Want to be a retailer? Don’t be a Dick Smith

DICK Smith is in big trouble, and we’re all part of the problem. Its ill fortune tells us something about shopping’s future.

DICK Smith is circling the drain.

The falling share price has cost early investors nearly 90 per cent of their money. Yesterday, shares fell 57 per cent to close at $0.28.

This week the electronics retailer’s chief executive officer announced that the inventory it is holding is worth $60 million less than it thought, revealing trading in November was “below expectations”.

He cast doubt over the chance of a good Christmas and abandoned the profit guidance of the company, which is a publicly listed company no longer owned by the Aussie businessman.

The result is bleak and it tells us something about the future of shopping.

I’m part of the problem. I just bought a mobile phone and I bought it online.

It made me realise — we don’t need shops for most items. If you know how something works, and what it’s like, going into a shop is just trouble you can avoid.

Dick Smith’s stores are its focus. The company has opened 70 new stores in the past three years, taking its total to 393. It does just 8 per cent of sales online (although that figure has doubled recently).

The company’s brand is all about convenient stores and staff with expertise. That means it pays a lot for real estate and wages.

But is that what we want? I can get expertise from online reviews and nothing is more convenient than buying online.

Dick Smith can also be more expensive than online retailers.

The stores offer the Apple iPhone 6s 64GB Silver for $1229. Kogan has it for $50 less.

Dick Smith sells the iPhone 6s 64GB for $1229.

Kogan is $50 cheaper.

That makes sense, because not having shopfronts should help online cost less. But one thing a shop should be able to offer is after-sales service.

Dick Smith seems to be heading in the other direction. It dumped its tagline “talk to the Techxperts” a few years back, and the whole setup seems to be from another era. On top of that, people think it’s expensive, and that hurts it.

The death of RadioShack in the US a year ago, with $1 billion in debt, should have been a warning sign. Radioshack went from being very geeky and selling electronics parts to being just another place to buy a mobile phone — a path Dick Smith also seems to be on.

JB HiFi is hanging on for now, but also moving into homewares. It’s a tough old dog that survived the end of the CD and will probably still exist in 100 years, selling something completely unrelated.

Like books and music, plane tickets and video games, electronics are just not that likely to be sold in shops in the future.

Slowly, the internet will probably take over more and more product categories. All it needs to do is increase our trust that the product will be right for us. That’s easy for mobile phones, harder with something like fresh fruit or a dress.

But the internet is really only just starting out. There may be ways to make us confident in the ripeness of a banana that haven’t been invented yet. There may be ways to make us realise what dress will fit and what won’t.

Anything that you can consume at home can be delivered and probably will be.

That will change our cities a lot. Shops that do remain will mainly be clever ones that sell you something — and a desirable place to consume the good at the same time — such as pubs, restaurants, cinemas, yoga studios, nail salons and gyms.

We might look back at the time when our high streets were full of stores — all piled high with goods — and think it was as quaint as having a blacksmith in each town.

Jason Murphy is an economist. He publishes the blog Thomas The Think Engine. Follow him on Twitter @jasemurphy.