10 12 14 16Year

Real household disposable income

SOURCE: WWW.IBISWORLD.CO.UK

%c

hange

5

10

5

0

1804 06 08 10 12 14 16Year

Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2011-12)

38%TVs

8%Speakers

20%Digital video players

5%Headphones

10%Portable music players

10%Stereo systems

9%Other


p. 18

p. 4

SOURCE: WWW.IBISWORLD.COM


4/23


Ke Extenal dives Real household disposable incomeAudio and visual equipment is generallyseen as a discretionary purchase, and thefrequency and size of purchases made byconsumers partly relates to their levels ofdisposable income.

Competition from department storesSpecialised retailers of audio and visualequipment sell many of the sameproducts that are available in departmentstores, and are therefore competing forthe same customers. Growth in sales of

audio and visual equipment in

department stores would generally be abad thing for specialised retailers.

IT and telecommunications adoptionNew innovations in audio and visualtechnology can make meaningfuldifferences to the level of expenditure byconsumers on industry products. Therelease of products such as Blu-ray Discplayers, mp3 players and LCD TVs hascompelled many consumers to upgradetheir old equipment.

ExectiveSmma

The recession in the United Kingdomhad an adverse effect on specialisedaudio and video equipment retailers.Consumer condence and spending felland retailers discounted products toencourage sales. Competition fromdiversied retailers and departmentstores compounded national economicproblems. Industry revenue is expectedto fall by an average 3.4% per annumover the ve years through 2011-12.However, new products are still being

released and some measure of consumercondence is returning. As such,industry revenue is forecast to grow by amarginal 0.2% in 2011-12, to 1.4 billion.

These issues have served to speed upthe emergence of online retailing in theindustry, which potentially offers lowerlabour costs, more efcient stockmanagement, broader geographical

reach and lower property rents. Manyretailers currently operate both shop-front and online selling channels, withonline selling expected to increase inimportance over the next ve years.During the ve years through 2016-17, industry revenue is expected toincrease by an average 2.6% per annum,to 1.6 billion.

This industry is driven by technologyand benets from innovations such asLCD TVs, Blu-ray Discs and the

introduction of digital TV broadcasting tothe United Kingdom. Technology is alsoenabling the rise of online retailing andnumerous new online retailers areexpected to emerge in the next few yearsas the economy shows signs of a recovery.A minor shakeout is expected soon after,with a handful of stronger playersemerging in the online marketplace.

Inst PeomanceExective Smma | Ke Extenal dives | Cent Peomance

Inst Otlook | Lie Ccle Stage

Percentage

88

56

64

72

80

1703 05 07 09 11 13 15Year

IT and telecommunications adoption


%c

hange

3.0

3.0

1.5

0.0

1.5

1806 08 10 12 14 16Year

Real household disposable income


5/23


Inst Peomance

The economic les Operators in this industry haveencountered challenges over the past veyears that have largely been outside oftheir control. Previous to the nancialcrisis, consumption was one of the main

drivers of the United Kingdomseconomic growth. Consumption volumesgrew by 2.8% per annum, outperformingmost OECD countries until 2008, withtechnology being one of the star sectors.

However, the start of the recession in2008 changed this. With consumers lesscertain of job security, moneyincreasingly stayed inside their pockets.As a result, retailers had to discount moredeeply and more often to attractcustomers. This reduced the revenueslide to some extent, but it came at theexpense of the prot margins that theindustry previously enjoyed. Industry

protability is estimated to be 5.5% in2011-12. There has been considerablevariance between companies operating inthe industry due to differing niches,market positioning and the impact that

the recession has had in local areas.Consumer condence began to show

signs of recovery in mid-2009, with nomajor setbacks in the nine months thatfollowed that time. Retail spendingduring the Christmas 2009 period wasstronger than the previous year, butmajor doubts lingered over a number ofEuropean economies, including Irelandand key trading partners Spain and Italy.

British consumers do not appear tohave regained the ability or the desire tospend since the economy began torecover. UK consumer condence inApril 2011 was rated at 43 by Nationwide,

CentPeomance

The Specialised Audio and VideoEquipment Retailers industry has beenthrough turbulent times in the ve yearsthrough 2011-12, due to technologychanges, imposing discount generalretailers, the ongoing rise of online

retailing and the nancial crisis. Revenueis expected to decline during this periodby an annualised 3.4% to 1.4 billion,reecting the difculties that operatorsexperienced during the recession.Industry employment and wages havealso fallen since 2006-07, with weakeconomic conditions coinciding withincreased interest in online retailing.Industry revenue for specialised retailersof audio and video equipment is forecastto grow by 0.2% in 2011-12.

Establishment numbers have declined

marginally during the past ve years,with the recession expediting the exit ofsome small players from the industry.There have been isolated instances of

merger activity, but the industrycontinues to consist largely of smallretailers. Vigorous competition fromdiversied retailers and departmentstores has also played a role in theindustrys fortune, with the larger buyingpower of major electronics chains makinglife difcult for specialised retailers. Atpresent, specialised retailers of audio andvideo equipment are believed to accountfor less than half of total revenue for

audio and video equipment sales in theUnited Kingdom, with department stores,diversied retailers and discount varietystores accounting for the remainder.

