Computer and Software Stores
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Industry Overview
The US computer and software store (computer store) industry includes about 10,000 stores with combined annual revenue of almost $20 billion. No major companies dominate the industry, which includes video game stores.
Competitive Landscape
Business growth, personal income, and technological innovation drive demand. The profitability of individual companies depends on effective merchandising, competitive pricing, and reliable service. Large companies have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by serving a local market, offering unique products, or providing superior customer service.
The primary competitors for computer stores are consumer electronics stores and Internet and catalog retailers. Computer stores also compete with office supply stores, computer and peripheral manufacturers and distributors, value-added resellers, mass merchandisers, and warehouse clubs.
Products, Operations & Technology
Major products sold by computer stores are computers and peripherals (65 percent of revenue); software (20 percent); parts, repair, and installation services (7 percent); and video recorders, cameras, and electronic game devices (5 percent). Other products include audio equipment, office equipment, and used or refurbished equipment. Companies may also offer technical support and training classes. Some retailers custom-build PC systems.
The industry consists mainly of national and regional chains, along with independent retailers. Both chains and independent retailers may offer a “superstore” format, which can exceed 25,000 square feet. Specialized computer retailers, like video game stores, can range between 1,200 and 1,600 square feet. Computer stores are typically located in high traffic areas within strip malls or indoor shopping malls. As an alternative approach to retailing, Dell Direct stores allow customers to try products and place orders online with the help of a technical salesperson.
Companies may display demonstration merchandise that allows customers to experience products before purchase. Video game stores typically have interactive game stations that feature the latest hardware and games.
While large companies may buy directly from manufacturers, small companies typically rely on distributors. Computer retailers may use distributors, like Ingram Micro or Techdata, to ship products directly to customers. Some retailers are authorized dealers for certain products, and may perform repair or warranty work on behalf of manufacturers.
Inventory size and selection can vary greatly. A computer superstore can offer a wide variety of products and may have as many as 20,000 stock-keeping units (SKUs) in-store, with even more items available through catalogs or online. A video game store may offer between 3,000 and 5,000 products, including a selection of used products. Large retailers may offer private-label products, like computers or accessories. To reduce the risk of inventory obsolescence due to advancing technology and price changes, most large retailers protect themselves by carefully monitoring product movement and taking advantage of limited price protection and return policies offered by manufacturers.
In the video game segment, demand for new titles or hardware systems can exceed supply. New products generate the greatest percentage of sales in the first few days or weeks of release. As a result, video game retailers strive to be first-to-market with new releases. Large retailers typically have highly efficient distribution systems to coordinate product introductions, and tend to receive a disproportionate share of allocations for new items. Retailers may allow customers to place advance orders for big releases to better gauge demand and ensure adequate supply.
Many companies use integrated computer systems to link point of sale (POS); inventory; distribution; and financial systems. Large retailers may have proprietary inventory management systems. Integrating POS and inventory allows for automatic replenishment. Traffic-counting technology helps compare store performance to store traffic.
