CE Retailers See Salvation In Connected Devices And Services

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If HDTV was the growth catalyst of the 2000s, what will be the new industry drivers for this decade?

Jim Ristow, executive VP, Home Entertainment Source (HES):

The nontraditional category mix, i.e., green, energy management, whole-home control, IP, IT — things that are not traditional to our channels. It’s much wider than what most people thought two years ago. Explaining IPTV to a consumer and presenting that experience, that demo, and showing how it’s going to interact in their home, it’s a whole different way of looking at things. It’s more than just the product itself. I think that’s going to be our next biggest opportunity and also our largest challenge — to make that a simple solution for everyone.


Best Buy has been tapping into some non-traditional categories, like musical instruments and fitness.

Michael Vitelli, executive VP, consumer operating group, Best Buy:

We were pleased with those and how they started to develop. You could also argue that the e-reader business is a new category for the consumer electronics industry in the sense that it’s adding books to consumer electronics, which is a positive.

I think you have two cycles: The next three to fi ve years of getting people connected to their devices is a growth period. And in the three- to six-year period it will be energy management/home control, because our industry has looked at it a lot by way of entertainment control.


That will also include homesecurity control and surveillance.


The channels that are at the front edge of being in consumers’ homes on a regular basis have an opportunity there.

Dave Workman, executive director/ COO, PRO Group:

That’s why I always sort of get frustrated when I hear people say there’s nothing new. There isn’t necessarily a home run, but there are a thousand base hits out there on the fl oor. Not all of them are relevant to every business model, so the thing that every retailer has to look at is how to integrate some of these new categories.

The consumer is going to have some want for this integration. You are talking about a connected system, which does more than just entertain you. It also manages energy and maybe is energy efficient, and perhaps there are some other things involved.

Retailers need to start thinking forward to those businesses. Some of them are the bleeding edge right now and some are leading edge right now, but the key is to start exploring these types of things because they will be the relevant technologies.

We’re also seeing a rapid escalation of how quickly technologies are morphing, and that is another challenge for a retailer. E-readers were a hit product for this season, but in my opinion are probably going to very quickly morph from an application or an enable technology into some sort of a tablet device. Will e-readers be a category, or will they be a feature on another product? It’s one thing to get on the horse, and it’s another to stay on the horse.

Ross Rubin, industry analysis director, The NPD Group:

E-readers are also interesting because they’re an example of a retailer, Amazon.com, capitalizing on a category. But it also has the potential to show how brick-and-mortar retailers can capitalize on content devices with some of the things Barnes & Noble is doing with the Nook in terms of the Wi-Fi capabilities. When you bring it into the store, you have access to browse content there, and as we see other kinds of devices get that connectivity, it opens up a lot of possibilities.

Dan Schwab, co-president, D&H Distributing:

There will be a lot of singles this year, but then there’s the whole area of connectivity. Once you have the device, there’s a big opportunity in what you want to be able to do with it, whether it’s content or control.

There is still a home run to be had out there, and this year it’s the mobile devices themselves; that is what leads the pack. There is still a tremendous potential audience that does not have a smartphone, and there are going to be mobile Internet devices with the acronym MIDs. There’s going to be a whole slew of products that are variants upon each other.


It’s a continuum from the smartphone to the laptop.


I really think this year is going to be very exciting. There are going to be a lot of different form factors. The Flip was a singular function device, which was a tremendous solution, but I think Connected continued from page 18 today these are going to be multi-use devices that are going to completely open up the consumer because the experience to date has mostly been an iPhone. That is the primary device, though BlackBerry has now made large inroads. The masses have not fully experienced the full capability and the larger data stream, whether you use it for an e-book or true Internet browsing.

Those are the seeds that then drive the back office, whether it’s the home server or connectivity to the different apps. I really think that’s the home run and the big opportunity this year.


Also, over the next two years you’re going to see the infrastructure really mature to where it can supply content to these devices.


In this business every product at some point becomes a commodity, but solutions generally don’t. If you remember that about this business, you don’t end up getting surprised. If you think back to home theater, it wasn’t a product, it was a solution. It took two products that were long in the tooth in their technology, and the industry combined them to create a solution, which created value and thus margin. It’s the same with mobility. That is where there is a lot of energy, and the good news is the connected aspect of all these various devices creates a solution. While there may be individual price pressure on one item, the solution will have value in it and thus margins for retailers so we can stay in business.

