By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Despite the economic downturn and a slowdown in CE sales in recent weeks, Sony consumer sales company president Jay Vandenbree said getting back to basics in providing services and solutions is the way the industry can help weather the storm.
In the following Q&A interview with TWICE, Vandenbree assesses Sony's expansion strategy into the entry end of the TV business and how the company has maintained its high-end image.
TWICE: What products are doing well for Sony this year?
Vandenbree: The core products continue to sell. Our television business is doing well. Certainly the industry is not growing at the pace that it was, but people continue to step up and buy televisions. Some of our new categories are selling well, such as the Sony Reader. Our Alpha digital-SLR camera has sold very, very strongly. We've seen tremendous share gain there, and I think that speaks to the strength of the SURE [Sony Unified Retail Execution] program and what it's done for that product line.
TWICE: How has the SURE [unilateral pricing] program helped you sell more product?
Vandenbree: I think it helps retailers know the investments they have to make and what they can get in terms of profitability from the product line. So it helps them focus. But from the consumer proposition, consumers don't have to worry about price being the obstacle. No matter where they buy a [SURE-protected] product, they don't have to say, "Is this the best price?" They can look at shopping in terms of the retailers' value equation and the features and benefits of the product. That is sometimes a very different buying proposition. If you look at buying a car or almost anything else in any other industry, the first thing you are going to think about is, "Am I getting a good deal or not?" Nobody has to worry about that when they buy an Alpha."
TWICE: SonyStyle stores recently rated well among retailers in Consumer Reports magazine. What do you attribute that to?
Vandenbree: Very simply put, it is our endless focus on the consumer. For years we have said our business model there is not to compete with, but complement, our retail partners. They don't sell at price point there. They compete at levels of service. They give great education to the consumer. They are a resource for consumers to be able to see not only the products we have, but to focus on what they want to do, not just on what they want to buy … It's that experience that consumers will migrate too. The other thing we get to leverage is the Sony United activities. It's not just about hardware. It's also everything we do around software with our sister companies. We show the art of the possible as well.
TWICE: On that note, you are now selling the Bravia Internet Video Link as an add-on to some of your Bravia TVs and that includes bringing content to end users directly through the TV set. How is that helping you leverage other Sony businesses?
Vandenbree: Our intention is to deliver content to the home in different ways. Sony Pictures continues to be involved, but really all forms of media continue to be involved. We know that streaming video to your home will be one of the ways that people get content. It won't be the only way people get content. But today we can offer owners of Sony televisions "Hancock" through that [Video Link] unit.
TWICE: Do you see the television business model progressing to a point where the sale becomes based as much on the content available through the TV brand as the hardware itself?
Vandenbree: It will be a combination of both, but clearly consumers are buying the product for entertainment. They don't buy the product for the product in and of itself. It's always been a combination of hardware and software that creates the value equation. The difference here is the different ways you can get that content and play it back. I think the Internet plays a bigger portion in that but not the only portion.
TWICE: How are Sony's Blu-ray Disc player sales going now?
Vandenbree: If you look at the home video business, its growth over the prior year is predominantly driven by Blu-ray. I think once we got past the issue of which high-definition format to buy it allowed us to tackle that next issue of why high definition vs. an up-converted standard-definition DVD player? That is the fight we are having now. Blu-ray is doing very well for us. Blu-ray is one of the categories that is growing right around expectations — a little bit lower than our initial expectation, but then the question was, "How high is up?" But we are not disappointed at all with how Blu-ray is doing.
TWICE: Do you sense that consumers understand the value proposition of BD-Live enough to make that step now?
Vandenbree: I think there is more work to be done on our part and on everyone's part to help consumers get that message. I know my kids understand it, because they are very savvy to the Internet. I think we still need to do work around that. We were very focused on the format issue, and I think the time is now to swap over to the content and the experience you can get with BD-Live. It's also incumbent on the retailers to understand it and execute it. That has been a little more difficult to execute on the retail floor, because it requires people to have an Internet connection or at least a loop playing so people understand. But I think we'll get there. You'll see an increased push on [BD-Live] in 2009 as there is more content and interactivity available.
TWICE: In 2008 Sony broadened its TV assortment with mass-merchant discounters. With the economy going the way it is, are you feeling lucky that you made those steps when you did?
Vandenbree: I never say we were lucky — I always say, "It was a part of the plan." We've been selling mass-merchants products for a long, long time. What we decided to do was to put together a product that would break into that next band of consumer. With that we have been very successful. We have broken into that next wave without taking away our business from our step-up product, and that was very important to us. Our intention was not to bring the market down, just to open up the next wave of consumers, and that has worked very well for us.
TWICE: How have your step-up retailers responded to that?
Vandenbree: They have taken advantage of that on their floors as well and it's helped bring that consumer in for them. I think retailers would all tell you that they would hope you would sell products only to them, but the reality of the situation today is that consumers are making that choice themselves. They are all deciding which value equation is the right one for them. We continue to have upscale product for our traditional retailers to be able to step up and utilize that value equation. At the same point we are testing the scores to make sure that it hasn't made any impact against our brand, and it hasn't. Consumers understand what we are doing and why we are trying to do it. From the Wal-Mart and Target mass-merchant group we find the value proposition we are putting in there is very much impacting those second-tier manufacturers like Vizio, where they can see the differences in our product and we see their consumers stepping up.
TWICE: Which screen-size segments will do the best this year?
Vandenbree: Certainly 46- and 52-inch sizes continue to grow beyond expectations for the industry, but the closer you get to the holidays, the more you see smaller-screen-size shoppers coming out. So far, there is a lot of growth in the bigger-screen models, but it wouldn't surprise me at all that 40-inch and 32-inch does very well over the holidays.
TWICE: What surprises, if any, are you expecting to see come out of the Black Friday promotions this year?
Vandenbree: You will continue to see promotions from us, from other manufacturers and from retailers. You will see things all over the place. I would expect to see Black Friday have a lot of excitement around it, but for us as an industry we have to remember that what we're faced with today revolves more around consumer confidence than price point. I don't think price point fixes consumer confidence. I think we need to make sure that we continue to talk to the consumers and explain to them those value propositions. Our focus this year has all revolved around the consumer, and the good thing for us is no matter what is going on with the economy, it doesn't affect our strategy whatsoever.
TWICE: What advice do you have for retailers in this environment?
Vandenbree: Get back to basics. Do those things that drive your business. If there is one thing that changes in the economy have proven throughout the years, it is that the basics and fundamentals always work. Make sure you are engaging the consumers. Make sure you are putting the products that they want to buy out in front of them. Make sure you listen and qualify what you are doing — make sure your value goes beyond items of price because nobody sells everyday high price.
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.