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Advertising Propels Top Satellite Dealers

The secret to success in retailing direct-to-home satellite TV systems in 1999 was simply getting the word out.

Combining that approach with a fleet of brick & mortar locations propelled virtually all of last year’s leading satellite dealers.

Ironically, while the addition of knowledgeable on-floor sales personnel was a major plus for the biggest winners in 1999, the presence of discount chains Kmart and Wal-Mart on the TWICE Digital Home Satellite Retail Registry indicates that consumers will sell themselves when aided with the right merchandising support and an efficient installation team.

Apparently, another common denominator among the top DBS players during the year was maintaining an allegiance to DirecTV. In fact, only two chains — Sears, Roebuck and Co. and Ultimate Electronics — carried equipment for EchoStar’s Dish Network. Ultimate carried both services but dropped EchoStar in early 2000, in part, to focus on new HDTV systems with integrated DirecTV tuners.

According to executives for the industry’s leading manufacturers and programming suppliers, the national and regional chains that did the most to get the word out about satellite TV took the lion’s share of the business.

Meanwhile, the industry continued to make strong gains against cable operators, tallying more than $1 billion in retail revenue in the period, according to TWICE estimates. This included new equipment sales, and activations and commissions up to one year of programming service.

Observers said few chains placed the importance or resources on the DBS business that Circuit City did during the year. Using almost weekly advertising blitzes, large merchandising assortments and strong on-floor sales support, the dealer led all retailers in revenue, according to TWICE estimates.

Circuit City, which ranked first among all retailers on this year’s Registry, with a conservatively estimated $126 million in dollar volume, was perhaps the best at relentlessly bombarding its markets with advertising and merchandising messages.

DirecTV sales president Bill Casamo said, “When you talk about the successes of Circuit City, RadioShack, Best Buy and Wards, the same factors apply. First, they all maintain consistency in advertising. Both Best Buy and Circuit City advertise DirecTV at least weekly, and I don’t think RadioShack has missed a flier in over two years. This creates a destination for the product.”

At the same time, he pointed out, the rich tend to get richer in the business.

“A large volume of sales come by word of mouth,” Casamo said. “When you see DirecTV at a friend’s house and say, `Gee, I really like this,’ usually, the next word out of your mouth is, `Where did you get it?’ Naturally, people are predisposed to go to the same retailer to get it.”

RadioShack, which fell in line just behind DirecTV, has long established itself as a satellite destination, sources said, and strengthened its position with a strong alliance with the RCA brand – itself a prominent national advertiser for DirecTV on the equipment side.

Previously, RadioShack carried both DirecTV and Primestar services, but opted to stick with only DirecTV when that service provider acquired the rival Primestar.

Best Buy, which sources said had a better than 60 percent sales increase during the year, may have been limited only by the number of outlets in its stable. The chain had 357 stores in 1999, compared to 616 for Circuit City and 7,186 RadioShack storefronts.

The biggest surprise of the year, according to some industry executives, was the strength of Wal-Mart in the field. The discount-channel giant ranked fourth among all satellite dealers in 1999 without the sales support of most of its rivals. Wal-Mart offers in-store-merchandising kiosks supported by a strong advertising and promotional campaign.

Customers generally purchase a system off the shelf and then call DirecTV for service and programming support.

DirecTV handled back-end fulfillment of installation and residential services for Wal-Mart, Kmart (the seventh-rank satellite retailer on the TWICE registry) and others, using the DirecTV Home Services Network, formerly Primestar’s installation network. The same program will be used to support Blockbuster Video stores when that chain adds DirecTV sales to its mix later in the year.

Montgomery Ward and Sears continued to show impressive satellite sales results, although each was aligned with a different satellite provider.

Sears continued to sell EchoStar Dish Network systems under the JVC brand name, while Ward showed strong growth behind its strong DirecTV presence.