By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Grace Post, my partner in Coyote Insight, and I were talking a few months back about the hurdles the industry faces when trying to sell TVs that cost $5,000 or more. Obviously topping that list would be price, but that's not the only issue.
Many consumers, probably more than you realize, believe HDTV technology, and certainly flat-screen plasma technology, to be works in progress. Even if they were willing to spend $10,000 or $15,000 for a new TV, they chose not to out of fear that advances in technology will soon render their investment obsolete.
Indeed, Grace, who wants a wall-mounted flat-screen TV and has the wherewithal to buy one, chooses not to for that very reason. And that in turn prompted her to wonder why there is no lease program for such expensive products as there is with vehicles. If there were, she said, she would lease one immediately and very likely upgrade her entire A/V system in the process. And when her three-to-five year lease was up she would undoubtedly upgrade at least the TV — exactly as she and her husband have traditionally done every three years with their cars.
The new vehicle market analogy is a good one to consider. These days, a bad year for passenger car and light truck sales would be 15 million units. But even in these economically challenged times, the sales of new vehicles in the United States will not drop that low, and may even exceed 17 million units on an annualized basis. Over a third of these are leased, a number which has more than tripled since the mid-1980s.
It really is amazing that each year in this country we buy or lease almost as many new vehicles as we buy televisions. They far exceed the number of vehicles that no longer run, or would cost more to repair than replace. We get them simply because we want what is new and/or because we perceive the newest technology as worth paying for, an attitude that has been cultivated by the automobile industry with aggressive sales and lease incentives. Why else would we replace our perfectly good vehicles with new ones as often as we do? And we are talking about a product that starts around $10,000, averages more than $15,000, and costs thousands of dollars a year to insure, maintain and operate.
True, it is considered to be essential by most all of us, but more so than our TVs? I don't think so. We do so because the automotive industry makes it easy to swing financially. Nothing perpetuates this advanced replacement cycle and encourages us to buy ever more costly vehicles than leasing.
You may be happy with your TV sales but you can sell a lot more. CEA reports that just under 1.5 million DTVs were sold in 2001, which is phenomenal, relative to expectations. But that's less than 2 percent of U.S. households. And remember that the 1.5 million includes all DTVs, not just those costing $5,000 or more.
So here's the idea: Lease televisions (and other expensive A/V equipment for that matter). Just as the automotive industry has done, so should the CE industry offer leasing programs to help consumers get over their concerns about technological obsolescence, declining prices and the like. There is no reason that it can't work, and the benefits will go well beyond the sale of more TVs. The "coattail" effect will positively impact the sales of other A/V products, not to mention dramatically increase the replacement cycle, which for many is only when the TV breaks.
What about all of that used product that will roll around every year or so as those leases end? That, my friends, is not a problem. Rather, it is an incredible opportunity for even more profit in reselling "previously owned" TVs that are coming off lease. If you don't think so, don't worry, somebody else will — and will take all you can sell them for the inevitable secondary market that will result.
Like any good consultant idea, the easy part is making the suggestion. The devil is in the details. How do you set up a lease program? Fortunately there are companies whose primary business is exactly that, and I spoke with a few in preparation for this column. They had never considered leasing high-end TVs either, but some of the more enlightened ones believe that it can be done.
How about you? Call me if you like; I would be happy to help, and maybe as a result Grace will get her new TV. After all, it was her idea.
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.