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IN THIS ISSUE
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UPCOMING EVENTS
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| Who will dominate the 3-D TV market this year? Vote and view live poll results |
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Recent Poll: 63% think suppliers to seek new markets overseas to offset retail consolidation. See full results below. |
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The Evolution of Consumer Electronics Retailing
There is some very interesting re-positioning going on in consumer electronics retailing. Here are two stories we’ve come across recently:
First, we find that Walmart is going to be selling 3-D televisions this holiday season. This is of interest because Walmart has traditionally not entered categories that are not mature – leaving specialty stores to develop a market and then coming in to sell to the masses.
This may be in line with Walmart’s recent effort to increase its margins – which has run into problems (as we discussed here a few weeks ago) because it undercut their image as the low-price leader. Innovative products, of course, generally carry better margins, without suffering the price-comparison problems involved in trying to sell commodities at a few cents more than Target or Kroger.
However, there are other problems related to selling new products – problems with which Walmart may not have experience:
Bob Perry, senior vice president of Panasonic Consumer Electronics, said in an interview earlier this month that it's unlikely that mass merchants such as Walmart will carry the 3-D TV this year because of the education needed for the technology. |
Is Walmart going to hire salespeople capable of explaining the new technology and the differences between brands and features? Are they prepared to build a market for a new technology (which will take time, since there’s little programming available in 3-D) rather than to exploit an existing market? This is new ground for Walmart.
Meanwhile Best Buy is looking to go into the consulting business – selling advice on increasingly-complex CE products.
"We do not believe that our store fully reflects all the things that customers can do today. And we believe that there is a huge opportunity to re-engineer that," Brian Dunn, chief executive, told investors as the company reported earnings yesterday. The shift reflects the growing demand from consumers for guidance on connecting their households to the internet, as well as the retailer's need to offset the continuing commoditization of core goods such as flat-screen TVs and computers. Mr. Dunn said the retailer would redesign its stores around offering advice on issues such as competing digital media download systems, and how to connect a television to internet services such as Skype. |
While Walmart moves onto Best Buy’s turf, Best Buy re-positions themselves. I honestly don’t know how either move will work out. For our exit question, let’s just deal with the Walmart move: Who will dominate the 3-D TV market this year?
Sears and Kmart: Their Fifth Wedding Anniversary
Five years after the merger of Sears and Kmart, things have not worked out as planned, nor as analysts expected.
The company has shrunk – though the number of stores has increased, the new units are smaller – and sales and profits are down (though the fact that the company has been profitable at all through the recession is no small feat). Kmart stores were to be converted in Sears Essentials, but that didn’t work out.
Analysts at the time of the merger thought it might be a real estate play, placing an estimated value of $22 billion on the property. However accurate that guess might have been, Eddie Lampert didn’t sell off the real estate, and now he probably couldn’t if he wanted to.
It’s interesting that, five years on, we still have so little understanding of where Sears/Kmart is headed, or if it is headed in the right direction.
Recent Poll
We discussed the difficulties faced by suppliers who have dwindling numbers of customers, and asked how they ought to deal with the problem: “What is the best way for suppliers to react to retail consolidation?”
- 63% Become more global – to have additional markets and customers
- 16% Nurture smaller customers
- 13% Open their own retail outlets / Sell direct on the Internet
- 4% Merge – to be one of the two or three survivors in their category
- 3% Other
Our respondents think globalization is the best option – that by reaching out to new markets, the suppliers will expand their customer base. I like the idea of nurturing smaller customer and helping them grow, but I think globalization offers the quickest and surest return, and that ‘all of the above’ (or at least some combination of the options) may be the best approach.
Online
There has been a lot going on since last we discussed online promotion and retailing, so we’ll just cover the various developments quickly.
Financial Times tells us that luxury marketers are finally getting into online retailing. We mentioned a few weeks ago that many of them had reservations, primarily because of the dangers of price comparisons and customer service – recreating the luxury shopping environment online. Regardless, some may feel they have no choice:
Last week, Richemont, the Swiss watch and jewellery group that owns Cartier, Van Cleef & Arpels and Montblanc, entered into an agreement to acquire online retailer Net-a-Porter , valuing the UK-based company at £350m. In doing so, it became the first leading luxury conglomerate to purchase a multi-brand virtual store, taking the industry's involvement with the web to a new level. Richemont has in the past had a relatively low profile online and has been wary of confusing the exclusivity of its high-end jewellery brands with the more democratic and public nature of the internet. |
According to Bain & Co., the online luxury market grew 20% last year, to reach $4.9b.
Others, however, continue to have doubts. Hunter Douglas, a supplier of designer window treatments, is discontinuing online sales.
