Online retail giants like Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY) have encroached on the retail stores market. According to Forrester Research, U.S. online sales are expected to reach $248.7 billion in 2014 and grow at a compound annual growth rate of 10% over the next few years. In such a scenario, retail stores are attempting to adjust their strategies by developing their major segments and expanding their existing business online as well as offline. Here is the discussion of three retail stores which have adopted the above strategies to remain competitive in the market. Will it be enough to drive growth?
Credit facility and stores expansion to drive growth
CONN’S, Inc. (NASDAQ:CONN) offers an in-house credit service, with this being the primary revenue-generating segment. This service differentiates CONN’S, Inc. (NASDAQ:CONN) from other brick-and-mortar retailers, as it offers credit to those customers who have comparatively low credit worthiness. In the last fiscal year, this financing accounted for 71% of its sales. This helped it to drive customer loyalty with around 70% of Conns’ credit customers being retained customers.
This credit is offered to those customers who have low FICO scores, a measurement of an individual’s credit worthiness. Scores range between 350 – 850, and a score above 750 is considered “excellent.” CONN’S, Inc. (NASDAQ:CONN) has more than 60 million customers with low FICO scores of around 550. The credit service segment’s revenue grew by $22 million year-over-year to $149 million in 2012.
Over the past few years, CONN’S, Inc. (NASDAQ:CONN) saw decline in its consumer electronics segment with sales decreasing from 35.1% in 2011 to 30% in 2012. This was due to the entry of online retailers into this sector. To offset this, Conns is pushing forward its furniture and mattress segment. It is expanding the floor space available to furniture and mattresses, as well as opening new stores. Its new enlarged stores offer 35,000 square feet of floor space, increasing from its historical 25,000 square feet. For the 2014 fiscal year, CONN’S, Inc. (NASDAQ:CONN) expects its stores to grow at 11%, with the addition of 12 stores
Growth strategies in major segments
Microsoft Corporation (NASDAQ:MSFT)’s recent announcement concerning the Xbox One came as positive news for GameStop Corp. (NYSE:GME). An Internet connection will be required for the initial setup. Once this process is over, gamers can play games offline without the need of Internet connection again. Additionally, Xbox One games can be bought, sold, or lent without any restriction.
This announcement was a positive one for GameStop Corp. (NYSE:GME), as the company is emerging as an exchange store for video games. In a GameStop store, customers can sell their old video games for cash or points. These points can be used to buy new or used video games. Xbox One is expected to sell around 300 million units over the next ten years. Stemming from Xbox One sales, GameStop Corp. (NYSE:GME) expects its used video games segment revenue to increase from $573 million in the first quarter to $650 million in fourth quarter of 2013.