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Taking a step back to examine 12-volt business during the first half of 2004, car A/V suppliers say the market is more price-competitive than ever.
The maturation of single-CD units continues to be a critical challenge. In addition, store traffic remains spotty; it's good some weeks and slow in others, said suppliers.
Overall, 2004 started off on an up note, according to some vendors. After double-digit monthly losses last year, sales picked up in December and held fairly steady during the first quarter this year, only to slow again in April and May, leaving the outlook for the second half wide open to speculation, according to many.
Some are hoping for slightly better sales than last year, while others say sales will be flat at best.
"I don't see any change in the second half. We're a little bit up from last year, but if you don't have new products to show, it's just brutal out there," said Hal Moulton, mobile electronics sales VP for JL Audio.
Kenwood's sales VP Keith Lehmann noted, "In the first half, dealers continued to have challenges with floor traffic. Promotional activity that worked ten years ago is less effective today. Gas prices have been a huge problem in some parts of the country. Many consumers are driving less and focusing attention on non-car-related activity such as gaming and the Internet."
Pioneer and Alpine cited single-CD pricing as the key market challenge this year. CD receivers represent nearly half of the industry revenue, according to NPD sales figures, and over 80 percent of single CD sales now take place at the entry level, according to Alpine's marketing VP Steve Witt.
"Increased price competition under $150 will drive volume," he said as suppliers try to match last year's dollar sales by increasing volume to compensate for lower prices. But more and more of the car CD sales will occur at mass merchants, rather than traditional 12-volt retailers, said Witt.
To stem the tide, suppliers are focusing on the growth areas of mobile video, satellite radio and navigation. Some are increasing promotions and beefing up dealer programs.
Alpine said it is embarking on its most aggressive promotion to date, focusing on its new iPod adapter. The campaign will target iPod users, attempting to broaden the appeal of mobile audio beyond the traditional 12-volt demographic, said the company. "This is the largest investment we've made [in advertising] in ten years," said Witt.
JL Audio is pushing a new volume incentive program which offers six, rather than four, rebates a year, said Moulton. "So the dealers have two more chances to get a rebate … We think business is going to be down. We need to see if we can help the small independent as much as possible. The past six months, we've been lucky. We're extremely happy with our business. But we really want to focus on the little guy and how they are going to sell through the product," Moulton said.
JL Audio is also adjusting its Christmas strategy this year, expanding on an online program that began last winter. "The customer can go online, pick out a package, e-mail it to the parents and we will absolutely get it to the dealer within three days, in time for Christmas. We have a menu of systems, so they can just say 'System 1.' We ship it free freight to the store so dealers can put a piece in stock in the store to show what they have, but they don't have to carry the inventory. The last thing they need is to load up and then find it's the wrong product. The first time we did it was last year. This year, we'll start earlier, in October," said Moulton.
Pioneer said it is focusing on the growth areas of A/V and navigation and is stepping up promotion. Marketing VP Mike Townsen said, "One of the initiatives we've had is to really support our dealers by giving more product and sales training and helping them do a better job of closing on the sales floor. We added a national sales trainer so now we have a total of six. We're also continuing a pretty large national advertising presence with our current Chronicles of Riddick campaign."2004 Mobile A/V Sales
|Car Stereo Speakers||$29.1||$36.6||$46.1||$38.2||$40.1|
|In-Dash CD Players||$51.6||$66.4||$78.1||$61.4||$65.5|
|Source: The NPD Group/NPD Techworld|
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.