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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]
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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
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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
SOURCE: WWW.IBISWORLD.CO.UK
p. 18
p. 4
SOURCE: WWW.IBISWORLD.COM
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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
SOURCE: WWW.IBISWORLD.CO.UK
%c
hange
3.0
3.0
1.5
0.0
1.5
1806 08 10 12 14 16Year
Real household disposable income
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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
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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
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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
SOURCE: WWW.IBISWORLD.CO.UK
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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
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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
SOURCE: WWW.IBISWORLD.COM
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
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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
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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
SOURCE: WWW.IBISWORLD.CO.UK
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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
SOURCE: WWW.IBISWORLD.CO.UK
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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
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Pocts & Makets
SOURCE: WWW.IBISWORLD.CO.UK
revene (%)
Col Zone (
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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
SOURCE: WWW.IBISWORLD.COM
Yorkshire
EastofEngland
NorthEa
st
NorthernIreland
SouthEa
st
Wales
WestMidlan
ds
EastMidlan
ds
London
NorthWest
Scotland
SouthWest
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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
SOURCE: WWW.IBISWORLD.CO.UK
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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
SOURCE: WWW.IBISWORLD.CO.UK
Level & Ten
Barriers to Entryin this industry areMeim and Stea
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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%
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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
SOURCE: WWW.IBISWORLD.CO.UK
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
SOURCE: WWW.IBISWORLD.CO.UK
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
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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.
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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.
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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.
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