Fred Towns, senior VP, New Age Electronics :

Consumers want the convenience of taking it with them, and as Dan was saying, a lot of different things will probably be meshing into a portable device of some sort. The other thing that is going to change is that most of it is going to start to turn to solid state vs. hard drive, because consumers are going to expect speed and they don’t want to wait any longer for the boot-up time. That will bring a whole new configuration. That new world is changing very quickly, and the platforms that support it are changing and going all multimedia. Windows 7 was a really big change for Microsoft, but they saw what Apple was doing and it was a need.


Do you see traditional audio/video specialists getting into wireless mobility?


We’re seeing a trend in that a lot of guys who typically were not on the connection side using computing are now saying, “I’ve got to be in that.” Everything is converging together and connecting into one. Some way, some how, I think they’re missing a link if they’re not.

Jeanette Howe, executive director, Specialty Electronics Nationwide (SEN):

One of the things that I’m very enthused about is smart-grid technology. GE just announced a relationship with Tendril Networks, and Whirlpool [attended] CES showing product. In the Nationwide family there are thousands of appliance dealers, and those appliance dealers are going to be selling smart-grid technology. And if you just put a smart appliance on a floor and it’s not hooked to the grid, it’s just a dumb appliance, so installing it will also be a huge opportunity for the specialty dealer.

There is also an enormous opportunity in the green-technology arena for dealers to get involved. To Dave’s point, there is a lot of opportunity right now not just in IPTV and connectivity, but in how those devices will be controlled by your cellphone. You’ll be able to look at your phone and know what kind of energy you’re utilizing within your home, and you’ll be able to control that consumption. There is a lot of convergence still happening, and that’s an opportunity for all of us.


David, is there a smartbook in your future?

David Pidgeon, president/CEO, Starpower:

It’s a big thing for us because we do a tremendous amount of custom installation, and we have to be at the top of our game. We have to understand all the computing.

Where the real question comes in is responsibility. The customer didn’t buy the computer from you, but they’re using you to do everything and something goes wrong. Whose fault is it, and who is paying for it? That’s where there is some confusion because we are a full-service dealer where they pick up the phone and call us on anything they bought, and we take care of it. They know it’s going to be taken care of, but all of the sudden their network goes down. Is it my fault? Is it the computer’s? Is it consumer error? There is a problem with being able to figure out how you tell where the responsibility resides, and right now it is just walking on eggshells.

However, if you want to stay in this industry and differentiate yourself, you have to be able to work with all the different new technologies and put them all together. When the customer comes to you and says “I need this,” and you say, “Well, we can’t do that” — that is what our industry is really going to struggle with over the next few years.


That’s an interesting point because the reliability of CE has been very consistent, and the reliability of IT when you’re adding a lot of devices has been very inconsistent from a compatibility standpoint.

You could draw parallels from the IT industry and the resources that sell to businesses. They become the outsourced IT departments. They have ongoing contracts and service agreements so that if a system goes down, they are going to be there. It is their responsibility. In fact, they diagnostically go in to make sure drives are still available so you can still download more movies. It’s an ongoing revenue stream, but it is also their responsibility. As you make the home network more complicated, it creates an opportunity for someone to help manage that. It probably necessitates that because long term it’s not just your TV and your DVD player. Now your home-security system is tied into it and your ability to access the Internet is tied into it. If you’re having guests over and the streaming is not working, that becomes a potential long-term opportunity.


One of the things the cellular companies always wrestle with is if you don’t get a good signal on your phone, is it the phone or is it the carrier? As these devices become more prevalent and connectivity is more prevalent, teaching the consumer what to look at to see if it is working right or not becomes very important, because nine out of 10 times it’s typically not a hardware failure.


There’s a great lesson from Apple, because with the iPhone, people definitely blame the carrier.


Sounds like all of this plays into Best Buy’s investment in Geek Squad.


As I’m listening to this I’m very happy that we have Geek Squad because I think it’s true. When you’re connecting all of these devices together, unfortunately we’re actually increasing complexity in the short term, and until the IT world is like the landline phone and the television, which may be a while, I think there is an opportunity to be able to provide whole house and whole out-of-house responsibility. Having a lot of locations and thousands of employees gives us an opportunity to provide that.


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