Delphi Expands SkyFi Distribution Market Looks To Expand Awareness

By Amy Gilroy On Feb 24 2003 - 8:00am

Delphi is broadening shipments of its XM SkyFi unit over the next few weeks to most leading retailers, creating mass distribution for the No. 1 selling satellite-radio product.

Until now, the SkyFi has only been available through Best Buy, Circuit City, Crutchfield, Tweeter and Ultimate Electronics. Since November, Delphi has sold over 100,000 units and continues to move product as fast as it can produce it, said a spokeswoman.

Seattle-based Car Toys and Al & Ed's Autosound, Monterey, Calif., expect shipments shortly. "We think it will create a spike [in sales]," John Haynes, Al & Ed's merchandise manager, said. "One of the disadvantages of the original XM products, except for Sony's, was the lack of portability and the fact that the customers had to carry more than one account for multiple units."

Crutchfield said the Delphi unit was its single best-selling satellite radio tuner for January, noting that home-to-car and car-to-car transportability is a key selling point.

"I've been in the consumer electronics business for 30 years and this is the hottest product I've ever seen," Delphi national sales manager Bob Kustasz said.

Delphi said it will introduce a marine kit for the product, possibly in the second quarter, which it expects to be popular because boats are unable to receive FM reception past 15 miles offshore, Kustasz said. He cited letters received from ship captains claiming to receive XM reception 1,000 miles offshore.

Kustasz would not release the number of SkyFi 'boom-box adapters' sold, but said they were also "very, very successful." He said even 12-volt retailers will carry the boom box.

It's been over a year since satellite radio was launched and it has become the fastest emerging consumer electronics product ever. Retailers say they are happy with both the XM and Sirius satellite radio services but that consumer awareness is still minimal, typical for a new technology.

Sales results still vary widely among retailers, although most say that satellite radio sales are climbing in general.

Audio Express, Scottsdale, Ariz., said its sales increase by 5 percent to 10 percent every month. Al & Ed's reported about 80 to 100 activations in 35 stores in January, selling XM exclusively. Sound FX, W. Warwick, R.I., said it sold between 25 and 30 units in two stores over the holiday season, while Music Systems, El Paso, Texas, sold 700 XM subscriptions for the year in two stores.

Crutchfield said sales were up 200 percent over last Christmas in satellite radio, with XM outselling Sirius 3-to-1. Car Toys has set a goal to sell one unit per store per day, with senior merchandising VP Jim Warren noting, "We think we'll be there shortly."

Several smaller retailers, however, reported selling only a few units, even over the holiday season because of low consumer awareness.

Most retailers said they simply push whichever service corresponds to the brands they carry. Several stores, including Best Buy, cited Kenwood's recent promotion, offering a free Sirius tuner, as helping to boost Sirius activations.

Said Best Buy senior buyer Mike Manske, "The Kenwood promotion is increasing Sirius' share but we believe it's incremental business because XM is on plan."

Car Toys' Warren said, "With the strength of the Sirius [Kenwood free tuner] offer, Sirius is now outselling XM 3-to-2.

Freeman's Car Stereo, Charlotte, N.C., however, said its sales are running 6-to-1 for XM. "We're starting to get people coming in off of other people we've sold to," said David Richardson, VP and COO. "It's like anything new. Once it gets out there, it starts to build."

"From our standpoint, it doesn't matter if it's XM or Sirius. The customer is happy with both. The satisfaction rate is extremely high," he added.

Retailers reported several strategies to counter low consumer awareness.

Music Systems said the key to its success is to "pitch everyone," said president Steve Hadaad. "Once the consumer gets it in the vehicle they are thrilled to death with it. If you stood in front of a movie theater and asked 20 people if they heard of XM or Sirius, 18 would say no. So if people come in for a remote control, we pitch XM radio," The two-store retailer also allocates part of its commissions from XM to advertising, he said. Although Music Systems sold 700 XM subscriptions last year, it only sold 12 Sirius subs, according to Hadaad, because it only began selling the Audiovox Sirius model in October.

Al & Ed's Haynes said awareness must also be raised at the floor level. The company is implementing a training plan for 2003, which will include more spiffs and incentives for salespeople. "We think it's an interesting category and want to present it properly. It's a product that must be presented to the consumer."

From a longer-term perspective, analysts and retailers say the services will achieve greater stability once they gain penetration in the OEM market. Ryan Jones, an analyst for the research firm The Yankee Group, Boston, said the latest round of financing achieved by both XM and Sirius, "is certainly a step in the right direction. The time when we will be able to say it's a safe bet is when there's significant penetration by the automakers. XM is well on its way with GM. But the automakers will make or break this."

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