Another 'Dog Year' For CE

Panasonic's president/COO Andy Takani, in describing the voracious pace of the CE industry, said it best earlier this year. He told TWICE in our CES issue that CE is a "dog year" industry, one that packs seven years of changes into 12 months. Even though we are only in mid-November, 2003 may be considered in years to come one of the "doggiest" of dog years.

For instance, last November who would have predicted that Circuit City would drop its commissioned salesperson strategy? Or that the venerable Recoton Corp. would disappear, through an auction no less, and have its accessories business purchased by Thomson? And Audiovox getting Recoton's electronics business?

Who would have thought that Gateway would become a major supplier of plasma TVs? It was surprising enough that Carlos Slim Helu and his Mexico City-based Group Carso firm, which owns CompUSA, made a bid to take over Circuit City. Rebuffed with that potential deal, who would have thought he would bag Good Guys?

There were plenty more changes in the industry during 2003, too numerous to mention here, including plenty of executive movement. If your Rolodex or electronic card files are like mine, you must have spent more time than usual moving familiar names to new companies, or seeing experienced execs getting new responsibilities.

But changes announced in the past couple of weeks topped them all. Sony management warned everyone over the past few years that it had to become leaner and more aggressive in the marketplace. But last fall, would you have predicted that Sony would announce a $3.1 billion restructuring investment and the cutting of 20,000 jobs worldwide? (And how about Sony moving many of its most important U.S. CE operations out of Park Ridge, N.J., to California?) No one would have predicted last November that Thomson would merge its color TV and DVD businesses worldwide with Chinese manufacturing giant TCL. (Who would have thought last fall that Thomson would keep for itself, in its consumer portfolio, communications, digital audio and accessories products?)

Just four years ago, on the eve of the new millennium, the CE industry was preparing for the onslaught of two sea-changing events: the move to digital technology and the dot.com retailers' takeover of the CE business.

Today digital products now dominate the CE industry. Traditional retailers took a page from Web-only retailers and have added sales and education sites to their business models. Both developments have dramatically altered the CE industry.

During 1999 many of us may have ignored the trend that will have the most dramatic effect on CE for years to come — the emergence of Chinese-based manufacturers. As the Thomson / TCL deal shows only too well, Chinese manufacturers, whose main attribute used to be low-cost manufacturing, are now aspiring to become well-known cutting-edge CE brands in their own right.

As you may know, the Chinese customarily designate each New Year, on a rotating basis, with an animal that has a special social significance. This has been the year of the Sheep, while 2004 will be the year of the Monkey. I'm no expert in Chinese culture, but I can speak with some authority on the CE industry. I predict that the continued effects of digital technology, digital retailing and the impact of Chinese manufacturers will mean that the industry will experience another enormously significant "Dog Year" during 2004.