Barter wars in W1

When PC World opened a store on Tottenham Court Road, a battle line was drawn between the retail mammoth and traditional dealers...

When PC World opened a store on Tottenham Court Road, a battle line was drawn between the retail mammoth and traditional dealers in London's IT epicentre

What's the cheapest price you've been offered? This is the typical opening gambit you might expect to receive from a salesperson on Tottenham Court Road - Electronic Goods Central and traditionally a stronghold for independent dealers.

People who shop for products on the street expect to be able to haggle and negotiating a price has long been TCR's appeal. It's the place where the more discerning computer buyer will go in search of the very best deal.

Which is why it was such a surprise to hear of PC World's intention to open on TCR back in June. The face doesn't really fit. This isn't the kind of environment in which you'd expect to find a major nationwide retail chain. With its more regimented pricing structure and strict adherence to target margins, it would be easy to assume TCR isn't ideal PC World territory. So a few months on, how has it fared?

The simple answer is that it's probably still too early to say -having opened its doors for the first time on 8 June, it's barely been trading for five months. PC World itself remains tight-lipped about the success of the TCR store - it will not divulge exact sales figures - but according to managing director Simon Turner, the early signs are encouraging. "We're delighted with the response. It's going to be a very big store for us and has definitely exceeded our expectations to date. Although the rent is a bit higher [on Tottenham Court Road], it's easily covered by the incremental sales we're getting," he claims.

Turner insists PC World can compete on a street renowned as a bargaining hotbed and to do so, will not change the way it does business. In other words, it will not haggle. "I think the haggling thing is much more a reflection of the past. No, that's not our style of trading. We will price manage, but we will not haggle. By-and-large we go on advertised price," he says.

Turner maintains the retailer's competitive pricing will be more than enough to attract computer buyers into the store. "We do not find there is an issue with our pricing. We knew that when we opened on Tottenham Court Road. And in any case, we have a price promise which is very public in the store - we will not be undercut on price," he adds.

In Turner's opinion, TCR has evolved as a shopping destination and left behind its old image of an electronic goods bartering heaven. He notes many of the stores operating on the street have become a lot more upmarket and sophisticated in their business approach.

"Tottenham Court Road as a destination and as an area has changed quite a lot over the last few years. It used to be a haven for small shops - very cramped with lots of products, not laid out in a way a normal retailer is laid out. That is not what Tottenham Court Road is about any more. There are some larger stores there now, clearly very professionally run, that don't look any different from the multiple retailers. We suspect we might help the area become more attractive as a destination for other retailers," Turner says.

Interestingly, others add weight to the view that TCR has diversified somewhat. Seamus Twohig, product director at Ideal Hardware, is one of the street's advocates. "I think it was a stronghold for the traditional independent dealer. However, the world's moved on and the proposition PC World offers is very strong. The foot traffic that goes up Tottenham Court Road isn't just the
discerning computer user who doesn't like big brand stores. It's a real mix. I think that was something that was nice to say all those years ago, but perhaps isn't quite so true now," he says.

Road to nowhere
While that may be the case, there are others who suggest it's inevitable PC World will have to be open to more negotiation on the sales floor if it is to succeed on TCR. "I would expect it to have to negotiate in the same way everyone else on that street has to because on Tottenham Court Road, if you don't negotiate, people will walk next door," argues Ian Snadden, director of channel and SME sales at Fujitsu Siemens.

"The most negative thing you can say is that if Dixons has a level pricing policy throughout all of its stores, then having a shop on Tottenham Court Road might signal more competitive prices everywhere. I'm sure there's going to be regional variances on pricing - PC World will have to [vary prices] to be sharp on Tottenham Court Road," he adds.

So if Snadden's right - and, as Turner points out, PC World isn't in the business of haggling - a question mark must hang over whether or not the store can be a success on one of the most fiercely competitive retailing streets in the country. Added to which, other industry commentators suggest TCR customers might simply use PC World as a showroom, before moving on to rival computer stores in search of a better deal.

"You might find [the TCR outlet] encourages people to look in PC World and then buy further down the street. So it might not have a totally negative effect on other retailers there. Depending on what a person wants to spend, PC World positions the product in a different way. The other retailers might be able to say: 'See what it can offer you for two grand, then come back here and I'll show what we can do'. That seems to work quite well. If I was going to buy something on TCR, I'd be thinking I'll get a better deal somewhere else along the street because of the kind of things PC World buy in," says John Turner, business manager of PCs and monitors at Midwich.

Twohig echoes Turner's sentiments. "Perhaps a customer won't buy everything from PC World. Maybe he'd use the store as a price comparison to find out what 'big brand A' wants to sell the product for and then go and negotiate down the road," he argues.

Route to success
So TCR seems to offer PC World something of a double-edged sword in that if it didn't have a presence there, it would potentially be missing out on what is arguably the biggest computer buying hub in the UK - while its existence on the street could be more beneficial to its neighbouring rivals.

"PC World's approach will be to ask: 'Where are all the buyers?' It needs to be wherever the buyers are to hold its own with the best of them," says Snadden, adding that having a store on TCR is not necessarily a sure-fire winner. Much appears to rest on the demographic of buyer the street now attracts and whether they fit in with the PC World brand and its style of business.

