Why We Need More Specialty Tech Retail

by Ben Bajarin   |   June 8th, 2012

Big box tech retail had its time but for certain types of technology I am convinced there is a better way to sell. I am convinced this is the case because big box retail simply offers too much choice. The real opportunity ahead is to provide better curation of that choice.

I am an avid and highly competitive tennis player. When I buy tennis equipment I buy the good stuff. More often than not the equipment I need is not found in a big box sports retailer. Rather it is found in specialty stores where the store owner is highly curating what products are carried in the store and more importantly highly knowledgable of all the goods. This is just one of example of many advantages of more specialty retail outlets and in every case it is generally the same–better products and better service.

From a technology standpoint I want to look at a couple examples.

Home Audio and Visual

Magnolia Hi-Fi was a purely specialty show room and retail outlet for high quality home AV products. You could go to Magnolia and experience the best in home CE for both the mid and high end. Magnolia never carried the cheapest home CE products but they carried the best in the categories they chose.

During the time of the CE industries transition from analog broadcast to digital broadcast and HDTV, these stores saw quite a bit of foot traffic and drove sales. There were several reasons for this.

The first was that people were hungry to learn about HDTV and all the different nuances of HDTV’s at the time. Magnolia carried a relatively limited line of HDTV’s in their outlets so it made the learning process a bit easier to take in but they also staffed very intelligent staff who clearly explained the products, their benefits, and the technology.

During the same time if you went into a Wal-Mart or Best Buy, you were confronted with too many options and SKU variables, too many screens plastered right next to each other, and staff that had a general knowledge of the products at best but couldn’t explain specifics. All of that together left consumers with too much information to process and often leaving the store less confident about buying a new TV than before.

What Magnolia did for the market while it was still being born was key. They curated choice and helped consumers feel confident and knowledgeable about their purchase. This is simply something big box retail can not do.

What About Computers

Apple, I believe, is setting the example of how computers may be sold in the future. This is why I believe Microsoft is getting serious about putting retail stores in many of the same areas as Apple stores. My observation of this move is that retail stores for computing may be more about ecosystems than anything else going forward. Let me explain that.

Apple is vertically integrated and will sell hardware and software all for their proprietary ecosystem. Microsoft’s ecosystem is not proprietary since they don’t make computers. Because of that they need partners like Acer, Dell, HP, Lenovo, etc., who may not open their own stores all over the world. However, Microsoft may and sell all those partners hardware through their stores, which all cater to the Microsoft ecosystem. In a Microsoft store the singular point is the Microsoft ecosystem rather than any one vendor. The difference in Microsoft’s licensable platform vs Apple’s vertical integration is the fundamental point that makes these different channel strategies a reality.

The benefit of this model is that you know where to go depending on whose ecosystem you have invested in. If I am an Apple customer, I can go to an Apple store and find many products, curated on my behalf, to meet my needs when it comes to the Apple ecosystem. Microsoft’s channel strategy will be the same, although it will carry competing brands, the point remains that they are all related to the Microsoft ecosystem.

You can argue that a big box retailer can accomplish this with a store within a store mentality. But, I would disagree, on the premise of sheer floor space. A retailer like Best Buy views inventory in terms of how much they can put on shelves since they have space to fill. A smaller retailer has very little space and must be highly selective due to their lack of space. The result is more curation rather than less.

I have long used Barry Schwartz’s book The Paradox of Choice as a reference for this thinking. The primary point remains in consumer psychology that too much choice is overwhelming. Many of the points of this book validate the fundamental reasons why Magnolia Hi-Fi and Apple stores are successful. Consumers want choice but rather than throw every possible choice under the sun at them, it is better to give them choice of a select list of products which are curated by the retailer. This is again a strategy which can only be employed by smaller retailers.

To go forward in this model retailers will need to accept the “if I don’t have it someone else does” mentality. Because a specialty retailer will have to be selective, they simply can’t carry anything. This strategy has its benefits which I pointed out above and will work for many things but it also has its negatives. The primary negative being what if no store has what I want? This may be where online comes into play.

