Price wars in electrical goods

Electrical goods retailers are locked in a price war, combined with a race for offers and intensifying advertising. The target is none other than the biggest share possible in a highly volatile market at this stage. Opening the battle was the entry of the Media Markt and Dixons multinationals, although the war drums had sounded earlier, when Radio Korassidis and Vassilakis crumbled under the weight of their debts. The messages communicated to consumers are not very different in their essence, as they all promote the chains’ most attractive products at prices that provoke consumer interest as well as worries about below-cost prices which would constitute breaching the law. Market professionals explain temporary below-cost prices saying they do not harm the equilibrium of the market. Yet chains such as Media Markt and Dixons are expected to suppress prices further in a sector with high competition and low profit margins. It seems in Greece, too, prices will be determined not by suppliers but by retailers. Developments in retailing seem to mirror those in the Italian market, with two big groups (Media Markt and Dixons) dominating, followed by two to six local sales networks, and cooperatives coming third in turnover and market shares. Experts agree market players will not exceed eight or 10. It may actually be too early to predict what the future picture of the market will be, but everyone in the sector agrees the market will consolidate in a few big business schemes to obtain shares by selling cheap products, intense advertising and a fight for consumers’ trust. Smaller chains will not be eliminated, though; given the Greek temperament, local cooperatives will survive. However 2006 is expected to be a year full of mergers and acquisitions, as well as closures. Media Markt seems to have won people over with its «Your Time Has Come» motto, having come to Greece promising a real price revolution. It has announced the opening of two more stores in Athens and Thessaloniki, while well-informed sources talk about many more stores very soon. Rivals stay calm Kotsovolos, which was recently purchased by Dixons, advertises products at prices Greeks «have never experienced before,» such as a «DVD player for 9.90 euros while stocks last.» The pretext for that is the opening of the new Kotsovolos megastore at The Mall Athens. «The advent of Media Markt does not worry Kotsovolos,» said the group’s marketing director. «That is because the two groups have experienced competition between them during their year-long common presence in European markets.» He adds that Kotsovolos focuses on guaranteeing low prices, developing Mega Stores Kotsovolos and renovating existing stores. In March, two new outlets are to open in Thessaloniki. Listed retailer Elektroniki Athinon responded with a TV advert welcoming Media Markt in Greek and in German, emphasizing that it awaits the German giant, with the implication that the German chain’s prices are not lower than those of the local chain. «We have watched Media Markt since 2000 so we know its business policy and consumer-wooing techniques,» said Yiannis Strountzis, president and CEO of Elektroniki Athinon. «This means we have prepared for its attractive prices and products and we have adjusted our pricing policy likewise. Yet our aim is not just to draw consumers but also to protect the company from unorthodox pricing and business policies,» he stressed. As for the new landscape in the domestic electrical goods retail market, Strountzis estimates that Kotsovolos will stay on top with Elektroniki Athinon second, while two years later Media Markt will rise to the third spot and battle for the top two. Small and vulnerable Market professionals believe smaller chains are more vulnerable in this price war and new cases of crumbling companies are expected, mainly from cooperative members who are in dire straits. Nevertheless, their competitive advantage against big and impersonal chains is their personal contact with customers, as in many cases they will retain their local character. Hence, in its radio adverts, SEHOS highlights the friendly relationship between a sales assistant and a customer, but makes reference to the Pan-European network it belongs to, Euronics. Sykaris is also planning a new ad, says its CEO, Antonis Sykaris, adding that «Greekness» and friendly contact and service will be his chain’s weapons as turnover and shares reshape, a reality Media Markt must also adjust to. «We were prepared for the entry of Media Markt, but already had good prices from our Greek suppliers,» said Sykaris, adding that all players are useful in a market and the wholesale market does not support oligopolies. «Wholesale companies are now having problems with bad debts (as in Radio Korassidis’s case). The ongoing reshuffle in retail market shares will unavoidably affect the wholesale market, too, as the two sides’ relationship is changing,» said Vassilis Fourlis, CEO of the Fourlis group. «Yet the entry of Media Markt and Dixons will not stop the growth of healthy retail chains and Media Markt will earn the share of those in distress,» he predicted. Electronet’s vice president, Eleni Korahai, goes further, predicting that 2006 will be a showdown year: «Media Markt’s advent has caused panic in retail chains. This will deteriorate due to consumers’ low purchase ability. Still, Electronet’s 68-store network already has competitive prices and well-trained and friendly staff, with free extra services, such as delivery and installation,» says Korahai.