Ke Extenal divescontine

Leisure time availabilityAn increase in the amount of leisure timeavailable to consumers is likely to

increase the priority placed on audio andvisual equipment.

Weak economic conditionscoincided with the rise ofonline retailing to reducedemand for industry stores


6/23


Inst Peomance

The economic lescontine

still showing signs of pessimism thathave failed to dissipate since the nancialcrisis. Ination is now higher than GDPgrowth, thus leading to negative real GDPgrowth. Consumer expenditure has beenfurther curbed by rising food and energy

prices, weak pay growth, stagnantemployment, the VAT increase and otherscal tightening measures. Lower interestrates are the only light on the horizon,and are expected to remain low for theremainder of 2011-12.

Ne technologiving sales

To a signicant extent, the fortunes ofthis industry are aided by the release ofnew technology onto the market. The

emergence of Blu-ray Disc players duringthe past ve years has driven sales in thevideo segment, while the increasingaffordability of large LCD and plasmaTVs has broadened their appeal to themass market. The United Kingdom ispart way through the process ofintroducing digital TV signals across thenation. The transition to digital TV hascreated demand from many consumersfor at panel displays and digital set topboxes. The release of the current range ofvideo games consoles from Christmas

2005 onwards has created greater use ofhome entertainment systems, thebenets of which have owed through tospecialised audio and video equipmentretailers, particularly with 3D TVs.Digital radio sales continue to grow,accounting for 26.5% of all radio listeningas of early 2011, according to Radio JointAudience Research.

While consumers display a highpriority towards owning coreaudiovisual products such as TVs, these

intentions do not translate as easilytowards audiovisual accessories. Thusthe long shelf life of core productshelped lead to the drop in revenue.Despite this, the most active area ofgrowth within audiovisual deviceconsumption has been headphones,

experiencing 69 consecutive months ofgrowth as recorded by GfK in March2011. This is due to portable deviceswith audio capability carrying poorquality headphones or none at all whenpurchased, thus driving consumers topurchase replacements. Portable music

players have also spurred a revival forthe clock radio market due toinnovations in device docking.

The increasing penetration of smartphones in the market has not been goodnews for specialised audio and videoretailers, as increasingly multi-functional digital music playersincorporated into these devices arecannibalising portable digital musicplayers in the eyes of many consumers.Generally speaking, the industry has

not witnessed a gamechanging devicesuch as the original release of theApple iPod around the turn of thecentury. However, the advent of SmartTV may provide this change aftermuch hype surrounding the muchanticipated Youview.

The emegence oonline etailing

During the past ve years, online retailinghas built its presence in the industry.Specialised online sellers have emerged,though the majority of sales havecontinued to be made through bricks andmortar outlets. Many established

companies in the industry are expandinginto online retailing to complement theirstore-front retailing and to keep theiroptions open as the terrain changes.Online retailing brings with it the potentialbenets of reduced labour intensity, more

New technology drives

consumers to upgradetheir equipment and thusincreases industry sales


7/23


Inst Peomance

The emegence oonline etailingcontine

efcient inventory management andreduced property rental costs.

In early 2009, major industry playerRicher Sounds acquired the website ofcollapsed former rival Empire Directand announced plans to integrate theoperation into its own business. Indeed,

the recession created opportunities forestablished shop-front retailers topurchase distressed assets in theonline retailing area and use theseacquisitions to smooth the companiestransitions towards new ways ofconnecting with customers.

Inst

Otlook

Economic conditions caused the past veyears to be unpleasant for the Specialised

Audio and Video Equipment Retailersindustry. Although the next ve years areexpected to be better, the recovery willnot be a miraculous one. During the nextve years, industry revenue is expected toincrease by an average 2.6% per annum,to reach 1.6 billion in 2016-17. Manyconsumers in the United Kingdompostponed purchases of audio and videoequipment during the past couple ofyears due to employment uncertainty andturbulent asset values. As the economystabilises, consumer condence will

begin to recover and more feet will bewalking through the doors of specialisedaudio and video equipment retailers. Thiswill drive revenue growth.

IBISWorld expects that establishmentnumbers will increase in the next fewyears, as online retailers spring up in theattempt to gain a slice of the recoveringeconomy. However, there will be ashake-out of online retailers in 2013-14,

with stronger and larger competitorsgaining traction in the marketplace. Theincrease in online retailing is expected tolimit employment growth due to the lowerlabour intensity of online business, thoughwages are anticipated to increase at aboutthe same rate as revenue, as relativelylow-cost showroom roles are partlyreplaced by IT-intensive specialised roles.

Ne tools to theaiovisal asenal

The introduction of digital TV signals tothe United Kingdom is alreadyunderway and is expected be completedin 2012. This process will occur intandem with the switching off ofanalogue TV signals, meaning thatthose consumers who have older TVsthat are unable to receive digital signalswill be forced to upgrade. This is goodnews for the industry, with sales ofdigital set top boxes and flat panel TVsexpected to grow strongly.

