LAS VEGAS - Joe Taylor, Panasonic Corp. of North America chairman/CEO, outlined his company's strategy to expand its role in electronics beyond the A/V business in the near future.
In a one-on-one interview with the Official CES Daily, Taylor was
candid about Panasonic's plans in CE and B-to-B markets and on industry
Panasonic North America is projected to make a profit by the end of the fiscal year, ended March 31. But it will happen with CE sales being lower, but with higher sales on its B-to-B side.
Here is part of the conversation we had with Taylor at Panasonic's booth yesterday.
How much of your business is consumer vs. B-to-B now, and where will it be in the future?
Globally, consumer sales are 50 percent of our revenue. In North America we were close to that in revenue five years ago, and that was without major appliances. Today that ratio is significantly less [in CE] due to our focus on the B-to-B business.
What does that mean for Panasonic's consumer business in North America?
That does not imply that we are walking away from the CE business, but sales there will lessen as we go into the near future. Also, we have no intention of bringing home appliances into the U.S. at this time [as announced in Japan late last year]. There is no timeline. Those products [for Japan] are smaller than what would be needed in the U.S. and higher priced.
Focus in the short term - the next two to three years - will be with the B-to-B side and then come back to [with an emphasis] the consumer side.
Will those new categories include health care, home energy management and others like them?
Initially, we have to make an investment in Cloud-based initiatives. One of them is health care to have doctors and hospitals interact [via the cloud] with consumers at home ... to monitor such conditions as diabetes or congestive heart failure, for example. Monitoring patients at home and doing preventive medicine will reduce health care costs.
How do you calm fears on the part of retailers who think you are backing out of the CE business?
The message we are trying to communicate is that we are not walking away or deemphasizing CE. Our core DNA as a company is in CE. Because of technology we developed on the B-to-B side we have more technology in CE. But we must be smarter in CE and not sell product that do not have value.
The customer has told us what they don't find value in. We will be in the TV business, but that doesn't have to make all the components. We can source them less expensively.
How we reduce what we make? All the SKUs we make are no longer realistic for us. You will see in 2011 a reduced portfolio of TVs, reduction of our SKUs in smaller plasma sizes, expansion in larger plasma and an expansion in LCD. Ninety percent of our line will feature 3D, 94 percent will feature smart TVs. We want profitable growth from value-added products.
Are you concerned about the introduction of Apple TV?
No, I welcome it. I'm interested in whatever they do in TV. If they introduce something that they beat us, good for them and shame on us. The industry does need a shot in the arm. But it may turn out that we are already ahead of them and they might have to catch up to us.
How can manufacturers take control of MAP pricing? Offer different lines to different retail channels? Open boutiques within stores? Open your own stores?
They are all valid points but represent a larger issue - there is a gap between consumers, retailers and manufacturers. And the gap concerns me the most the manufacturer and the retailer ... sense that we are not in this together. When you talk MAP, what is the relationship between retailers and the manufacturer?
We have no intention to open up stores. Unless your name is Apple, it is crazy. But we do need to have a relationship with the ultimate customer, the consumer.
In the past five to seven years manufacturers feel all the industry's problems were dumped on them. Retailers feel the same way. But if every TV manufacturer loses money there will be fewer manufacturers around and far less innovation.
We have plans over the years on how Panasonic will address our issue. We closed three TV factories, and we intend to make money on everything we sell. Make sure our partners are in sync with that. We want it to be clearly understood that we want to make a profit and it is not one-sided. We want our retail partners to make money.
I am pleased as we go into this new model year that meetings with our main retail partners that there is a real sense an understanding of this. But there is a long way to go.
Some retailers complain that Panasonic has undercut its own MAP pricing on your sales site online. Has that happened?
Our web sales, though improved with a new web site, are insignificant. If, and I mean
, a price of Panasonic product is lower by one day, is it affecting a retailer's business? Our sales are 99.9 percent from our channel partners. Is the 0.1 percent affecting their business? I don't think so.
We want our sell more products and make a profit, and we want our retail partners to sell more and make a profit, and have consumers get excited because they have bought our products.