Why Dick Smith Sell-Off Could Hurt Your Wallet

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.

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Comments

    *shrug* as a consumer pretty much all retailers look the same to me now. I go into JB Hi-Fi because I like the look and combination of software and hardware, but when it comes to price it doesn't matter where you go in retail: if you're prepared to actually buy and do a little leg work, you can get the best price from anyone.

    As far as I'm concerned there are two "entities" in the market, competing against one another: "online" and "retail". Kogan is really appealing to me these days, come to think of it.

    "Woolworths’ focus on Big W for electronics is a mild concern, given the retailer’s recent issues with iTunes card activation and online delivery. "

    My concern is one of retail space.. having been to a few BigW stores in the last few months they are severely lacking in electronics floor-space... I can only gather from this that they will be expanding the range at BigW.. but where exactly are they going to put it all??

      Along with this by putting more electronics down on the floor, they are thus going to have to limit the floorspace of other products in their stores.. so they are effectively reducing their overall variety across the board..

      .. not good at all.

    In a way the decision sounds good to me, the transition from the original form of the stores to a discount electronics retailer was flawed because the stores are generally too small to really compete and didn't offer higher level customer service to compensate.

    I would actually like to see JB or similar take them on as a higher level service store along the lines of Apple stores but for Microsoft and Android devices. Discount is increasingly headed online but SOHO and Home ICT service is a void waiting to be filled.

    WRT Big W I feel that like KMart and Target the games and gaming units will do OK and perhaps the entertainment lines but that ICT will fail because of the customer profile.

    There are definitely a few stores they can close without affecting anybody: I was in Claremont (WA) the other day and realised they have two DSE stores within 100m of each other. I don't think many people will complain if one goes.

      There are actually quite a few double ups of DSE retailers in WA, definitely there is room to move. But I think they do that so they can put all the old crap stock in one store and then the other all the new stuff sorta to make it seem like their is a major difference between stores.

      There are 2 at claremont, armadale, morley, cannington, joondalup. As well as all them double ups there are even some DSEs going by the old tandy name, so there are probably a heap more.

    To be honest, I can't even remember the last time I bought electronics in a brick and mortar store anyway.

    Dick Smith died when they stopped selling all the little electronics and started selling TV's and Apple stuff. JB Hifi now has the upper hand in that market and so Dick Smith should just be laid to rest.

    dick smith is the store my parents go to. it went down hill when they stoped stocking kits and compnants (resistors, etc). it went from a specility electronics retailer to a mass market retailer - and those who used to shop shifted to other outlets - jaycar for me all the way

    Dick Smith used to be somewhere you could go to get resistors, potentiometers, etc. Now it's just another appliance/electronics store. Went in a while ago and asked for some "pot" cleaner. The guy thought I wanted to clean cookware, and had no idea what a potentiometer was.

    Jaycar is where the speciality stuff is these days.

    Sorry but all the above bullet points are irrelivant.
    1. All dick smith stores are within a stones throw of a JB Hifi, Harvey Normal, Domayne etc..
    2. DSE do not offer competitive pricing, so a non-issue.
    3. It already does not have the scale to compete. They are smaller than JB Hifi, have less products, have less turnaround of new items, have less demo displays. Woolworth's backing has not helped them and have actually gone down hill since Dick Smith sold the stores.
    4. Not a concern, BigW will struggle to focus on electronics. Their sales method is to wait for a customer to turn up, take a product off the counter (with no sales staff in sight), walk unaided to the counter and buy it off a checkout operator who has no product knowledge at all. If they try to do more than TVs and clock radios, they will not succeed because they will not be able to assist someone in selecting the correct wifi modem, the right phone cable adapter, etc...

    I really dont think anyone will notice. We will do fine with:
    1. Harvey Norman - For mums and dads who still think this is the best place to go for technology and get suckered into the used car sales pitch and rediculous overpriced goods.
    2. JB Hifi - the cheapest and most accessible bricks and mortar store for the general (non-online) public.
    3. Online Stores - At least 30% cheaper than JB Hifi but does mean you cant get something instantly, instead having to wait for delivery. Also, some people are still concerned about credit card fraud but main online sites are a total non-issue nowadays.