The transition of Blu-ray Disctechnology into the middle market forelectronics consumers is expected to

generate sales, as will the arrival ofthe next generation of video gameconsoles late in the coming ve-yearperiod. These consoles are likely to sellbriskly, generating demand for TV andhome theatre upgrades to maximise thenew technology.

The increasing integration of digitalmusic players into smart phones is lesswelcome news for the industry, with mostof these devices being sold bytelecommunications companies anddiversied retailers as opposed tospecialised audio and video equipmentretailers. It is expected that sales of

%c

hange

5

10

5

0

1804 06 08 10 12 14 16Year

Industry revenue



8/23


Inst Peomance

The challenge for specialised retailersof audio and video equipment to continue

to be competitive against diversiedretailers and department stores willincrease in the next ve years. Furtherconsolidation of the industry will occur,including growth of chain stores andbuying groups, but the major emergingopportunity for specialised retailers isonline retailing. Online retailing is not anew innovation, but with the vast majorityof Britons now connected to the internetand more frequent mainstreaming ofonline selling, it is an increasinglylucrative way of doing business.

There are numerous benets ofretailing audio and video equipmentonline. For existing bricks and mortarretailers, online selling offers the chanceto connect with new customers oftenoutside of the stores immediategeographical areas. By offering more thanone way for customers to interact withexisting retailers, there is the potential toimprove customer satisfaction.

For start up businesses in the industry,there are denite advantages to operating

solely as an online retailer. By bypassingthe traditional retail model of leasinghigh prole (and hence high cost) retailpremises, an online retailer can improve

their cost structure and competitiveness.The opportunity to sell directly tocustomers nationwide means thatspecialised retailers of audio and videoequipment are able to serve a nicheonline that may not be nancially viablein a single location shop-front.Controlling inventory out of a single

warehouse and dispatch facility can alsobe done more efciently than would bepossible with multiple retail outlets.

The lower start-up costs and relativeease of retailing online is expected tocoincide with an increase inestablishments in the industry. Many ofthese small online businesses may not befull-scale operations and may not survivein the long term. The challenge ofcreating credibility as an online retailer isa considerable one, and IBISWorld

expects that a small number ofrecognised retailers will emerge in theindustry, eventually squeezing out someof the smaller, less-reputable players.

Ne tools to theaiovisal asenalcontine

standalone iPod music players willdecline during the next ve years, with atransition towards products such as theiPhone and other smart phones.

The advent of Smart TV, which enableshome theatres access to on-demandcontent from the internet, is expected to

bring the industry further revenue andhighlight the ipside to the technologicalconvergence trend. While many devices,in particular videogame consoles andApple TV, already achieve this to adegree, the product has only recentlystarted to be promoted heavily.

Online retailers have better

cost structures and canreach more customers

The te is online


9/23


Inst Peomance

Revenue growth is closely tiedto consumer condence

The emergence of new technologicalproducts is helping the industry

Competition from diversied retailers is strong

Lie Ccle Stage


30

25

20

15

10

5

0

5

10

10 100 20

5 155 25 30

%

Growthoproft/GdP

% Goth o estalishments

declineCrash or Grow?

Potential Hien GemsFuture Industries

Qalit GothHigh growth in economicimportance; weaker companiesclose down; developedtechnology and markets

Time wastesHobby Industries

MatitCompanyconsolidation;level o economicimportance stable

Shake-ot

Shake-out

Qantit GothMany new companies;minor growth in economicimportance; substantialtechnology change

Ke Feates o a Mate Inst

Revenue grows at same pace as economy

Company numbers stabilise; M&A stage

Established technology & processes

Total market acceptance o product & brand

Rationalisation o low margin products & brands

retail o Comptean Gaming Poctsin Specialise Stoes

Electonic &TelecommnicationsEqipment wholesaling

ElecticalHoseholApplianceretail

Msical Instmentretailes

Specialise Aio anVieo Eqipment retailes


10/23


Inst Peomance

Inst Lie Ccle While the past ve years have seenindustry revenue hard hit by the state ofthe economy, average annual revenueand value added growth in the 3% to 4%range is anticipated to occur during thenext ve years. The nature of audio andvideo products is ever-evolving, with newtechnological innovations bringingcustomers back to upgrade theirequipment. The introduction of digitalTV to the United Kingdom is a goodexample of this. Despite these

innovations, the fundamental functionsthat the products perform do not changeas rapidly as it may seem.

Strong competition exists fromdiversied retailers and department

stores, many of whom sell audio andvideo equipment in their stores.Specialised retailers tend to emphasisecustomer service quality, serve nichesegments, or are conveniently locatedto customers.

The mature life cycle stage of thisindustry is characterised by mergers andconsolidations, which are expected tocontinue as the initial ourish of onlineretailers plateaus and then rationalises.Store-front retailers are expected to lose

some ground to online retailing, thoughmany companies operate a combinationof store-front and online retailing, andhence may not experience major changesto their revenue.

This industryis Mate


11/23


Pocts & Sevices TVs are the highest selling productcategory of this industry, and sales haverecently been driven by many consumersupgrading from old CRT TV technologyto modern LCD and plasma screens.Many consumers are currently upgradingto equipment with built-in digital TVtuners, which will enable them to receivethe digital TV signals that are beingphased in across the United Kingdom

between 2008 and 2012. Thegenerational change in TV technology hascaused this product segment to swell insize over the past ve years.

