By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Unauthorized Internet sales continue to represent a drain on profits for 12-volt retailers and suppliers, and sales over the Internet continue to gain, say industry members.
eBay expects Internet sales of new and used 12-volt products to increase by over 10 percent this year. And Car Toys just entered a partnership with Amazon.com and plans to more than double its Internet business.
It is nearly impossible to pinpoint the level of 12-volt sales on the Internet, but TWICE polled a few key players. eBay's sales can be tallied at over $180 million; it reported $135 million in 12-volt sales in 2002, with year-over-year growth through October 2003 of 23 percent, and year-over-year growth through October 2004 of 13 percent. Crutchfield said slightly more than half its 12-volt sales are performed on the Internet, which, according to the TWICE's Top 25 Mobile Electronics Retailers report, would place its Internet sales at $42 million.
A leading independent 12-volt and car accessory site, CarDomain, based in Seattle, claims it is the No. 2 car A/V site on the web, second to Crutchfield. Although it would not give specific sales figures, CarDomain said it expected to see gains this year of more than 20 percent for 2004.
Another popular 12-volt site, TheZEB.com, Statesville, N.C., claims annual sales of $4.4 million.
If authorized sales on the Internet are difficult to pinpoint, unauthorized sales are even more elusive. According to Joe Loomis, president of NetEnforcers, Coral Springs, Fla., 75 percent of the 12-volt sales on the Internet are unauthorized.
Scott Mech, chief operating officer of theZEB.com, says there are hundreds of Web sites selling gray market goods and dumping overstock on the Internet. “Over the course of the last five years, the overall volume has increased every year.”
A search on Google for “car stereo sellers” identified 468,000 listings. A search for “Rockford Fosgate sales” on Google showed 71,000 listings.
Mech points out that gray goods and transshipping have plagued car audio long before the rise of e-commerce. “I think the Internet has brought it to the forefront. In the past, product was dumped through large distributors whether overseas or in the U.S. With the Internet, the ability of people to obtain product for resale became easier and it publicized the problem. It made the 'Canal Street' sort of business apparent to the dealer base.”
NetEnforcers claims unauthorized sales have gone down because the company is now shutting down close to 1,000 unauthorized 12-volt sellers and auctions a day. “Unauthorized sales over the Internet have changed in that they've gone down. Last year it was a free for all, where there was no level of enforcement,” said Loomis.
But most industry members say the problem is on the rise. Kenwood's sales VP Keith Lehmann noted, “It's a scourge. It's like 'Whack-a-Mole' in the arcade. You shut down one and two more pop up.”
The scourge is limiting the profitability of all websites. Ike Arvilli, owner of IkeSound.com — a key 12-volt seller on eBay that also runs its own Web site — said the competition has gotten so stiff that his profit on eBay has dwindled to zero
“There are too many sellers. If a thousand customers had 10 sellers four years ago, now it's more like 1,500 customers have hundreds of sellers. Anyone I speak with is down. I'm down by half on the Internet. And we sellers are making almost no profit. So profit is close to zero and the sales went down.”
Arvilli claims he once sold $10 million annually in gross 12-volt sales on eBay and was one of its largest sellers. Now he claims $1 million in sales.
Arvilli, however, is able to make a little more profit on his own website, IkeSound.com because he doesn't have to pay a commission and listing fees, he said, and because he has good placement on the search engines. Arvilli said 90 percent of his business was on eBay and 10 percent on the Web site a few years ago, but now that split is 40/60. “I'm not happy. Even with 40 percent gross sales selling on eBay, I don't make money — between the commission and the listing fees… I believe in the next year, I will be out of eBay or maybe it will be only 5 or 10 percent of my business.”
The problems of overcrowding on the Internet, unauthorized sales and below-cost retailing is not wholly to be blamed on retailers. Suppliers place an enormous pressure on retailers to make product quotas in order to receive volume discounts. Sometimes retailers dump overstock on the Internet to make their quotas, admitted suppliers. “A lot of times [dealers] say that the pressure placed on them by the supplier is very great,” confirmed Lehmann, adding that sometimes dealers liquidate inventory to pay bills, selling it on the Internet at a little over cost.
In turn, people buy the goods and set up their own Web sites. “The barrier to entry is very, very low. Anyone can get on line with product,” Lehmann said.”
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.