    Gotta wonder which stores they'll close.. Will it be the little ex-franchised (I'm assuming) stores or the massive corporate stores that have tended to replace the small stores?
    Are they going to sell the brand as a Consumer Electronics Brand or go back to the older Jaycar-style bits and pieces store?
    The only way I can see the Brand can survive is as a CE store with staff that actually KNOW their product! It's going to take someone with a lot of guts to do it, but could be a successful business with the right amount of staff and the right skill set.
    All those 50+ age consumers (plus a big percentage under 50) need assistance with every detail from what to buy to how to use and how to install.

    "If you live near one of the 100 stores that gets shut, you’ll have to rely on online ordering or alternative suppliers."

    That is usually cheaper anyway...so??

    Will this mean DSE will bring back components such as transistors, cable, and those sorts of things rather than just being like everybody else and selling TVs, etc?

      i dont think it will, the company that will be buying it will relise the time and money(millions) it has put into its new branding.
      if they dont continue with what dick smith is doing atm, they will proably kill the dick smith brand and incorperate it into its existing brand(or create a new on if it doesnt already have a retail brand, but i doubt that will happen, becasue dick smith was heading in the right direction. and it would cost millions)

    I think this will be a good thing, in my biased opinion. When Woolies bought DSE, my local DSE stopped stocking electronic hobbyist stuff (i.e. resistors, diodes, connectors, etc). Admittedly, I could still get connectors and stuff at the larger store a bit further away, but their range was still shrunken and the stands were pitiful afterthoughts. DSE has only been a consumer electronics store. My hope is that DSE will fail completely from here on, and a more hobbyist-centered company will be able to step in and fill the void (such as Jaycar).

    dse has not been all bad. im typing this on a $1500.00 laptop i got at 799.00.

    they have deals you just have to look, just like everything.

    sell some Dick Smith stores to Best Buy in the US... that might work out well for consumers

    All I can say is if people continue to buy things online store will close because of low profits.

    The funny thing is (you can mark my words) in a few years time when all of these stores have gone, people will kick up a stink because they can not get person to person help if something goes wrong.

    I shut my store because more and more people were buying their things online, having problems, coming in and asking me what's wrong and going off and buying things to fix the issue. This wasn't going to pay my bills. The funny thing is my product pricing wasn't that much more expensive than online sellers who shrug all their emails off if it didn't lead to a sale.

    I hate to say it this way but Apu from the Simpsons says it best "I am not a lending library, if you are not going to buy anything, get out!" (P.S I was never that harsh).

      Several stores in the US that offer product adivce (so not the likes of Walmart) charge for the advice. If the customer purchases an item, what they paid is deducted from the price of the product. That's the solution for now when people go into HN, JB, etc. and ask the sales people for advice, explaining what they want, finding the best product then go online to buy it. But I've found sales staff at JB are completely clueless and have no idea what they're talking about. The sales staff at HN just try and say the most expensive is always the best - when they had the 40% laptop sale, there was an elderly lady that spoke to the guy and said that all she wants to do is check email. The HN guy went to a $1000 laptop (sale price) and said these other laptops (while pointing to the cheaper ones) don't have reliable connections so when you connect you'll drop out and can be complicated. Absolute pure crap, which she fell for (but when the sales guy went out the back to get one, I gave her the truth and told her which one she should get)

        That is true Anthony, most sales staff blindly grab for the most expensive item when they get asked what to buy. I have witnessed the same thing at both the Stores you mentioned (HN and JB).

        I didn't know there was a pay for info scheme going on in the states. It's actually not a bad idea, I'm just not sure how it will be accepted if it were to be implemented over here.

        I went to a computer store to buy a motherboard and CPU, because the motherboard was out of stock, he tried to sell me another, the only problem was he was trying to sell me an Intel motherboard for a AMD CPU. Dumbass.

        If it all goes online and that creates a problem(as not having bricks and mortar stores to return/repair things too) then that just opens up another business opportunity to make a solution and earn a buck.

        The way forward is online commerce.

    No more Woolies staff discount for me there then.

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