Woolworths is planning to sell off its Dick Smith electronics chain, after a strategic review concluded the business would do better under independent ownership. But while the shift will take a while, the planned closure of up to 100 stores means it isn’t great news for Australian shoppers.
Woolworths explained its logic in a statement to the ASX:
Consumer electronics will remain an important category for Woolworths and is better delivered through BIG W and its expanding multichannel offer. The investment and management attention given to Dick Smith have been disproportionate relative to its position within the Woolworths group. The company’s current focus is on accelerating growth in its core trading divisions; Following further restructure, Dick Smith will be divested as a going concern to an appropriate buyer and will continue to operate as normal . . . In order to maximise value and best position the business for divestment, Woolworths will implement a number of business improvement initiatives identified by the strategic review, including accelerating the rationalisation of the store network, with up to 100 underperforming stores identified for closure within the next two years.
As that quote suggests, the process will take quite a while, so it’s difficult to predict the long-term impact. But there are four obvious areas for concern (from a consumer perspective — obviously it’s potentially lousy news for the employees in those stores):
- If you live near one of the 100 stores that gets shut, you’ll have to rely on online ordering or alternative suppliers.
- If Dick Smith is ultimately purchased by one of the existing chains, then there will be less competition in the market. As we’ve seen with the supermarket chains, that can result in low prices but it can also result in consumer angst when unpopular decisions are made.
- If Dick Smith is purchased by (say) a non-retail investment group, it won’t necessarily have the scale to compete with other bricks-and-mortar retailers, let alone online rivals. It will also lose access to some Woolworths-only product lines (the Kindle is the most obvious current example).
- Woolworths’ focus on Big W for electronics is a mild concern, given the retailer’s recent issues with iTunes card activation and online delivery.
What’s your reaction to the shift? Share your thoughts in the comments.