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A/V Dealers Sing, Softly, Of Portables

Like kids on their first date, many A/V dealers have tentatively embraced solid-state portable audio players, but they’re not sure what comes next.

Through most of the year, computer-selling CE retailers such as Best Buy, CompUSA, Circuit City, Fry’s and J&R Music World led the brick & mortar charge in Internet audio devices.

But now, electronics dealers with no computer presence plan to plug into the technology.

For most of these dealers, fourth-quarter expectations are decidedly modest; in many cases because their customer base is an older home theater purchaser rather than the teens or young adults who are snapping up the devices. In some cases, dealers are simply wary of putting their arms around a product that PRO buying group executive director Roger Heuberger called a “very Web-shoppable product.”

Other retailers freely admit they aren’t sure what the demand will be. “We’re not sure the volume is really there,” said one high-volume retail executive. “Even in college markets there is interest in it, but you don’t have people banging down the doors for it.”

Some retailers have already lowered their projections and have decided to wait for products from their longstanding CE vendors rather than pick up available products from computer product suppliers.

Retailers have also had to wait for product to become available in greater quantities from all suppliers, added Forrester analyst Mark Hardie. “Fabricating is proving to be problematic for just about everyone, and big-box retailers won’t put something on their shelves unless they have adequate inventory.”

Sensory Science senior VP Ralph Palaia cited yield rates for onboard and removable memory as the chief culprit. “Manufacturers are having difficulty getting it out,” he said.

Another reason for product arriving late to stores is that some retailers didn’t decide to order until September and October, Palaia added. “Most buyers six months ago didn’t know anything about the market.”

Although some A/V dealers have decided to pick up CE vendor products in time for holiday sales, others are shying away from the market altogether. Some A/V dealers, including Indianapolis-based Ovation, want to concentrate their fourth-quarter energy on two other digital audio recording technologies: CD recorders and MiniDiscs.

Like most CE dealers, the solid-state skeptics are most enthusiastic about the prospects for CD-R sales, which continue to outpace many dealers’ expectations (see story at right).

Forecasts for solid-state portables are hazier. “We’re tentative about it, but we have reason for optimism,” said Bob Warren, portable buyer for Florida’s Sound Advice chain. “We hope the customer is also an A/V customer, not just the computer-retail customer.”

By the end of October, Sound Advice hoped to begin displaying its first model, a unit from Sensory Science. “We plan to promote it, but we have nothing in concrete yet,” Warren said.

Like Florida’s Sound Advice, New York’s Harvey Electronics plans to bring in Sensory Science’s model, which president Franklin Karp expects will be purchased by Harvey’s traditional customers for their teenage children.

PRO buying group members Magnolia Hi-Fi & Video, Ultimate Electronics, and two to three other members are selling solid-state portables, said PRO’s Heuberger. However, for the group as a whole, he said, “it’s not a boom business for us right now. It’s not the core demographic for most of the group.”

PRO members are also reluctant to sell portables that can’t be upgraded to be SDMI-compliant, he said, or those units that are sold by manufacturers to online retailers or through their own Web sites.

“Most of the merchandise today isn’t upgradable [to SDMI],” so it won’t download or rip future SDMI-compliant music, Heuberger pointed out. “Therefore, we’re selling it cautiously; because at more than $200, it’s not a disposable item.”

PRO has reduced its sales projections, he added. “We’re not going to do as much as we thought because a lot of suppliers aren’t shipping yet,” he said in late October. “It’s available mostly from PC and software suppliers who don’t normally sell our channels. It has largely been a computer-based phenomenon. But we expect to get in it more in October as CE manufacturers ship.”

Ovation isn’t likely to pick up CE supplier products this year, said president Gary McCormick. But the Midwest chain has expanded its CD-R selection as more manufacturers enter the market.

“We brought in CD-R in the fall [last year], and we sold more than we thought because it appealed to our customer base,” McCormick said. “They’re comfortable with the 5-inch format, and they have it in their cars.”

Best Buy, on the other hand, is far more bullish about solid-state portables. “MP3 is gaining ground fast, much faster than MiniDisc,” said Wade Fenn, executive VP of marketing. “We’re the largest MP3 retailer in the U.S.”

The chain has aggressively promoted the technology, a spokeswoman added, pointing to MP3 Technology Tents erected at 28 concerts by Alanis Morissette and Tori Amos. Best Buy also sells solid-state portables in its computer and audio departments and plans to expand its selection beyond its current five SKUs.