Best Buy Bowing Private-Label Plasma, MP3 Players

By Alan Wolf -- TWICE, 7/11/2006

Minneapolis — Best Buy will fan the flat-panel fires this fall by introducing its first private-label plasma display.

The 42W-inch Insignia-branded HDTV will be HDMI compatible and will retail for about $1,500. The sets will begin appearing in stores by mid-August.

Best Buy will also offer three new LCD TVs next month under the Insignia brand, topping out with a 27-inch widescreen model.

Complementing the flat-panel array is an Insignia up-converting DVD player with 1,080i output via HDMI. The unit, in stores now, has a vertical form factor and retails for about $70.

Best Buy has also introduced a pair of Insignia MP3 flash players that support music and photos, and feature 1.2-inch color screens and FM radios. Price points are about $100 for the 1GB model and $130 for the 2GB player, which have also begun shipping.

Mike Vitelli, Best Buy’s CE and product management senior VP, believes sales of MP3 players “may have peaked at the $200 level, but hundreds of millions are ready to be sold at lower price points.”

Best Buy will also bow a new private-label line of A/V cable and accessories called Rocketfish. It joins the company’s four current house brands, which include the aforementioned Insignia (CE and PC products); Init (cases, bags and furniture); Geek Squad (PC accessories and software); and Dynex (computer peripherals, power and camcorder accessories).

Vitelli said the private-label programs allowed Best Buy to eliminate dozens of opportunistic off-brands while providing customers with good value and performance in the opening price-point tier, where “we try not to compete with our technology providers.”

But house brands also offer retailers richer margins. Banc of America Securities analyst David Strasser estimates that private labeling can add upwards of 1,200 basis points of margin to a product, and that private-label products could comprise as much as 25 percent of Best Buy’s sales within five years.

“The power of the brand has finally moved from vendor to manufacturer in the CE space,” Strasser observed. Indeed, other national chains with substantial private-label CE programs include Circuit City (Nexxtech), RadioShack (Accurian), Wal-Mart (ilo) and Target (TruTech).