Digital video players are also asignicant product category and largelycomprise DVD and Blu-ray Disc players.Blu-ray Discs are to be the successor toDVD technology, which has been on themarket for over a decade. Blu-ray Discs

offer higher resolution images that are ableto be seen on new high denition (HD) TVscreens. While digital video players arerelatively inexpensive, the lifespan of eachgeneration of technology is generallyshorter than that of TV screens.

Stereo systems account for about 10%of industry revenue, and increasinglyrelate to theatre installations in thehome. Stereo systems were generally

more popular in the marketplace adecade ago, but the emergence of iPodsand computer systems geared towardsmusic playing in the home have chippedaway at their market share. Portabledigital music players such as the iPodhave proliferated the marketplace, butare commonly sold by diversied shop-front and online retailers.

Speakers and headphones are

KEy buyING INduSTrIES

r90.010 Peoming Ats in the uK

Many orms o perorming arts rely on audio and video equipment, either in the perormance

itsel or in the production process.

Z99 Consmes

Private customers buy a large proportion o the products sold by this industry, generally or

personal use in the home.

KEy SELLING INduSTrIES

G46.520 Electonic & Telecommnications Eqipment wholesaling in the uK

Companies in this industry supply wholesale audio and video equipment to retailers.

Sppl Chain

Pocts & MaketsSppl Chain | Pocts & Sevices | Majo Makets

Gloalisation & Tae | bsiness Locations

Products and services segmentation (2011-12)

Total 1.4bn

38%TVs

8%Speakers

20%Digital video players

5%Headphones

10%Portable music players

10%Stereo systems

9%Other



12/23


Pocts & Makets

Majo Makets The major markets for specialisedretailers of audio and video equipmentcan be identied as domestic audioequipment customers, domestic visualequipment customers, and professionalcustomers. Domestic (personal)consumers are collectively the key marketfor retailers in this industry, estimated toaccount for over three-quarters of totalindustry sales in 2011-12.

Advances in technology inuenceshifts in the size of each market from yearto year, with the release of new

generation products in a market segmentgenerally coinciding with increased salesin the couple of years following. Anexample of this has been the transition ofLCD and plasma TV screens from luxuryproducts to mass-market products duringthe past ve years, bringing with it a largenumber of domestic consumers who haveupgraded their screens. An additionalfactor has been ongoing growth in the

penetration of video game consoles intohomes, with a growing number of avidgamers driving demand for larger andbetter-quality screens. The transitionfrom DVD players to Blu-ray Discs incoming years is likely to coincide withdomestic consumers upgrading theirvideo equipment.

The market share for audio productshas been largely reactive to the visualproducts segment, as fewer majorinnovations have taken place. The growthin purchases of portable digital music

players such as the iPod has been strongin recent years, although the highestvolume retailers for products of this typehave generally been non-specialisedstores. In future, the incorporation ofdigital music players into new generationsmart phones is expected to reduce salesvolumes of standalone portable digitalmusic players.

Professional users of audio and visual

Pocts & Sevicescontine

purchased for a variety of personal andprofessional uses. The sales ofheadphones have been boosted by thepopularisation of the iPod and higher-quality digital music recordings.Speaker dock products have beendevised that allow iPods and otherportable digital music players to plugdirectly into a speaker system for use in

the home or workplace. Manyconsumers who would have previouslypurchased a stereo system with abuilt-in CD player are insteadpurchasing speaker dock products.

Products included in the othercategory include professional sound-recording equipment, cabling andvideo-editing equipment.

Major market segmentation (2011-12)

Total 1.4bn

48%Domestic visual

equipment customers

29%Domestic audio

equipment customers

23%Professionalcustomers



13/23


Pocts & Makets

As a retail industry selling primarily toresidents near to store locations, theindustry is not highly globalised in a true

sense. While the majority of productssold are manufactured in Europe andAsia, the international trade involved ingetting these items to market isundertaken at the manufacturing andwholesale levels. Some high-endmanufacturers (such as Danish companyBang & Olufsen) primarily sell theirproducts worldwide through self-branded

stores, of which there are many in theUnited Kingdom.

There are limited examples of UK-

based online retailers selling audio andvideo products to overseas customers,however most countries have similaronline businesses. A foreign customerwould be likely to only purchase from aBritish seller if there was a major priceadvantage, or if it was for a particularlyobscure piece of equipment that wasdifcult to locate elsewhere.

Majo Maketscontine

equipment have been upgrading theirequipment in the past ve years, withmany users making the switch to HDrecording and display technology. ThisHD digital equipment is becomingcheaper as the technology matures,

subsequently compelling more users toupgrade. Generally speaking, professionalquality audio and video equipment hasbecome considerably more affordable inthe past decade, thanks in part to moreefcient production facilities in Asia.

