Spurred by aggressive promotional pricing incentives and broad-based advertising campaigns, the direct-to-home satellite category again proved to be a major revenue generator for the top 10 retailers in the category during 1998, according to the TWICE Digital Home Satellite Retail Registry.
Collectively, the top 10 satellite dealers garnered an 18.5% increase in DTH dollar volume to $365 million, with first-time Top 10 dealer Tweeter Home Entertainment Group pacing the growth leaders with a 75.7% uptick. Others who made significant gains in system sales, installations and service revenue included Montgomery Ward (up 59.5%), Best Buy (up 50%) and Sound Advice (up 33.3%).
Industry observers said the top five dealers on the list represent the power base of DTH distribution, and all have profited from making solid commitments to advertising, merchandising and sales training.
"Although they all succeeded by attending to the fundamentals of the business, each chain had its own unique approach to merchandising," stated Sam Baumel, Hughes Network Systems (HNS) national accounts director. "Really, the common denominator is a consistent theme of keeping the focus of the sales floor on changes in programming, product, services and promotions."
RadioShack once again landed in first place, thanks to its network of 7,030 outlets. The chain is now well established as "a destination point" for home satellite information, sales and installations, observed Dave Spomer, Thomson DBS product management VP.
He credited the chain for its "consistent promotional message to the marketplace. They provide a strong end-to-end solution message to the customer - not just come and buy the box, but solutions for installation of the product as well."
Spomer said RadioShack may have been the strongest retail organization in getting the local-channel issue across to consumers and greatly helped to "dispel the perceived Achilles heel in the satellite product."
During the year RadioShack continued to carry both the DirecTv and Primestar platforms. An attempt to carry its private-label Optimus-brand DirecTv systems was short lived, however, and the chain pushed RCA-branded systems.
For home satellite, 1999 should prove interesting for RadioShack. Now that Primestar has been acquired by DirecTv, the chain is expected to play a major role is helping Primestar customers make the transition from their medium-power systems to DirecTv's high-power platform. It should also be an information resource for customers curious about changes in local-TV options following changes in federal law.
Circuit City is a veritable advertising machine for DirecTv service and products. The chain maintains an exclusive with the platform and has played a major role in making the public aware of the satellite provider's aggressive programs.
"Circuit has a very strong focus on the sales counselor," said HNS's Baumel. "They really know how to explain the rate plans and product capabilities. Like RadioShack, Circuit City has incredible coverage of the country, which generates high volume."
The chain relies heavily on manufacturer-supported sales training programs, noted the supplier.
"We've got a group of regional salespeople around the country constantly working on training for new DirecTv products," Baumel said. He added that the chain has helped develop the Hughes message by linking HNS and DirecTv (sister divisions of Hughes Electronics) under one umbrella.
Best Buy's success formula is almost a carbon copy of Circuit City's, hardware vendors said, but with subtle differences in style and approach.
Like Circuit City, Best Buy is a very aggressive DirecTv advertiser.
"The repeated exposure of their store message to the consumer that they are a destination point for home satellite, 52 weeks out of the year last year, has to be a key factor in their share of the success of home satellite for 1998 in general," said Thomson's Spomer.
Baumel of HNS said Best Buy "does an excellent job of merchandising product and educating sales personnel. I'd say sales training is the one thing that really sets them apart." The focus on training, he noted, is a direct reflection of the long-term commitment senior management has made to DirecTv.
Sears is an example of another chain that made an early commitment to the DBS category, only it refuses to maintain an exclusive with one platform. In 1998, Sears carried both DirecTv and JVC-branded Dish Network systems.
"Sears has a firm belief that it needs to offer its customers a choice of products and services in virtually anything it sells," said John Suranyi, EchoStar western division sales and operations VP. "They also believe in offering the latest DTH technologies, such as Dolby Digital surround sound, and they will offer high-definition systems and services."
Jerry Barbera, JVC consumer video division general manager, said demand for the Dish line has been "incredible," and the largest portion of that comes from Sears. "I think they really benefited from the aggressive pricing promotions Dish offered last year," Barbera said. "Sears has proved that Dish is a very viable platform for electronics retailers, and it's getting the attention of some of their competitors."
Sears was credited by Dish Network executives for doing an exceptional job of promoting the platform in newspaper fliers that call to attention the "discounted rates that complement their sales strategy," said Suranyi.
The chain uses multiple approaches to system installation, determined by the location of the Sears outlet. In some cases the chain uses its own installation network, while other locations use either EchoStar-authorized installers or a subcontractor arranged by Sears.
The Good Guys has long been noted as a distributor of value-enhanced home theater products that does an exceptional job of sales training, advertising and promotion. Based in the Western U.S., The Good Guys is a dedicated DirecTv retailer.
Montgomery Ward made a significant turnaround in 1998 and became a much bigger factor in home satellite retailing. The chain saw strong growth from its DirecTv business last year, heavily stressing the HNS receiver line.