“We believe the American consumer is best served by purchasing from well-trained and fully merchandised dealers who understand, appreciate and recommend our custom products and will consistently provide professional service and full support to their customers, to assure thoroughly satisfying experiences with Hunter Douglas brand products,” says the letter signed by Marvin B. Hopkins, president and CEO of Hunter Douglas Inc., the U.S. arm of Netherlands-based Hunter Douglas N.V. |
Differing perspectives: while I’m sympathetic to the views of H-D (I did some work for them years ago), and understand the need to protect their core base of dealers, I wonder if a no-online policy is sustainable today. We’ll see.
Walmart is trying to increase its share of online sales. Last year the company had sales of $1.7b online – an impressive number, unless you compare it to Amazon’s $19.2b. Walmart is only #13 online, behind the sites of a number of other bricks & mortar retailers.
Walmart is posting a number of job openings for its online operations, with one of the qualifications perhaps giving a clue as to where they see their opportunities: “Fluency in one or more of the following languages - Mandarin, Cantonese, Japanese, Portuguese, Spanish, Hindi and French - is a plus ...”
Direct Mail
A lot of attention has been paid (here and elsewhere) to the problems of the US Postal Service, and their proposed cutbacks in service, and how that might affect direct marketers. Urban Outfitters is one retailer that doesn’t seem concerned.
If print direct marketing is dead, someone forgot to tell apparel marketer Urban Outfitter. The company is planning on boosting its catalog circulation during this calendar year. Take its Anthropologie brand, which circulated 17.4 million books during fiscal 2010, which ended on Jan. 31. That’ll jump to 18.4 million in 2010. Its flagship Urban Outfitters line, which put out 12.1 million catalogs in fiscal 2010, will increase that run to 13.2 million in fiscal 2011. And its Free People line, which distributed 7.4 million catalogs, plans to release 8.2 million copies. |
Walmart Pricing
A few weeks ago (and in the article above), we discussed the problem Walmart is having with reconciling its push for higher margins with its lowest-cost positioning. As we mentioned then, they are cutting prices to try to get back on track, and this graph may explain why:
"We felt we needed to increase the intensity and excitement with our customer, especially the feeling that Walmart has great deals," Chief Marketing Officer Stephen Quinn said in an interview Thursday. Walmart is publicizing its price cuts with a barrage of placards in the aisles of its 3,700 U.S. stores and a media campaign describing how the company's cost-cutting moves, such as combining shipments so its trucks carry full loads, translate into savings for consumers. Mr. Quinn said Walmart expects to expand the number of price cuts in coming months with help from suppliers. Walmart is encouraging them to reduce what they charge the chain in exchange for having it spotlight their products as part of its price "rollback." "It forces them to sharpen their pencils a little bit and see what they can do to be a part of this," Mr. Quinn said. "Obviously they are competing with each other to get space and visibility at Walmart" |
I imagine the last sentence got through loud and clear to our readers.
But some people think the new ‘rollbacks’ are mostly for show, and that Walmart is no longer the price leader – at least to the degree it used to be.
"The gap on prices is nowhere near as wide as it once was, or as many consumers perceive it to be," said Wall Street Strategies analyst Brian Sozzi. "Walmart just markets its 'everyday low price' message at a superior level relative to rivals." In a note to investors on Monday, JPMorgan analyst Charles Grom echoed the sentiment, noting that the price advantage for an average shopping cart at Walmart compared with three traditional grocers has narrowed to 12 percent from 18.3 percent since April 2009. Aside from promotions at the end of the aisles, "it was somewhat difficult for us to discern what was a 'new rollback' versus what was already on sale and simply received updated signage," he said. "For example, while Walmart had already carried DVDs for $5, the new rollback was entitled "was $7.50, now $5.00." |
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At 100, Jantzen Stages a Fashion Splash
Jantzen is celebrating its 100th birthday with a series of promotions. I found this factoid interesting: “While the recession has cut into swimsuit purchasing, down roughly 5% last year, women's aversion to the whole bathing-suit shopping experience doesn't help. Women's Health, for example, reports that the average woman would actually prefer to have dental work done than shop for a new suit, and that 22% prefer just to wear shorts and T-shirt and skip the ordeal entirely.” Anyway, Happy Birthday, Jantzen.
MediaPost, 5 April 2010
Ace Hardware to DIYers: Think Outside the Big Box
Ace is trying to reposition itself as the place to go for all the small jobs that take up so much of a homeowner’s time, and ceding the big jobs (e.g., building a deck) to Home Depot and Lowes. New ads and marketing materials “center around the theme that fixing up your house should be a quick and painless process and that Ace is the down-the-block hardware store for small jobs.” Not a bad idea, since there’s probably more spent, collectively, on all those little jobs than the few big ones.
Brandweek, 4 April 2010
RadioShack Exploring Sale and Share Buyback Options
RadioShack is looking into several options, according to this report, including the oft-mooted possibility of being bought by Best Buy. The company, though, also has cash ($900mil) and may be interested in simply buying its own shares or acquiring somebody else.
New York Post, 26 March 2010
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New York
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AT&T
Bedminster, NJ
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