Gloalisation & Tae


14/23


Pocts & Makets


revene (%)

Col Zone (


15/23


Pocts & Makets

bsiness Locations The higher than average level ofdisposable income in the London regionis a key factor that shapes the regionalrevenue gures for this industry. WhileLondon only accounts for 12.4% of theUnited Kingdoms population, about22.4% of industry revenue is sourcedfrom this area. The size andconcentration of the population inLondon enables large specialised retailersto operate, and these retailers often serveother parts of the country via online

retailing arms of their businesses.As a result of the over-representationof the London area in industry revenuegures, the majority of other regions inthe United Kingdom are under-represented in industry expenditureshare compared with population share.The only other sizeable exception to thisis the South East region, which has ahigher than national average level ofdisposable income per household.

Percentage

30

0

10

20

Revenue

Population

Distribution of revenue vs. population


Yorkshire

EastofEngland

NorthEa

st

NorthernIreland

SouthEa

st

Wales

WestMidlan

ds

EastMidlan

ds

London

NorthWest

Scotland

SouthWest


16/23


Cost Stctebenchmaks

Retailing audio and video equipment is acompetitive game. Like many retailindustries, purchases comprise thegreatest share of revenue, with many of theproducts stocked by retailers costinghundreds of pounds to purchase, even atthe wholesale level. Companies withmultiple retail outlets will tend to usecentralised distribution centres as hubs for

their stock purchasing and warehousing.With a strong focus on customer

service and advice, particularly in

specialised stores, wages also account fora signicant portion of industry revenue.Retail staff are required to be on the oorof shops, assisting customers andensuring that the store remains wellpresented. For companies whoconcentrate more heavily (or exclusively)on online retailing, labour costs tend tobe lower per dollar of revenue.

Poor economic conditions in theUnited Kingdom in recent years havecaused rental costs to fall in many cases.

Ke Sccess Factos Having a good reputationAs a specialist store, reputation forstocking quality products and offeringexpert advice contributes greatly tobusiness success.

Ability to quickly adopt new technologyAs an industry that is technology-focused, it is crucial that retailers acquire,stock and advise on new technologyquickly after it is released.

Attractive product presentationA bright, modern showroom enables theproducts to be displayed well. This willcreate a better impression withcustomers, and will lead to more sales.

Experienced work forceStaff members with thorough productknowledge and extensive sales experiencewill increase customer satisfaction,leading to return business.

Maket ShaeConcentation

This industry has low concentration,meaning that the four largest players inthe industry account for less than 30% oftotal industry revenue. It is estimatedthat concentration is about 16%, withmuch of the industry being comprised ofsmaller niche retailers serving specicgeographic areas.

Industry concentration has beenincreasing, with companies such asRicher Sounds expanding their retail

networks. Some merger and acquisitionactivity has been taking place, whichhas coincided with weak economicconditions in the United Kingdombetween 2008 and 2010. It is expectedthat concentration will continue toincrease in the future, with largercompanies being better able tocompete on efciency and price withdepartment stores and other non-specialised retailers.

Competitive LanscapeMaket Shae Concentation | Ke Sccess Factos

Cost Stcte benchmaks | baies to Ent

Level

Concentration inthis industry is Lo

IBISWorld identies250 Key SuccessFactors or abusiness. The mostimportant or thisindustry are:

Inst Costs an Aveage Secto Costs Poft

rent

utilities

depeciation

Othe

wages

Pchases

IndustryCosts(2011-12)

AveageCosts o allInsties

in secto(2011-12)

0 100%

5.5Poit

68.510.09.21.2

2.1

3.5

4.8Poit

53.141.01.3



17/23


Competitive Lanscape

baies to Ent The barriers to enter this industry are ata medium level, with considerable capitalexpenditure required to open a retailspace and to acquire stock. Items ofupmarket audio and video equipment canoften cost thousands of pounds.Competition in the industry is also high,with many established retailers beingsituated in major population centres.Strong competition from departmentstores and other retailers who sell abroader range of products also exists.

This level of competition means thatmargins are often slim, particularly onlower and mid-market products.Difculties in securing high-quality retailpremises in key centres can also act as abarrier for new entrants. Another barrierto entry is the ability to nd skilled staff,with extensive product knowledgerequired for some roles.

The pre-existence of distributionnetworks between operators andsuppliers may in some cases be viewed as

a barrier to entry. Prospectiveoperators planning to enter the industryshould be mindful of the long-standingrelationship existing players have with

suppliers and consumers alike. Potentialentrants should also ensure that relevanttrading licenses are obtained; however, inmost cases this is not a formidablebarrier to entry.

Growth of the internet over the pastdecade has created new opportunities forspecialised retailers of audio and videoequipment. The ability to have just onelocation for all inventory enables web-based companies to manage stock moreefciently. The nature of the internet also

allows full national coverage for retailerswho would not have previously had thescale or resources to create a nationalshop-front network.

Cost Stctebenchmakscontine

Leases that are up for renewal are oftenable to be negotiated with reduced rentalrates due to the soft commercial propertymarket that is currently prevailing.Depreciation costs for the industry relateprimarily to store tout, IT equipmentand point-of-sale systems.

