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Online CE Sales Are Ready To Take Off

San Francisco - Consumer electronics manufacturers, e-tailers, click & mortar retailers and e-commerce service providers all converged on the city by the bay earlier this month convinced that online CE sales volume should be ready to fly soon.

But that boom won't occur without some growing pains, the key one being competition be-tween manufacturers that want to sell direct to consumers, putting them in competition with their retail partners.

Most speakers and attendees at "Consumer Electronics On The Internet," a seminar held at the Hyatt Regency Embarcadero, here, and presented by the International Quality & Productivity Center, agreed on many key issues, among them:

  • · Online-only and click & mortar retailers will both be successful on the Web.

  • · Customer service, such as online and call-center help lines and fulfillment are as important, if not more, important, than overall Web design.

  • · E-tailing should increase the overall market for consumer electronics and not cannibalize sales.

  • · Detailed information to educate consumers is vital, along with product reviews from experts and from consumers who have purchased those products.

  • · And product selection, including accessories and hard-to-find items, is vital.

But the main issue, the one that has drawn everyone to the Web, is that there will be "explosive [CE sales] growth domestically in the next 12 to 24 months," according to Christopher Payne, VP/general manager of electronics for Amazon.com.

"Consumer electronics is the fastest growing category at Amazon.com," said Payne, who made his presentation at the seminar almost a year to the day since his company opened its consumer electronics store on the Web.

While CE sales are a "tiny, but growing online business today" - with less than 1 percent of the industry's sales being performed there - Payne quoted two studies indicating a bright future.

Forrester Research predicts combined consumer electronics (about $1 billion) and PC sales (about $4 billion) growing from $5 billion this year to $21 billion (CE at $6 billion) combined by 2003. And a study by the Consumer Electronics Association is even more bullish, maintaining that during 2000/2001, CE sales will be 13 percent of the market, or about $13.8 billion - on the conservative side. The more bullish estimate is $24.9 billion, Payne noted.

Traditional CE retailers are coming online, he said, because "consumers want them to be there." More manufacturers will be embracing the web, Payne added, with the web being used as a research tool and the infrastructure to handle electronics sales "developing and improving."

"The easy categories to sell and ship are PDAs, cameras and other small items," he detailed. "The tough ones are still large products that need some installation - big-screen TVs and others."

The web, Payne emphasized, enables e-tailers to "showcase a brand's complete line" and launch "new technology, especially connected devices" through target marketing and efficient use of limited first-run inventory.

The main battle many see on the horizon is between retailers and manufacturers that want to sell direct. A few at this conference, however, maintain that there doesn't have to be a battle and there will be enough market expansion to take on more competitors.

Sunil Mehrotra, founder and chairman of KnowledgeLINK.com, launched getplugged.com last fall. The basis of getplugged.com is "collaborative selling," he said. Through getplugged.com rules are set on "how and where products are sold." So far 33 manufacturers and 33 retailers, mostly dealing with mid- to high-end products, have signed onto the new system.

For both retailers and manufacturers using the service there are "efficiencies and economies of scale," as well as the ability to "manage channel conflict," Mehrotra said. The ability to demystify technology and provide consumers with expert content to research their purchases gives manufacturers and retailers using the service "a better closure rate . which is sometimes better than offering price discounts."

Eric B. Kim, corporate senior VP in global marketing operations for Samsung Electronics, provided the conference attendees a manufacturer's view of e-commerce by saying, "I cannot afford to ignore the channel."

While Samsung chooses to cooperate with retailers in terms of e-tailing, Kim noted that manufacturers will be more active on the Web in the future. He cites the statistic that 80 percent of consumers are going directly to sites posted by manufacturers, which have among the highest visited sites on the web.

Those manufacturers offering products for sale on their sites are expanding their online offerings. The problem, he said, is that "channel conflict is the biggest concern. We need to have a mutual synergy there because retailers are better at selling."

One of the main reasons for expanding online sales is that consumers mistrust consumer electronics retailers tremendously. Robert Heiblim, CEO of etown.com, said surveys indicate "67 percent of consumers say that shopping for consumer electronics is the worst shopping experience they have, even worse than car shopping, which used to be number one."

The rapid change to digital technology will work to the advantage of online sales because of the need to get accurate information and research, which can be done online with such sites as etown.com. Kim said that the development of new technology in the marketplace "changes the nature of a sale from a transaction to a relationship. Consumers love to do research about consumer electronics."

He also noted that due to all the new products entering the marketplace, chances for a manufacturer and/or a retailer to develop a relationship with a consumer is greater. "A consumer interested in a DVD player, MP3 player or digital TV is the same customer."

Kim added that manufacturers and retailers, wither e-tail-only or click & brick, can act as partners in the following ways: joint market development, integrated supply chain, customer service, shared customer database and shared margins.

Noel Lee, the founder of Monster Cable, agreed that manufacturers and online retailers need to develop a profitable partnership - and he suggested e-tailers should push the public relations and promotional angle by promoting a "manufacturer's brand name and image beyond the way a manufacturer could have imagined it."

Lee also noted that online retailers should give vendors an outlet to promote their products in a way "they could not do it with traditional retailers. Guarantee price parity with the manufacturers' brick & mortar distribution." As for manufacturers, they should also use the Web as a promotional vehicle, providing content to online retailers.

But Lee pushed three key points in his presentation: "Fulfill your goal of making your product available to online shoppers with minimal impact on your traditional retailers. Develop special agreements that covers all of your online concerns. And indicate that unilateral pricing policies can be enforced online as well."

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