If your specialty retailers don’t have the precise product mix then perhaps online will fill the void. To use my tennis example, I prefer a very specific type of replaceable over grip. My preference in this matter is different than the mainstream so not many specialty stores carry it. So I order in online in bulk, wait a few days, but have my needs satisfied.

I am not sure if big box retailers have much of a future. I think they have their place for certain types of goods, but I have my doubts when it comes to computing goods. I, for one, think the current big box retailing experience is pretty poor and for many of the goods I would buy in a Best Buy, I have moved to purchase online.

Simply put my experience is far more superior in specialty retail over big box retail when it comes to the things I care most about. It is this fundamental point that leads me to believe that computers (i.e desktops, notebooks, smartphones, tablets) are better sold in specialty locations rather than a try-to-please-everyone-and-end-up-pleasing-no-one-big-box-retailer.

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Ben Bajarin

Ben Bajarin is a Principal Analyst at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research. He is a husband, father, gadget enthusiast, trend spotter, early adopter and hobby farmer. Full Bio
  • Rich

    Ben, you said you’re not sure if big box retailers have much of a future. How far does that go? Take washing machines…there are many brands and models of those, but if your curation idea extends to them as well as computers, you might not anticipate a good future for big box stores in any category.

    • benbajarin

      Yes, it doesn’t work for all products. What I think it may be is that big box works for commodity items and perhaps ones that are not terribly emotional / personal. Things like Tylenol for example. But if you look at purchases that are highly personal and highly preferential like clothes, food, wine, home decor, etc., it seems like those seem to be the right categories for something like this.

      There are plenty examples of specialty retail done right and my point is I don’t see why that model wouldn’t work for highly personal products and ecosystems.

  • steve_wildstrom

    I agree with Ben, but will add that not all big box stores are equal.

    My experience with H.H. Gregg (which literally replaced my local and unlamented Circuit City by moving into its abandoned space), for example, has been far superior to Best Buy. So much so that when my wife decided to move to an iPhone, she wanted to buy it at Gregg, not an Apple store. And not only was the process free of the relentless upselling that usually characterizes big box sales, the rep found she was qualified for a grandfathered lower-cost plan. Of course, she had decided on an iPhone before we went to the store, so we just ignored the sea of semi-undifferentiated Android handsets.

    And not all specialists are good either. For example, I would never again voluntarily set foot in our local Verizon Wireless store (a company store, not a franchise) because every transaction is guaranteed to take a minimum of an hour.

    • Rich

      A Verizon Wireless store sold me batteries for my phone that were very expensive and didn’t last very long. I bought one from Amazon for half the price and it’s lasted 4-5 times as long as the ones from Verizon. I’m not exaggerating at all with these numbers.

  • Lars F. Jørgensen

    It’s been my responsibility for about 15 years to fill the shelves of a number of specialty stores, with a curated selection of CE products. I have the same basic belief as you put forth in your post, but must say that in real life things are just a bit different. What I have seen happened over the last 3 – 5 years is that customers walk in to a specialty store, get all the info and knowledge they need about the product they want to buy. Then leave the store and pick the product up either at a big box retailer or online. The reason behind this is simple. Specialty stores need to put a higher price tag on their carefully selected products, since they do not enjoy the same output as the big box retailers. Their staff is more qualified and therefor gets better pay, and their locations are often high-street where the rent is higher. This of course is only true if you are an independent specialty store. Apple, Microsoft and others will not have the same problem. They will be able to view the expense of having a brand store as a marketing expense, and will be able to set prices in the store and on the web alike.

    I hope that your thoughts turns out to be true, since the customer deserves the buying experience that they get in the specialty store, but for that to happen the specialty store will have to evolve. I foresee that stores like that primarily will work as showrooms for their online shop. They will have highly qualified staff, but no stock. They will work closely with suppliers to minimize central stock, and only order products when a customer commits to at sale. This way they can continue to offer the best advice and at the same time still get the sale.