Yet PC World is able to offer customers some extremely attractive price points which other TCR dealers may find difficult to beat. "You should consider that due to the volume it procures, PC World is able to [buy product relatively cheaply], which allows it to make margin while offering quite good retail prices," says Twohig.

He believes that in the wireless area and perhaps in terms of memory or CPUs, TCR's traditional businesses may be able to offer something better than PC World, but generally speaking, it's no longer the case that dealers there need be feared.

New kid on the block
So what about those traditional TCR dealers? How do they feel about Goliath coming to the street? There must have been some very anxious glances when PC World opened its doors there and judging by dealers' general reluctance to comment, it remains a delicate issue.

However, Asad Hussain, managing director of Procom Electronics, is upbeat about it. "We are more than happy that PC World has joined Tottenham Court Road, particularly as the street has taken a slightly different direction due to retail stores other than electronics outlets opening premises here," he says.

"Having a recognised name like PC World join Tottenham Court Road has many benefits. In particular, it will generate more business for all retailers on the street and hopefully help drive out the unprofessional retailers that currently exist," Hussain adds.

A spokesman for another TCR dealer is more cautionary, admitting that it could still go either way. "It depends on how PC World wants to go about it. If it's going to be sensible about pricing and is here to do business side by side [with traditional dealers] then I think it will benefit both parties. It will add new business and we can hopefully benefit from the throughput its marketing brings in. But at the end of the day, PC World is a fairly powerful beast," he argues.

While acknowledging the fact that it is possible to negotiate on price at PC World, the spokesman insists the company won't pull in the regular TCR customer and suggests it could be aiming for a slightly different type of buyer. "PC World has seen a market here that is flourishing and I think the road itself has changed
significantly over the years. It's becoming much more lifestyle oriented while retaining its traditional base."

More fuel, perhaps, to the theory that TCR is a different type of retail environment these days compared with years gone by. But the spokesman objects to the idea that PC World's presence raises the standards of the street or gives more credibility to the stores that have long been there. "I don't think it could compete in terms of a showroom. We're pretty proud of the way we present our products. So in that respect I don't think we necessarily need
PC World," he stresses.

London calling
What is clear about PC World's move to TCR is that it is by no means a mere symbolic gesture - the 21,500 sq ft store is one of the largest in its chain. And Turner rejects the notion that it has steered clear of the street in the past.

"It can take a very long time to get a property you want. In that area of London, we wouldn't want to open a store that wasn't large, you need at least 20,000 sq ft - and there are not many premises like that on the market at the right rental. So it was just about waiting for the right deal to come along. We signed the deal about a year ago. If it had come along earlier, we would have opened earlier. Very often there are lead times involved in getting the right store and we can't work any faster," he insists.

PC World has also been extremely quick on its feet in terms of marketing the TCR store, rolling out a number of advertising campaigns during the launch phase that it wouldn't usually be associated with, distributing leaflets outside local tube stations and buying a Capital Radio promotion.

Turner claims the bottom line with the TCR store opening is purely the captive audience of computer buyers on the street - a very large student body (with the likes of University College London located nearby) and a healthy population of business purchasers. "What we saw was a catchment for a PC World store. We're not there because of [other retailers on TCR]. We're there because the location makes a lot of sense to us," he says.

Turner adds that PC World is on the lookout for more sites like TCR in other large UK cities. It's interesting to note that the company has a City store in Moorgate which does well with business sales - and Turner claims the same pattern is emerging at the TCR store. Laptop sales are also doing well in London, perhaps proving Turner's point regarding the student populous.

David versus Goliath
PC World opening on TCR represents the classic scenario of a big cheese taking on the little man - Starbucks versus the local coffee shop. "It's like sending Goliath into the lion's den because PC World is a giant of an organisation going into the hotbed of the best technology deals you can get on Tottenham Court Road," Snadden claims.

So who will win, or can traditional dealers and Goliath co-exist quite happily? The worry for the smaller independents has to be the sheer size and strength of companies such as Dixons and PC World. "Dixons is a very strong and powerful organisation. It is not afraid to take on any competition and is big enough to handle itself in practically anyone's company. It rarely fails at things - its proposition, brand appeal and pricing is strong. [Dixons and PC World] absolutely need to be able to compete on Tottenham Court Road and once they have proven they can, there are other major urban centres that they need to go and compete in," Twohig argues.

He also suggests the cut-throat image of TCR has been overplayed and the way the computer industry has evolved means PC World can adapt to life on the street. "I think people have built a picture up of the competitive nature of that road and the families on it. It's also true that the IT world has matured somewhat. The home users and small businesses are more knowledgeable and need slightly less handholding and slightly more availability at a better price," he says.

So what it really comes down to is how good PC World's proposition is, irrespective of how good everybody else's is. Ultimately, if a retailer offers customers good service, a good product range and aggressive prices, there's no reason why it shouldn't be successful anywhere. Whether TCR haggling is more a reflection of the past remains a moot point. But the street definitely remains the place where people who know what they want go to get it. It's the domain of the self-confident buyer.

It's too early to say how successful PC World will be on TCR, but given the large catchment, there is no reason to suggest it can't grab itself a decent chunk of this market. Will it be enough?

Let battle commence!

Read more on IT for small and medium-sized enterprises (SME)