Sony Shifts Retail Operations Structure

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New York — Responding to strong growth in its direct-to-consumer sales operations, Sony has realigned management responsibilities, shifting the online consumer electronics and Sony-branded retail stores to the consumer electronics group, Sony Electronics’ COO Hideki “Dick” Komiyama announced at roundtable conference with the press, here.

The e-commerce and retail store businesses, which were previously managed under Sony’s e-Solutions Company, have now been moved into the consumer electronics sales operation headed by Stan Glasgow, Sony’s U.S. consumer sales president.

Glasgow said Sony will continue to use its direct-marketing e-commerce and flagship Sony Style boutique stores as a vehicle for building Sony’s sales across all of its channels of distribution.

“We’re giving consumers a choice to shop anywhere [they] want,” Glasgow said. “We’re going to try to have a very open environment to allow consumers to shop, and we’re going to try to make sure there’s synergy between our online sales and our retail partners and between our stores and our retail partners.”

Glasgow, who said Sony will double the number of its stores to 30 this year, said the company has been successful at balancing its direct sales and its consumer electronics retail distribution, adding that he has not had one complaint from a retail partner about Sony’s stores.

“They don’t see them as a threat,” Glasgow said. “Number one, they’re too small. We don’t stock everything in the stores. We’re trying to sell a select range of products and inform the customer and demonstrate things.”

The shift was made in tandem with the realignment and expansion of Sony’s business-to-business sales into one company, which will bring together sales and product development teams to address the needs of various markets, Komiyama said.

“Previously, our other segment of the business was more or less fragmented and it functionally separated sales and marketing,” he said. In response Sony has established “a completely new platform” for business-to-business, focusing more directly on key product areas “while segmenting different markets such as education and government,” said Komiyama.

Also as part of the change, direct sales of Sony Vaio PCs to business-to-business clients, which was formerly handled through the e-Solutions Company, has moved to the new business-to-business operation, Komiyama said.

Komiyama said Sony Electronics North American sales operation “had another banner year,” in 2004, and is continuing to see growth as Howard Stringer, Sony’s newly approved worldwide chairman, leads a “turnaround” for the global organization.

Komiyama said Sony is following closely its three-year rejuvenation plan, called “Transformation 60,” which included last year’s relocation of its CE sales and marketing headquarters from Park Ridge, N.J., to San Diego. The goal is to complete the transformation around Sony’s 60th anniversary next year.

The move, Komiyama said, has helped solidify communication between engineering, sales, marketing and manufacturing, while speeding the time to market for innovative new technologies.

Komiyama acknowledged “concern” over certain market trends, including the rapid price compression in flat-panel televisions, and all digital technologies which have been exposed to the rapid commoditization of key components.

“However, I believe we have strong strategies for meeting these challenges,” Komiyama said.

Glasgow mapped out Sony’s display products strategy for 2005, showing the currently available 70W-inch Qualia 006 ($13,000) SXRD rear-projection microdisplay HDTV “at the very high end of the line.”

Below Qualia, Sony is extending the XBR sub-brand — which was once used to mark top of the line CRT TVs — to include flat-panel LCD and SXRD.

Glasgow said Sony will introduce in the fall 50W-inch and 60W-inch SXRD-based microdisplay rear-projection HDTV sets under the XBR line “at considerably lower pricing” than the current Qualia 006 model.

Below SXRD, by display type, are Sony’s 3LCD-based Grand Wega microdisplay rear-projection HDTV sets. Glasgow said Sony’s Grand Wega line is currently its largest consumer display segment. Kamiyama pointed to Grand Wega as one of Sony’s “vertically integrated” products that use Sony-manufactured key components such as high-temperature LCD panels.

“We are going to be highly competitive in microdisplay with our Grand Wega 3LCD line 42W-, 50W-, 55W- and 60W-inch models,” noted Glasgow. “We’ll be competitive against all the other rear-projection products.”

In flat-panel TV, Glasgow said Sony has scaled back its plasma TV offerings, but he added “we’re not out of it officially at this time.”

Glasgow noted that production has started at the new Sony Samsung LCD-panel joint venture factory, giving the company a core competency in flat-panel production. Sony will market three major flat-panel LCD lines including the entry S Series, which “will be highly competitive, even against the 50 to 60 brands now showing up in the United States,” Glasgow vowed, noting that Sony “won’t be the cheapest. That’s not our goal. But we will be competitive in terms of base LCD models.”

“Where we are really excelling is in stepping it up to higher performance” LCDs, Glasgow said.

Sony’s step-up V Series LCD TVs are positioned “for the more discerning XBR type of customer,” he said. The series will use enhanced CCFL backlighting to expand the color gamut, while using “a wider looking panel” with a faster response time.

At the high end, Sony will also deliver this year’s models using LED backlighting, which outperforms even CCFL, Glasgow said.

Glasgow said “Sony hasn’t given up on CRTs,” adding the company “will be responsive to whatever the market needs in terms of how these changes happen.”

Glasgow said as prices are driven down in Grand Wega and LCD, CRT, in turn, will have to move to lower price points.

In camcorders, Komiyama said Sony will be focusing its promotional push on DVD recordable models, which was one of Sony’s major strengths last year, and new high-definition models, including the company’s second model introduced in June.

Komiyama said Sony, once again, will make a strong push in the personal audio area this year. He cited the segment, which was once one of Sony’s most dominant categories, as a personal disappointment last year, and credited Apple Computer, which has dominated the market in recent years with its iPod products, for being a strong competitor.

To boost the personal audio business he said Sony will be working closely with key service partners and with Sony’s software businesses to deliver entertainment media for its hardware products.

In addition, Glasgow said Sony has had discussions about possibly including XM and Sirius reception functionality into future portable audio products — a move Apple was also considering.

Komiyama said Sony’s new direction under Stringer will help the company work more effectively as “one company” to leverage its various strengths for synergistic purposes.

He said Sony will be adding a new service and some hard-disk-based players soon. In the meantime, it is marketing a pair of new micro-sized flash memory-based personal audio players.

Sony has moved to include in its players open standards including MP3 and WMA.

The new efforts have helped Sony see “a strong resurgence” in market share within the flash-media-based personal-audio category, said Rick Clancy, Sony’s communications senior VP. Sony now holds the No. 1 market-share position for flash-memory personal-audio products in the Japan market, he said.

Sony’s Vaio PC business, meanwhile, continues to perform profitably, although the company has chosen to innovate rather than to “chase market share,” in the area, Komiyama said. Sony is preparing to market a Media Center PC “for the den” with certain living room functions later this year, to be followed with a full “living room”-based entertainment Media Center for next year.


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