Suppliers Watch As Best Buy Adds Internet-Connected PNDs

By Amy Gilroy On Oct 27 2008 - 6:00am




For almost a year, suppliers have promised personal navigation devices (PNDs) with embedded wireless connections to the Internet, but not a single unit was available from a major brand until last week, and the brand turned out to be Best Buy's house brand, Insignia.

The retailer beat major PND brands to market, and that just might be what the major brands prefer. Best Buy could be the test bed for Internet-connected PNDs that are pricier than unconnected versions and that could encounter consumer resistance to ongoing wireless-service fees, said one PND marketer and one analyst. Other PND marketers, however, see Best Buy's entry into the market as a way to boost awareness of connected PNDs before they enter the market themselves.

Until now, only Dash Navigation, a lesser-known brand that sells through Crutchfield and Amazon, has offered an Internet-connected PND in the United States. Magellan and Mio have demonstrated such units but have not shipped them here.

Best Buy, on the other hand, is offering two Insignia-branded Internet-connected PNDs, which feature Live Google Local search and real-time traffic updates with no service fees for the first year. The annual service will cost $99 after the first year.

The two Best Buy units are the 4.3-inch Insignia NS-CNV20 at $499 and 3.5-inch Insignia NS-CNV10 at $399.

For its part, Magellan said it “suspended development” on its Maestro Elite 5340 with Google Local search. The device had been slated for March shipment. “Although Magellan believes there is great promise in connected navigation, in the near term, consumers have shown an unwillingness to pay a steep price for PNDs, especially with the recent economic downturns,” the company said. “We have suspended our development on this device and will re-examine the market potential when the climate changes.”

Other reasons for delays by major brands in offering connected PNDs include consumer resistance to monthly Internet service fees and potential wireless-service interruptions, one analyst said.

“I think the main reason why we haven't seen similar offers is related to doubts about the viability of the business model of connected PNDs. Research has shown consumers are very reluctant to pay monthly fees. In this respect, it is interesting to see Best Buy offer a one-year free subscription, said Dominique Bonte, ABI Research telematics and navigation director.

Best Buy might encounter the same problem as OnStar, “which faces high churn rates after one year,” he added. Moreover, the purchase price [of the Best Buy PNDs] “is quite high compared to many decent sub-$200 PNDs,” Bonte continued.

Mio senior sales and marketing director Kiyoshi Hamai sees the potential for Best Buy to increase consumer awareness of connected PNDs through its trained sales staff, which he said is capable of explaining the new technology. “This potentially could save any brand considering bringing a connected PND to market a great deal of marketing since Best Buy is making that investment into the market and consumer,” Hamai said.

Joy Morel, Tele Atlas consumer marketing director, agreed. Best Buy is “paving the way” for other manufacturers to deliver Internet connected PNDs through a “well trained” and “well paid” sales force, she said.

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