PNDs Pose Dilemma For Specialists

By Amy Gilroy On Mar 12 2007 - 6:00am

Car stereo specialists are faced with a challenge in merchandising one of the hottest growth products in mobile electronics — personal navigation devices (PNDs).

They can beef up the category and cash in on the 50 percent growth expected in PNDs this year, but they will find themselves competing head on with big-box retailers who have become the destination stores for PNDs.

Many of the larger PND brands, such as Garmin, require smaller retailers to purchase through distribution, which puts the specialist at an even greater disadvantage.

About half the specialists polled by TWICE say they are trying to find a profitable way to capture more PND sales, and for some, this is a front-and-center issue.

Custom Sounds, based in Austin, Texas, currently carries Alpine and will be adding Garmin this year. President Mike Cofield is well aware of the pitfalls. "Because you can only obtain the product via distribution, the margins are less than acceptable and since customers don't traditionally think of 12-volt car audio stores as a place to get portable devices, there's a struggle on how you make customers aware in an economical fashion. Since the margin is so short, one has less money to promote the category."

Custom Sounds' strategy is to bundle several categories together that appeal to an older demographic and then promote them on TV. The bundle will include GPS, both fixed and portable, window tinting, Bluetooth and rear-seat entertainment. "TV is new for us," said Cofield. "We'll advertise on CNBC, Fox News channel, which are venues "that would not be our normal demographic." The company is adding to its promotional budget to do this and decided to go ahead with the plan in January.

Vicky Scrivner, co-owner of Sante Fe Auto Sound, Overland Park, Kan., said, "It's true there's not a lot of profit in this category. What we retailers need to do with it is use it to build traffic. It's the same as satellite radio. Yeah, you are not going to make much profit, but you want to sell your traditional car audio while you've got them in there."

Les Ore, Discount Auto Sound, currently carries Lowrance and will pick up Harman Kardon. Acknowledging the "GPS dilemma," president Les Ore said, "We're working on it. We're looking at changing some of our advertising, moving from print to more direct mail, radio and looking at TV."

Suppliers say the GPS dilemma is part of a larger challenge faced by specialists. Many of the popular products in consumer electronics are now low-margin portables and/or products that are outside the core car audio mix.

To tackle GPS profitably, suppliers recommend carrying the alternative brands with higher margins. While the big name brands — Garmin, TomTom and Magellan — own 85 percent of the mobile navigation market combined, "even 10 percent of the market is better than nothing," said Harman Kardon brand marketing director Chris Dragon. Harman is about to begin shipping this month its Guide+Play GPS-500 with a 4-inch screen and a built-in upscale media player at $499.

Dragon claims that retailers should not carry PNDs to compete with the mass merchants, but to get the most out of current store traffic. "If a guy comes in and gets a remote start and sees the retailer sells portable navigation, he might be inclined to come back and say, 'I see you have PNDs.' The retailer instantly benefits from his own floor traffic by offering the product."

Alpine said the category is so hot that if retailers just put up a banner saying, "We sell portable navigation" they will get some store traffic. For that reason, Alpine supplied a 10-foot banner to its retailers in December.

"For the last three or four years there's been a decline in traditional categories and the retailers are feeling it. The new categories are non-traditional like affordable navigation. Those are the areas of growth so it's clear the business is changing and they need to change with it," said an Alpine spokesman. He recommends carrying at least two brands, setting up a kiosk or freestanding display (and not putting PNDs in a display wall with other equipment) and promoting through Yahoo! Local and customer mailing lists.

Sound FX owner Steve Madeiros already carries two brands and said he's not expanding. "The price erodes so quickly that you can get stuck with the product," he said, adding, "We need portables and we know this, so I've chosen to align myself with the Pioneers and Alpines where the price is a little more stable, and with Alpine they offer a way to add on sales to the product with their W200 or the flip-up radio."

Cobra said it offers a separate portable GPS package for specialists, which has more accessories than those provided to the big-box retailers. "It's different enough from Best Buy that customers don't just walk across the street and buy it for $100 less at Best Buy," said navigation director Dave Marsh. Specialists receive brackets for both permanent and semi-permanent installation, and the company is also adding a three-year warranty on the specialist models. An extended warranty can cost $80 to $120 value at a big-box retailer, he said.

Unit Volume Share
January 2007
Source: The NPD Group/Retail Tracking Service ©TWICE 2007

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