If insurers reduce credit for whatever reason, it can cripple the ability for retailers to remain stocked, as vendors, publishers or distributors become reluctant to put product into a store which they can’t guarantee is protected.
It might not sound like it would have a huge impact, but this is one of the most common ways retailers go out of business. In recent months, High Street stalwarts Woolworths and Zavvi – formerly Virgin Megastores – went under because EUK – the Woolworths’ owned distributor – had its credit significantly reduced by insurers – which led to devastating stock shortages for the retailers.
Commentators will be primed to see retail collapses everywhere following those recent fiascos. While it’s true the effects of tightening credit by insurers are being felt across retail, it has to be said DSGi looks pretty vulnerable given all that we know about the firm’s recent troubles. And it should also be remembered that Comet posted flat sales for Christmas.
We talk about the looming Best Buy invasion a lot, but it holds particular relevance here. I’m no financial expert, but one would assume a retail superpower like that won’t be receiving the same credit terms as embattled PC World stores – which would add an even greater advantage to the firm when it hits the UK this spring.
A meeting of minds
Last month we covered Microsoft’s move into cloud computing, which was particularly interesting since the firm made its initial fortunes out of box product. Passing it on the other side of the road this month was Google, which is currently trying to make moves into the channel, after making its millions as a purely online business.
That the internet firm is looking to woo reseller chains and independents is not surprising – the resilience of the latter especially in this country is to be envied by most industries. If Google Apps is to become as well adopted by business and consumers as it would like, it will surely need the help of those who are well entrenched in the software selling game.
What is noteworthy is the blurring of the lines between online and physical business models. To reiterate the point echoed last month, the online versus box product software argument is no longer a case of either/or. When two of the biggest firms in the tech sector – who also happen to be rivals – agree on something, you can bet others will follow.