Report: Vendor Retailers Facing Risks

Oyster Bay, N.Y. — As vendor-operated retail stores continue to expand their ranks, market research firm ABI Research is warning that the strategy could disrupt traditional CE retail channels and backfire for manufacturers.

“OEM storefronts and kiosks represent a major change that will disrupt the current retail ecosystem,” said ABI's research director Vamsi Sistla. “Bypassing their existing distributors and retailers could prove successful for some, but might present challenges for others.”

CE manufacturers who maintain their own retail presence include Apple, Bang & Olufsen, Bose, Dell, Sony and, more recently, Nokia and Pioneer. ABI acknowledges that OEM retail outlets provide retailers with an opportunity to control and protect their brands while providing a “more customized experience for shoppers than the major retail chains can.” However, the firm, based here, warns that there are some risks involved due to operational costs and the generally unpredictable nature of retail.

In particular, manufacturers risk vulnerability as related to their stock pricing because prices will now be determined according to brick-and-mortar performance instead of its traditional base on the general success of products (something these manufacturers have already proven.)

“Anybody can make money when times are good,” Sistla noted, “but when economies contract, retailers are the first to be tested.”

ABI, based here, released its finding in a recent report titled “CE OEMs Launch Disruptive Retail Strategy: Their Own Storefronts.”