Blurring Lines
By Steve Smith -- TWICE, 8/24/2009
Sony and Best Buy announced last week that they have co-developed (my emphasis) a line of wireless audio products under the Altus brand.
The line will be sold at Sony Style stores, 700 Best Buy locations and — Sony retailers. (See p. 10.)
So get your head around this: Sony, a leading CE manufacturer that is also a retailer (and an entertainment industry giant), partners with a major customer, Best Buy, the No. 1 CE retailer in the U.S. and a supplier of its own in-house brands that compete with Sony. And Sony will offer Altus to its retail customers — which, in effect, they compete against on a certain level — and Best Buy, which competes against everyone.
Sony designed a line specifically for Target Stores and had special products for Walmart in the past, but nothing like this.
When our executive editor Greg Tarr spoke with Mike Fasulo, Sony's executive VP and chief marketing officer, last week and asked a logical question — Who would carry a brand developed by Best Buy, considered the “enemy” by many? — Fasulo diplomatically pointed out, “I'm not sure they would say that Best Buy is their enemy. I would hope they wouldn't.” (See p. 1.)
He later volunteered, “We had this similar phenomenon when I launched Sony Style Stores, and people asked, 'Why are you competing with your retailers?' We are not. We are giving the customers a demonstration that the retailers, because of the cost, can't do.”
I remember when Sony revealed its retail plans in the early 1990s. CE retailers nationwide reacted as if they were going to march to its old Park Ridge, N.J. headquarters with torches and pitchforks and attack the building. (P.S. Other major brands were “outraged” and fell over themselves to complain in the media ... and provide gasoline for those torches.)
But now we're in the 21st century, the digital age, where via the Web everyone can compete against everyone else. When Sony began to increase its Sony Style store locations there was hardly a peep from anyone in the industry. Few manufacturers complained, on or off the record, about Best Buy and others coming up with house brands that compete against their products.
In an industry where Apple has its own stores, Amazon.com introduces Kindle, and manufacturers, large and small, sell products in varying degrees online, to name a few examples, the line between major suppliers and retailers continues to blur.
Ever since the demise of Circuit City, there has been rumblings — really wishful thinking — from other major manufacturers about opening up stores of their own so they would have some control of their products at retail.
This partnership between these two iconic CE brands — Sony and Best Buy — blurs the lines between supplier and retailer, but that's inside industry stuff.
If consumers like the products and Altus becomes a hit, it will be considered ingenious. If not, the deal will be an intriguing industry footnote.
I'll be very curious to see how many Sony retailers will step up early on and carry the Altus line. Unlike Mike Fasulo I think there are enough old-school retailers out there that will — at least initially — resist carrying a line that will send cash to their major competitor — Best Buy. Of course, if Altus is a hit, all bets are off and retailers will clamor for the new line.
It will be interesting to watch how this innovative partnership evolves during the fourth quarter and beyond, and if it is accepted by consumers and the industry.
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