San Diego — Retailers attending the recent DisplaySearch TV Supply Chain Conference said they have seen a strong early-take rate on the government-coupon eligible DTV converter boxes, which is making it easier to forecast demand in the final months of the digital TV transition.
But the challenge for CE retailers going forward will be to sell “the HDTV experience” to keep the mainstream consumers interested in making an upgrade to a new digital set.
Jonathan Zupnik, audio/video products DMM for Sears Holdings/Kmart, attributed the heavy early sales in converter boxes in part to the 90-day expiration date on the government-issued $40 coupon/debit cards.
“I think it took most vendors and retailers by surprise, and we are all struggling to make sure we are fully in stock,” Zupnik said of the early converter-box demand. “Whether that drives a differentiated need later in the year is an interesting question. We originally anticipated the converter box would generate a huge spike [in demand late in the year] and everyone was concerned about what we were going to do when all of these customers came in October, November and December and then the demand falls off after January.”
Zupnik said the early demand is helping him get a better gauge on the purchasing trends, “and seeing what parts of the country where it is selling at a higher rate or at a slower rate.”
Paul Kollberg, American TV e-marketing and merchandising VP, also acknowledged seeing strong early demand, but he added: “I think there is still a fair amount of confusion out there, even though there has been a lot of publicity and a lot press. A lot of people are thinking they need the converter box when in reality they don’t. I think that confusion will get less and less as people continue to do more research and more information gets out there.”
Meanwhile, Jeff Smith, Blockbuster consumer electronics category manager and former executive with CompUSA and Highland Superstores, said the national video rental chain is committed to rapid penetration of HDTVs to help fuel demand for its various video software formats, but in pondering getting into the business, he questioned the direction the market has taken.
“When I’m looking at if this is a business we want to be involved in, I ask, ‘What is the state of the marketplace?’ … I know that to a great degree the television business is being marketed like the computer business, and this troubles me because the computer business is a collection of specifications on a page with a price next to it. I’m not certain that speaks to the mainstream audience.
“Early adopters know what they are looking for,” he continued. “That’s terrific. They know what a 10,000:1 contrast ratio means. My mom doesn’t. I worry that we are selling the protein value of the steak and not the sizzle of the steak itself … It seems like the same rut that the computer makers fell into. And if you look at the computer business, you can count on the fingers of one hand the number of people that are still in that business and viable.”
Smith blamed both retailers and manufacturers for allowing the HDTV market to follow the PC model.
“For the customer sitting on the fence, we aren’t giving them the reasons why they want to buy a flat-panel television. We are telling him what the resolution is or how many HDMI inputs it has. We aren’t speaking to the motivations for customers to buy.”
“To the manufacturer, you make very sexy ads in trade magazines. In TWICE magazine your ads really look great,” Smith added. “It’s only when it comes to the retail ads that it becomes all about specifications.”
Kollberg said presenting both “the sizzle of the steak” and a product’s technical details is a difficult challenge online.
“There is so much information out there,” said the American TV e-commerce merchandising VP. “Consumers are not only coming in for more information, but some are coming in, because of all the information out there, very confused — much more so than had they not done the research. We find that when they come in with this half knowledge, half confusion — that is where it gets a lot more difficult, and it forces us to get better on the front end with our training. If a customer comes in asking about certain specs or features, we have to be very knowledgeable about those.”
Sears’ Zupnik said as much as 60 percent of the customers coming into his stores “are clicking through online to get a significant amount of information on a product … The consulting sales team that we have though is still a key component to having those final few questions answered.”
Zupnik said the shift of the HDTV retail market from a delivery to a “take-with” model has been “a dynamic change for the TV industry as well as for us as a retailer at Sears Holdings Corp. We’ve had the luxury of delivering all of this product. When you keep all of your product at a high level, managing your inventory is much, much easier. Going from 900-plus to 1,400 stores and having all of that product at the right place is extremely challenging.”