Industry protability has also been hitby the recession, with retailers having todiscount more heavily and more regularly

than normal in order to aid sales volumes.While the industry has always relied onvolume selling at modest margins,specialised high-end retailers are in somecases able to command considerablyhigher margins than average. A responseto the lower-than-normal margins in theindustry has been for numerous retailersto shift more towards online retailing,which is seen as a way to reduce costs.

baies to ent checklist Level

Competition High

Concentration Low

Lie cycle stage Mature

Capital intensity Low

Technology change Low

Regulation and policy Light

Industry assistance Low


Level & Ten

Barriers to Entryin this industry areMeim and Stea


18/23


Othe Companies This industry is predominantlycomprised of small retailers who cater togeographic or product niches. With a fewexceptions, they are generally not part oflarge-scale franchises or store networks.

The role of non-specialised sellers ofaudio and visual equipment is relevantto this industry. Retailers such asCurrys.digital and Comet have retail

networks across the United Kingdom,

retailing hundreds of millions of poundsworth of audio and video equipmentannually. Stores of this nature willgenerally stock home appliances,cameras, computers and kitchenappliances in addition to audio andvisual equipment. Furthermore,department stores such as Debenhamsand Marks and Spencer stock a range of

audio and visual equipment.

Plae Peomance Richer Sounds is one of the UnitedKingdoms leading hi- and TV retailers,

with about 50 stores operatingthroughout the United Kingdom. Thecompany is owned by entrepreneurJulian Richer, who opened the rstRicher Sounds store at London Bridgewhen he was just 19 years old. In additionto the physical stores, the companyoperates an online store.

In the year to May 2, 2009, companyrevenue grew strongly, rising by 38.0%to 116.2 million. Pre-tax protexperienced greater challenges, decliningby 8.0% to 3.4 million. In February

2009, the company purchased the brandname, web architecture and databases of

collapsed electricals retailer EmpireDirect. The purchase was made with theintention of expanding Richer Soundsrange of products into small and largeelectrical appliances.

Revenue for 2007-08 was about 84.0million, up from 75.0 million in 2006-07. During this period, the companyemployed 375 staff. The protability ofthe business has remained quite stableover the past ve years, remainingconstantly in the 1.0 million to 4.0million range.

Majo Companiesriche Sons plc | Othe

Majo plaes(Market share)

91.8%Othe

riche Sons plc 8.2%SOURCE: WWW.IBISWORLD.CO.UK

riche Sons plcMarket share: 8.2%


19/23


Capital Intensit Like many retail industries, specialisedaudio and visual equipment retailers aregenerally labour intensive. Labour costsfor the industry are incurred through theneed to hire staff to serve storeconsumers. Labour costs or wagesaccount for a signicantly larger share ofthe daily running costs for operatorscompared with capital expenditure,making the industry labour intensive. In2010-11, the ratio of capital to wage costswas 1:8.3, which means that for every

pound spent on capital expenditure, justover 8 was spent on labour.Capital expenditure for this industry

comes in the form of display shelving,cash registers, xtures and ttings.During the past decade, capitalexpenditure has been made by mostoperators to introduce computerisedstock systems, digital cash registers andthe scanning of barcodes duringpurchase. The results of this have

included more simple labour tasks, feweremployee mistakes and better stockcontrol. The other signicant capitalinvestment made by numerous industryoperators in the past few years has beenthe development and maintenance of anonline retailing presence, including

Opeating Conitions

Tools o the Tae: Goth Stategies o Sccess


LabourIntensiv

eC

apitalIntensive

Change in Shae o the Econom

Ne Age Econom

receation, Pesonal Sevices,

Health an Ecation. Firms

benet rom personal wealth so

stable macroeconomic conditions

are imperative. Brand awareness

and niche labour skills are key to

product dierentiation.

Taitional Sevice Econom

wholesale an retail. Reliant

on labour rather than capital

to sell goods. Functions cannot

be outsourced thereore rms

must use new technology

or improve sta training to

increase revenue growth.

Ol Econom

Agiclte an Manacting.

Traded goods can be produced

using cheap labour abroad.

To epand rms must merge

or acquire others to eploit

economies o scale, or specialise

in niche, high-value products.

Investment Econom

Inomation, Commnications,

Mining, Finance an real

Estate. To increase revenue

rms need superior debt

management, a stable

macroeconomic environment

and a sound investment plan.

retail o Compte an GamingPocts in Specialise Stoes

Electonic &TelecommnicationsEqipmentwholesaling

Electical Hosehol Appliance retail

MsicalInstmentretailes

Specialise Aio anVieo Eqipment retailes

Capital intensity

1.0

0.0

0.2

0.4

0.6

0.8


Dotted line shows a high level of capital intensity

Capital units per labour unit

Specialised Audioand Video

Equipment Retailers

Wholesale andRetail Trade

Economy

Level

The level ocapital intensityrequired is Lo


20/23


Opeating Conitions

Capital Intensitcontine

payment systems and a full web interface.With the reduced labour

requirements but increased capitalrequirements of selling via the internet,the industrys level of capital intensity

has increased during the past ve years.While the capital intensity remains lowoverall, further moves towards onlineretailing are expected to increase thelevel in the future.


