MERA's Knowledgefest Charts Multimedia Potential
By Amy Gilroy -- TWICE, 10/9/2000
DALLAS -- Knowledgefest 2000, sponsored by the Mobile Electronics Retailers Association (MERA), convened here Sept. 24-26 to provide a welcome forum at a time when so many new technologies are about to converge in the automobile, said industry members.
Multimedia was a key topic at Knowledgefest, along with SDAR, e-commerce, profitability, and the emerging Gen Y market.
At the opening panel on "Where is the Industry Headed," NPD Intelect, Port Washington, N.Y., stated that mobile multimedia is now 3.5 percent of the 12-volt specialists' business, hitting $42.8 million industrywide. About half of that business is performed by the specialist.
Audiovox and Alpine have taken the biggest slice of the multimedia pie, said NPD, which placed Audiovox in the lead in unit share at 33.6 percent, followed closely by Alpine at 33 percent. Alpine took the lead in dollar share at 45.5 percent, followed by Audiovox at 21 percent.
Overall, there is still good growth in the traditional car audio segments, said Jim Hirschberg, NPD director of consumer electronics research. Multimedia, however, will be a key breadwinner, because much of that growth is in less-than-$100 CD players.
Another growth area this year, said Hirschberg, is in $300-plus head units, including the "disappearing face" type such as Sony's ABP, Kenwood's MASK and JVC's El Kameleon.
Multimedia is the key to the future of the industry for several reasons, said Alpine VP marketing Steve Witt. "I believe firmly that DVD will change everything in the car," he said, "because it brings together information and video and audio in one format, a format that has caught the attention of the American public. So everything will shift to one format."
Witt also mentioned that handheld products (MP3 players, PDAs and cellular phones) are now growing at a faster rate than any of the CE categories, and manufacturers will have to look for opportunities to dock these products in the car. In addition, he said, the industry must learn to adjust to a faster speed of introduction for new technology.
"Once SDAR comes into cars, for the first time everything can be fully digitized, and on the info side, we'll have wireless digital for both voice and data," said Witt. "That means the speed of adoption of new technology is going to be very fast-paced and will become critical to our industry.
"And that includes retailers and their abilities to adapt their marketing strategies and to instruct salesmen quickly. Because if they don't, they will not be able to address these new customer desires, and they will miss the opportunity in some of these new technologies to sell services.
"There will be a strong potential for revenue streams other than from pure hardware, such as through selling SDAR service and video-on-demand to the car, as well as information services, and even Bluetooth downloads at gas stations."
E-commerce: The topic of the Internet broke out in a lively discussion as Mark Bruno of Lightning Audio encouraged retailers to take an "informational" presence on the Web.
Consumers are increasingly surfing the Internet, and retailers will want their store known, Bruno said. However, he and Alpine's Witt reiterated their policies of restricting Web sales, which gave rise to numerous retailer complaints from the audience.
Bob Fields, VP/chief operating officer of MobileToys.com, told retailers to sell products on the Internet while advising them that "e-commerce is OK, as long as the products are delivered and installed in your store, because with mobile, it has to be interfaced with the vehicle."
Expand with the import car market: In a separate seminar, Witt spoke on a key opportunity for dealers to expand their market, namely through the import and performance compact car market. While retailers tend to focus on the car audio enthusiast, the import car buyer demographic is a young male who spends a lot of money on his car.
"All the data says these guys are ready to buy mobile electronics," said Witt. "It's one of the top four or five things they want to do. And since Honda is the biggest part of that market, the retailer can say, 'I'll go hook up the Honda dealer to get a display in his store and cross-promote,' instead of standing in the parking lot on Saturday and doing another soundoff contest where you get the same 200 people."
Witt presented research showing that import car enthusiasts tend to fall in the 16- to 25-year-old group, 81 percent are male, and nearly 43 percent have spent upward of $1,000 to modify their cars.
Thirty four percent have spent $1,000-$3,000 to modify their cars, and close to 50 percent say they are planning to spend $1,000-$3,000 this year on their car. In addition, 30 percent say they have already purchased car audio and electronics for their cars, and 27 percent said they plan to.
"The industry hasn't marketed to them because we focus on the mobile electronics enthusiast," the Alpine exec said. "For this customer, their top interest is the car, but by this research, they love to personalize their car and spend a lot of money on it. And they've actually said, through research, they want mobile electronics in their cars."
Figures he presented reveal that the import car market is rapidly growing -- reaching $252 million in manufacturer sales in 1999, up from $100 million in 1997 -- and the number of magazines covering this market tripled between 1996 and 1999.
For this demographic, Honda is the preferred car, with the Civic ranking No. 1 (owned by 20 percent), followed by the Accord at 9 percent. Other top-ranked car models include the Integra at 8.5 percent; CRX at 3.3 percent; Eclipse, 3.3 percent; Prelude, 2.6 percent; RX-7, 1.7 percent; Corolla, 1.2 percent; Probe, 1.1 percent; and Mustang, 1.1 percent.
According to the Alpine study, most car enthusiasts purchased their vehicles used, which allows more of their available income to be spent on personalization.
Profitability in speakers: Another forum at Knowledgefest was on profitability. Mike Cofield, chairman of MERA and president of Custom Sounds, Austin, Texas, spoke on the topic, "Make More Money By Positioning High-End Speakers."
Cofield explained the art of making a high-margin speaker become a high-volume cash cow.
In a nutshell, retailers should generally offer a single speaker per category -- setting up categories such as 6-inch speaker with tweeter, 4-inch speaker with tweeter, 6 x 9 full range, 4 x 7 full range, etc.
Under this system, the broadly distributed products tend to occupy the lower price ranges, and the high-margin speakers occupy the higher price points. To get better velocity in the high margins, Cofield suggests selecting SKUs that occupy commodity positions and adding high-margin speakers.
"If your No. 1 seller is a 6-inch coaxial that retails for $99," he explained, "you might want to find a product that has exceptionally high margins for $119 or $129 so you can give the customers a high-quality alternative for a very small difference in price -- and which allows you to make high margins. Then you can do high volumes on a high-margin product.
"You should constantly be striving to move your No. 1 margin opportunity to your No. 1 volume position."
Cofield said this tactic has worked "exceptionally well for Custom Sounds with Focal and Boston Acoustics." In addition, he said, "If you do a good job of positioning these high-margin select-distribution speaker brands, then you can control the market in your territory. You'll have a sought-after product that people can buy from your store only."
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