Some Suppliers See Slowdown In FRS...

Staff On Jul 9 2001 - 6:00am




Despite the stunning success of Family Radio Service (FRS) over the past three years, the category has slowed this spring according to some, but not all, suppliers who attribute the lackluster performance to the economy.

Audiovox and Unwired both reported an unexpected decline in FRS sales this spring, while Kenwood noted a softening in growth. By contrast, Cobra, Midland, Topaz3 (Maxon) and Uniden said sales were on track and meeting expectations.

"There's been a definite softening in the past 30 days. It's a function of the economy rather than the category," said Audiovox VP consumer goods, Ralph Etna, adding, "given the feedback from key retailers, sales are very soft, even in soft goods. But I don't think its related to the category itself and I believe that sales will pick up in the fourth quarter and that by the end of the year, the industry will achieve its target numbers despite a weak economy."

Unwired president Larry Richenstein added, "We've seen a slowdown in the last 60 to 90 days. I think it's the state of the economy, although I understand it is picking up a bit now. March traditionally is not a big time for FRS, but by May or June sales are due to pick up and we didn't see the kind of increase we were looking for. I'm hopeful it will pick up in the fourth quarter."

Kenwood Communications reported a minor softening due to the economy. "We still see the demand as being strong but I think we have seen some slowdown, as we have in most of the consumer electronics categories. We've seen the effect of the general economic conditions on FRS, but we're still seeing good growth," said Chris Ryg, consumer sales manager.

According to NPD INTELECT, sales in general for FRS were up 22 percent from January through April compared to the period last year. Motorola said it expected FRS sales to reach 10 to 11 million units this year, which would represent approximately 25 percent growth, according to Larry O'Shaughnessy, director of FRS marketing.

Topaz3 said sales were steady. "We haven't experienced a slowdown in our FRS but our channel of distribution is a little different, as we go direct to sporting good dealers rather than mass merchants. Our sales are not growing by leaps and bounds, but we're steady. We're expecting modest growth," said Charlie Speights, markeing director.

Cobra senior VP Tony Mirabelli denied any signs of slowdown, claiming, "We haven't seen it." Midland senior VP John Chass agreed, noting, "I don't see an overall slowdown." Uniden said that sales of its new Sportclip series were going very well.

Motorola noted that as FRS matures, the growth rate is dropping from the triple-digit increases seen in the past and margins are eroding.

"From what we're hearing, retailers are experiencing frustration relative to the dollars because the market has become much more aggressive on price. The mix is so much more prevalent toward the low-end that the retailers are finding it harder to hit their revenue goals," O'Shaughnessy said. On the plus side, "That low-end price point of $19.95 is opening up the mass market, so I think they are pulling in a lot of consumers they weren't reaching before," he said.

He cautioned that suppliers should improve their marketing of the category to help boost pricing and consumer value.

"We can't hang a $49 radio next to a $19 radio and not tell the consumer why they should pay $30 extra. We've been caught up in this vortex of prices spiraling down, but there's something to be said for pure classical marketing. We can appeal to the hunter, to the mother who is keeping track of her kids, etc., and you'll see Motorola do a good job of it in the near future. You'll see a much different Motorola in 2002 with our products much more aggressive in price, but with more marketing and a new value proposition.

"If the market continues its current trends, there won't be much profitability for the retailer and manufacturers." he added.

Audiovox's Etna claimed that the market is seeing normal erosion, and that while margins are slimmer, they are not drastically reduced. "Last year prices were $59.95 for a twin pack and now its $49 with some promotional items at $39. That's more of a reflection of economies of scale in production, and those savings are passed on to the retailer. Margins are deteriorating a little, but it's within the line of progression of any consumer electronics product."

Etna added that the category will grow through innovation, and said that the company expects to introduce some very innovative products early next year.

Two-Way Radio Trends
Jan.-Apr. 2000Jan.-Apr. 2001% change
Category Unit Sales:944,1531,153,28822.0
Unit Share:
FRS98.6%95.9%
Other Two-way1.4%4.1%
Source: NPD INTELECT, Port Washington, N.Y.©TWICE 2001




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