21/23


Ke Statistics

revene( million)

InstVale Ae

( million) Estalishments Entepises Emploment Expots Impotswages

( million)domesticdeman

2002-03 1,820.6 276.9 2,310 1,435 8,631 -- -- 155.3 N/A

2003-04 1,721 258.3 2,218 1,376 8,665 -- -- 157 N/A

2004-05 1,726.5 260.7 2,198 1,363 8,604 -- -- 158.7 N/A

2005-06 1,696.5 256.3 2,199 1,361 8,467 -- -- 157.3 N/A

2006-07 1,637.9 249.8 2,078 1,284 8,365 -- -- 156.4 N/A

2007-08 1,494.5 197.4 2,087 1,280 8,123 -- -- 152.7 N/A

2008-09 1,413.2 171.7 2,035 1,248 8,000 -- -- 142.7 N/A

2009-10 1,363.3 160.3 2,008 1,229 7,832 -- -- 138.7 N/A

2010-11 1,376.7 174.3 2,041 1,248 7,863 -- -- 135.3 N/A

2011-12 1,379.4 183.7 2,071 1,267 8,021 -- -- 136.8 N/A

2012-13 1,396.7 193.7 2,112 1,291 8,117 -- -- 139.4 N/A

2013-14 1,441.3 202.9 2,094 1,296 7,995 -- -- 142.7 N/A

2014-15 1,486 205.4 2,080 1,289 7,851 -- -- 148.3 N/A

2015-16 1,527.6 206 2,067 1,282 7,922 -- -- 153.5 N/A

2016-17 1,568.8 209.9 2,031 1,265 7,930 -- -- 158.9 N/A

IVA/revene(%)

Impots/deman(%)

Expots/revene(%)

revene peEmploee

(000)wages/revene

(%)Emploees

pe Est.Aveage wage

()

Shae o theEconom

(%)

2002-03 15.21 N/A N/A 210.94 8.53 3.74 17,993.28 0.02

2003-04 15.01 N/A N/A 198.62 9.12 3.91 18,118.87 0.02

2004-05 15.10 N/A N/A 200.66 9.19 3.91 18,444.91 0.02

2005-06 15.11 N/A N/A 200.37 9.27 3.85 18,578.01 0.02

2006-07 15.25 N/A N/A 195.80 9.55 4.03 18,696.95 0.022007-08 13.21 N/A N/A 183.98 10.22 3.89 18,798.47 0.01

2008-09 12.15 N/A N/A 176.65 10.10 3.93 17,837.50 0.01

2009-10 11.76 N/A N/A 174.07 10.17 3.90 17,709.40 0.01

2010-11 12.66 N/A N/A 175.09 9.83 3.85 17,207.17 0.01

2011-12 13.32 N/A N/A 171.97 9.92 3.87 17,055.23 0.01

2012-13 13.87 N/A N/A 172.07 9.98 3.84 17,173.83 0.01

2013-14 14.08 N/A N/A 180.28 9.90 3.82 17,848.66 0.01

2014-15 13.82 N/A N/A 189.28 9.98 3.77 18,889.31 0.01

2015-16 13.49 N/A N/A 192.83 10.05 3.83 19,376.42 0.01

2016-17 13.38 N/A N/A 197.83 10.13 3.90 20,037.83 0.01

Figures are infation-adjusted 2012 dollars. Rank reers to 2012 data.

revene(%)

InstVale Ae

(%)Estalishments

(%)Entepises

(%)Emploment

(%)Expots

(%)Impots

(%)wages

(%)

domesticdeman

(%)

2003-04 -5.5 -6.7 -4.0 -4.1 0.4 N/A N/A 1.1 N/A

2004-05 0.3 0.9 -0.9 -0.9 -0.7 N/A N/A 1.1 N/A

2005-06 -1.7 -1.7 0.0 -0.1 -1.6 N/A N/A -0.9 N/A

2006-07 -3.5 -2.5 -5.5 -5.7 -1.2 N/A N/A -0.6 N/A

2007-08 -8.8 -21.0 0.4 -0.3 -2.9 N/A N/A -2.4 N/A

2008-09 -5.4 -13.0 -2.5 -2.5 -1.5 N/A N/A -6.5 N/A

2009-10 -3.5 -6.6 -1.3 -1.5 -2.1 N/A N/A -2.8 N/A

2010-11 1.0 8.7 1.6 1.5 0.4 N/A N/A -2.5 N/A

2011-12 0.2 5.4 1.5 1.5 2.0 N/A N/A 1.1 N/A

2012-13 1.3 5.4 2.0 1.9 1.2 N/A N/A 1.9 N/A

2013-14 3.2 4.7 -0.9 0.4 -1.5 N/A N/A 2.4 N/A

2014-15 3.1 1.2 -0.7 -0.5 -1.8 N/A N/A 3.9 N/A

2015-16 2.8 0.3 -0.6 -0.5 0.9 N/A N/A 3.5 N/A

2016-17 2.7 1.9 -1.7 -1.3 0.1 N/A N/A 3.5 N/A

Annal Change

Ke ratios

Inst data

SOURCE: WWW.IBISWORLD.COMFigures are infation-adjusted to 2011-12.


22/23


Jagon & Glossa

bArrIErS TO ENTry Barriers to entry can be high,

medium or low. High means new companies struggle to

enter an industry, while low means it is easy or a rm to

enter an industry.

