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ABI Warns CE Manufacturers Of Retail Risks

7/31/2006 12:21:00 PM Eastern

Oyster Bay, N.Y. — ABI Research recently released a statement warning that consumer electronics manufacturers could face financial risks if they continue the trend of opening chains of own-brand retail stores like those of Sony, Dell and Apple.

The statements are based on findings in the firm’s newly published market update: “CE OEMs Launch Disruptive Retail Strategy: Their Own Storefronts.”

“OEM storefronts and kiosks represent a major change that will disrupt the current retail ecosystem,” said ABI’s research director Vamsi Sistla. “Bypassing their existing distributors and retailers could prove successful for some, but might present challenges for others.”

ABI admits OEM retail outlets provide retailers with an opportunity to control and protect their brands while providing a “more customized experience for shoppers than the major retail chains can.” However, the firm warns that there are some risks involved due to operational costs and the generally unpredictable nature of retail. Particularly, manufacturers risk vulnerability as related to their stock pricing because prices will now be determined according to brick-and-mortar performance instead of its traditional base on the general success of products (something these manufacturers have already proven).

Sistla added, “Anybody can make money when times are good, but when economies contract, retailers are the first to be tested.”