Like Circuit City, the chain helped to tell "the Hughes story" by linking the common corporate ownership of DirecTv and HNS in packaged sales, said Baumel.
"Montgomery Ward always has been strong in electronics and hardlines areas," he stated. "Their management has put a real focus on DirecTv by maintaining a consistently strong level of sales training. They also do an exceptional job of merchandising and displaying the product lineup and communicating the DirecTv message through regional advertising."
Baumel also noted that Montgomery Ward led pricing moves leveraging such promotions as the dual-LNB program that offered steep discounts on second receivers for multi-room capability.
Ultimate Electronics maintained strong growth in its satellite business last year after continuing to stress the category in advertising, in-store merchandising and sales training, said Dave Workman, Ultimate Electronics senior VP.
Like Sears, Ultimate believes in offering its customers a choice and carried both the DirecTv and EchoStar platforms last year. "We believe our customers are best served when we can accurately inform them about all the platforms and benefits in the marketplace," Workman said, adding the philosophy was also applied to the DVD category when Ultimate added the controversial Divx system.
Although Primestar was also available as a third option last year, Workman said Ultimate shied away from it because it stressed primarily an equipment-rental program that was divergent from his chain's traditional sales practices.
Ultimate has taken the unusual step of developing its own installation network throughout the operation, Workman pointed out. "We don't work with subcontractors," which gives the chain direct control over customer service.
The retailer also maintains a continuous advertising and promotional program for its satellite business, which helps to attract customers to the chain and plays up Ultimate stores as "destination points" for direct-to-home satellite products, services and information.
Sales training and incentives are also important ingredients in Ultimate's success, Workman said. The chain provides additional compensation to sales representatives as an incentive for them to stay up to date with programming and technology changes and to take the extra time necessary to educate curious shoppers.
"We feel it's critical to keep the focus on the sales floor," Workman explained.
Sound Advice was also credited by manufacturers as an example of a chain that is seeing dividends for making a strong commitment to the DTH category. The chain sells DirecTv programming and systems by leveraging a strong advertising outreach program in local publications.
Michael Blumberg, Sound Advice senior VP, said the chain also benefited from DirecTv's aggressive promotional pricing programs for new subscribers and from a sales training program that DirecTv administered through the Internet last year.
Alan McCabe, Hughes Network Systems marketing director, said Sound Advice has done an exceptional job of promoting "the Hughes story," selling HNS-built IRDs and DirecTv in almost a single-branded fashion.
"They do a lot of in-store training," said McCabe. "This is an example of a strong regional retailer with a strong presence in its marketplace. They do a lot of advertising behind DirecTv in the Florida area."
The Wiz, the New York City-area electronics retailer, fell on hard times under its prior ownership and entered the year in bankruptcy. The chain was given a new lease on life after being purchased by Cablevision - which is a major multi-system cable operator based in Long Island, N.Y. - but not before closing nine outlets and dropping the Primestar service it carried in 1997.
This explains the chain's sales declines for the home satellite category in 1998, although 1997 figures are not compared here due to the change in ownership.
Despite being owned by a cable company, The Wiz carried in-demand products as a service to its customer base. A representative of the chain affirmed that it will continue to aggressively sell and promote DirecTv systems and services.
Tweeter Home Entertainment Group makes the top 10 list for the first time, after seeing a sales boost to $3 million. In recent months, the chain has been on an expansion binge, continuously opening up new markets to its strategy of offering mid- to high-end product lines at prices that foster a strong value perception.
The chain does a strong job with Sony lines, as well as ProScan and RCA.
Vendors credit Tweeter for its highly trained sales force that sells home theater in a complete-package approach, using attractive lifestyle home theater displays to maximize the high picture and sound quality of the DirecTv platform.
Tweeter is known for cultivating a personal relationship with its customers, leveraging its database to promote repeat business with low-price guarantees and informative promotional publications.
The 1999 TWICE Satellite Retail Registry ranks top U.S. retailers by their sales of satellite products, based on estimates developed by the TWICE Market Research staff after extensive discussions with industry suppliers, associations, analysts and retailers.
Information from retailers selling satellite products, responding to a questionnaire from TWICE, was also used to develop the estimates, along with data from public company filings with the Securities And Exchange Commission.
All sales information, except that supplied by publicly traded companies that break out line-of-business sales for satellite products, is TWICE Market Research estimates. Additional information for the estimates was gathered from published reports on the retailers and newspapers in the retail areas they serve.
The numbers are given for the 12-month period ending closest to December 31, 1998. Registry figures for 1997 were revised when needed to reflect additional information from the retailers and other sources. For the purposes of the Registry, TWICE includes 1998 retail sales of satellites and satellite products, including hardware, annual subscription fees and installation fees.
Rankings were made by market research director Kay Anderson, with assistance from research specialist Janice Chamberlain and research associate Cynthia Myers.
For Top Satellite Retailers chart, click