CAPITAL/LAbOur INTENSITy An indicator o how

much capital is used in production as opposed to labour.Level is stated as high, medium or low. High is a ratio o

less than 3 o wage costs or every 1 o depreciation;

medium is 3 to 8 o wage costs to 1 o depreciation;

low is greater than 8 o wage costs or every 1 o

depreciation.

dOMESTIC dEMANd The use o goods and services

within the UK; the sum o imports and domestic

production minus eports.

EArNINGS bEFOrE INTErEST ANd TAX (EbIT)

IBISWorld uses EBIT as an indicator o a companys

protability. It is calculated as revenue minus epenses,

ecluding ta and interest.

EMPLOyMENT The number o working proprietors,

partners, permanent, part-time, temporary, casualmanagerial and eecutive employees.

ENTErPrISE A division that is separately managed and

keeps management accounts. The most relevant

measure o the number o rms in an industry.

ESTAbLISHMENT The smallest type o accounting unit

within an enterprise; it usually consists o one or more

locations in which it operates.

EXPOrTS The total sales and transers o goods

produced by an industry that are eported.

IMPOrTS The value o goods and services imported

with the amount payable to non-residents.

INduSTry CONCENTrATION IBISWorld bases

concentration on the top our rms. Concentration is

identied as high, medium or low. High means the top

our players account or over 70% o revenue; medium

is 40% to 70% o revenue; low is less than 40%.

INduSTry rEVENuE The total sales revenue o the

industry, including sales (eclusive o ecise and sales

ta) o goods and services; plus transers to other rms

o the same business; plus subsidies on production; plus

all other operating income rom outside the rm (such

as commission income, repair and service income, and

rent, leasing and hiring income); plus capital work done

by rental or lease. Receipts rom interest royalties,

dividends and the sale o ed tangible assets are

ecluded.

INduSTry VALuE AddEd The market value o goods

and services produced by an industry minus the cost o

goods and services used in the production process,

which leaves the gross product o the industry (also

called its Value Added).

INTErNATIONAL TrAdE The level is determined by:

Eports/revenue: low is 0% to 5%; medium is 5% to

20%; high is over 20%. Imports/domestic demand: low

is 0% to 5%; medium is 5% to 35%; and high is over

35%.

LIFE CyCLE All industries go through periods o growth,

maturity and decline. An average lie cycle lasts 70

years. Maturity is the longest stage at 40 years with

growth and decline at 15 years each.

NON-EMPLOyING ESTAbLISHMENTS Businesses with

no paid employment and payroll are known as

non-employing establishments. These are mostly set up

by sel-employed individuals.

VOLATILITy The level o volatility is determined by the

percentage change in revenue over the past ve years.

Volatility levels: very high is greater than 20%; high

volatility is between 10% and 20%; moderate

volatility is between 3% and 10%; and low volatility

is less than 3%.

wAGES The gross total wages and salaries o all

employees o the establishment.

Inst Jagon

IbISwol Glossa

bLu-rAy An emerging new orm o digital media. TheBlu-ray Disc is a high-capacity digital disc predominantly

seen as a successor to the DVD.

HIGH dEFINITION (Hd) The majority o video

equipment sold today is high denition, which oers a

sharper, more detailed moving image.

rAdIO-FrEQuENCy IdENTIFICATION (rFId) Theuse o an object (an RFID tag) applied to a product or

the purpose o identication and tracking using radio

waves.


23/23

disclaime

This product has been supplied by IBISWorld Ltd. (IBISWorld) solely or use

by its authorised licensees strictly in accordance with their licence

agreements with IBISWorld. IBISWorld makes no representation to any

other person with regard to the completeness or accuracy o the data or

inormation contained herein, and it accepts no responsibility and disclaims

all liability (save or liability that cannot be lawully disclaimed) or loss ordamage whatsoever suered or incurred by any other person resulting rom

the use o, or reliance upon, the data or inormation contained herein.

Copyright in this publication is owned by IBISWorld Ltd. The publication is

sold on the basis that the purchaser agrees not to copy the material

contained within it or other than the purchasers own purposes. In the event

that the purchaser uses or quotes rom the material in this publication in

papers, reports or opinions prepared or any other person it is agreed thatit will be sourced to IBISWorld Ltd

At IBISWorld, we know that industry intelligence

is more than assembling factsIt is combining data with analysis to answer thequestions that successful businesses ask

Ienti high-goth, emeging an shinking makets

Am osel ith the latest inst intelligence

Assess competitive theats om existing an ne entants

benchmak o peomance against the competition

Make spee maket-ea, poft-maximising ecisions

who is IbISwol?

We are strategists, analysts, researchers and marketers. We provide

answers to inormation-hungry, time-poor businesses. Our goal is to

provide real-world answers that matter to your business. When tough

strategic, budget, sales and marketing decisions need to be made, our

suite o Industry and risk intelligence products give you deeply

researched answers quickly.

IbISwol Memeship

IBISWorld oers tailored membership packages to meet your needs.

Copyright 2011 IBISWorld Ltd

.iisol.co.k | 020 3008 6568 | [email protected]

Documents

AV Retailers