Yes, we still need electronics stores

Virtual store reports $1.5 billion in real sales

I’ve been discovering new virtual worlds this fall. First, I fought off zombies at Sandbox VR, which was certainly one of my spookiest retail research trips.

• Check out our LinkedIn video about how Rosedale Center placed Sandbox VR in second floor space above the Potluck Food Hall.

Not long after that, my wife and I bought an Oculus Quest 2 after our nephew introduced us to the highly addictive game Beat Saber. 

James researches cyberspace.

The Oculus Quest 2 is made by Meta, the parent company of Facebook. Meta does not report sales figures for VR headsets, but the company did recently say that over $1.5 billion had been spent on apps and games in the Quest Store, a completely virtual shopping place. And many shoppers buy their VR gear online too. In fact, a large percentage of all electronics are now sold virtually. So, will there be a future need for brick-and-mortar electronics stores?

2020 saw an unprecedented moment in electronic sales

When the lockdowns first hit, electronics sales fell along with everything else nonessential. But that quickly changed. What followed was a two-year run of demand growth, fueled by the many new people working, schooling, and gaming from home. By April of 2021, YOY sales growth in electronics and appliance stores hit 133%. 

Best Buy – Annual Domestic Comparable Sales Growth

But as with many great booms, there was a hangover to follow. Since March of this year, sales have been trending down.

Monthly Electronics and Appliance Store Sales

Why the fall? Many believe we bought all the electronics we needed (and more!) during the pandemic. And inflation isn’t helping either. With rising prices on necessities like groceries and gas, shoppers have less money left over to spend on electronics and appliances.

Electronics chains ride the waves of change

This up and down of electronics demand is just a chapter in a longer story. Electronics retailers have known for over a decade that while physical stores will still be important, an online sales shift would mean they’ll need fewer stores overall. 

Best Buy Store Count

To this end, Best Buy has been slimming its fleet for over a decade, and GameStop dropped its store count from 7,276 to 4,573 between the end of FY 2017 and FY 2021.  Both chains are looking for that perfect fleet size that will meet the needs of the omnichannel shopper without oversaturating the market.

More Apple for the holidays

Unlike other electronics brands, Apple hasn’t seen a decline in sales. In fact, its sales were stronger than expected in the third quarter. And while the tech brand has carefully controlled the number and location of its stores, it appears there is demand for more. 

To meet that demand, Target recently announced that it will have launched 150 Apple store-in-stores in time for the holidays. They will feature double the Apple space and will be serviced by Apple-trained Target tech staff. 

Physical stores still earn their keep

In the near term, electronics inventories are high, which means deals for holiday shoppers as retailers use discounts to clear excess inventory. For the longer term, barring another unprecedented event, retail sales growth can return to its usual pattern: up or down just a little bit from month to month, with an overall slow growth trend.  

And while we may not need loads more electronics stores, the number we do have are still proving valuable as educational and fix-it centers for tech consumers in need; as showrooms for the latest tech; as last mile shipping hubs; and as click-and-collect destinations.  And for VR lovers, when that Meta Quest 3 is released sometime in 2023, physical stores like Best Buy and Gamestop will be the perfect places to give it a test drive.