The business failure of Comet which lead to administration

The business failure of Comet

It has been well documented that a high number of large well-established and traditionally profitable businesses failed post credit crunch. Some such as Woolworths came as a surprise, whilst others had seen such a steady decline in sales and brand value over the years, it came as no surprise to economists when these businesses went into administration.

Comet is one such retailer, who over the years had seen sales double and its brand grow as a worthy competitor to all the dominating Dixons and Currys. Here are some reasons why it closed its doors after 77 years of being in business:

A competitive market

The margins on electrical products are thin. Latest products such as LED TVs commanded a premium when introduced and prices almost halve annually thereafter meaning retailers have to sell double the volume to keep up.

Savvy consumer behaviour

Comet, like all bricks and mortar retailers was a victim of show rooming – people visiting a brick and mortar retail location (which comes with much higher overheads) to touch and feel a product and then going online to buy it at a lower price.

New competitors

Comet was squeezed out by internet retailers and supermarkets encroaching on their territory. The former enjoyed much lower fixed costs; the latter had greater buying power and a loyal customer base who visited them frequently.

‘Must have’ products supplied direct

Innovations from the mid-noughties like 3D TV and Blu-Ray failed to piqué consumer interest. The products people wanted (tablets, EReaders and the early smartphones) were often bought direct: iPads from Apple, Kindles from Amazon, latest handsets from dedicated mobile phone shops such as Carphone Warehouse.

Low consumer confidence

Not only was there less cash around but people were reticent about big-ticket purchases. Fewer people were moving house – thus were not reappraising their white goods and electrical devices.

A dated retail estate

During its last few years, Comet’s stores were generally seen as grim, underinvested outlets on first-generation out-of-town retail parks: the sort that have a burger van in the car park rather than a Starbucks. Although this changed in the couple of years leading to its administration, it could still not compete with the bright modern space that other retailers and supermarkets who had invested heavily in stores cosmetics offered.

Not keeping up with direct competitors

A final point: Comet’s main competitor Dixons had invested vast sums of money on staff training. They realised the one thing bricks and mortar stores can do online retailers can’t is give face-to-face advice and guidance. The rollout of their ‘KnowHow’ programme is testament to this. Dixons was the main beneficiary of Comet’s demise.