2007 began on a chaotic note as retailers throughout the industry struggled to recover from a stressful holiday selling season dominated by flat-panel price wars. The repercussions of those battles rippled throughout the year as a number of key players each saw their own unique combinations of corporate restructurings, layoffs and store closings.
The news wasn't all bad though as many other retailers announced store additions, redesigns and new formats.
The industry saw also a number of key product introductions that helped drive consumer interest including Microsoft's Vista software and the much-hyped Apple iPhone.
Also, the National Telecommunications and Information Administration (NTIA) took a significant step toward smoothing the transition from analog to digital television with the introduction of a digital converter box coupon program designed to help retailers meet the needs of customers affected by the Feb. 2009 analog cutoff deadline.
Toward the close of the year, Black Friday pricing on big ticket items proved less sensational than the year before with door-busters focused primarily on older and private-label models. The flip side of that cautionary pricing was that many retailers reported consumers favored smaller items this year.
'Message' Shares Spotlight At 40th CES
Marshal McLuhan's famous mantra, "The medium is the message," took a bit of a hit at the 40th annual International CES as newly introduced technologies and products shared the spotlight with a variety of content industry executives who addressed the crowd via keynote speeches.
Notable speakers included Robert Iger of Disney, Les Moonves of CBS, FCC chairman Kevin Martin and more.
Circuit City Goes High Tech
Circuit City incorporated high-tech sales tools including wireless tablet PCs and in-store kiosks offering live video chats with firedog support staff as part of an ongoing effort to redefine its role among consumers and reinforce its retail presence. The innovations were demonstrated by CEO Phil Schoonover during the National Retail Federation's annual convention. "Technology is the key enabler behind our multi-channel strategy," he said.
Flat-Panel: Feast or Famine
Retail executives at TWICE's annual Retail Roundtable, held during the 2007 International CES, discussed the pricing pressure that permeated the flat-panel category during the 2006 holiday selling season. Oversupply, as opposed to the prior-year's shortages, provided dealers with just enough rope to hang themselves by allowing for a price war where the drive for market share outshined the hunt for profit.
"Once you set a low benchmark, you've degraded the price points thereafter," said Dave Workman, PRO Group executive director. "It's scary. We've robbed ourselves of two years worth of sales."
Vista Launch Boosts PC Hardware Sales
Microsoft launched its long-awaited Vista operating system this month. While initial sales of the software were considered disappointing when compared to the XP launch, the new system did serve to boost PC hardware sales in the days following the January 30 rollout.
Retailers like Circuit City and CompUSA hosted a series of Vista promotional events leading up to the launch including in-store promos, a live online forum to discuss the system (CompUSA), parties in select stores around the country (Circuit City), and more.
Circuit City Rearranges Its Deck Chairs
Following financial woes driven primarily by the flat-panel price wars during the holidays, Circuit City overhauled its corporate structure and moved to close stores in the United States and Canada in a bid to improve its financial performance. Under the new order, the organizational chart was streamlined and centralized, and executive VP Dave Mathews was given a key merchandising, marketing and services role.
Michael Dell: Back In The Saddle
Michael Dell took back the reigns of the company he started in 1984, succeeding Kevin Rollins as CEO. As the year progressed, Dell led his company to augment its long-standing direct-to-customer sales model and opened itself up to mass retailers. In June it began selling its Dimension line of PCs through Wal-Mart and Sam's Club stores; later in the year it added Staples and Best Buy to the retail roster. It also continued to sell some of its products through QVC and Costco.
This mass market move coincided with a brand adjustment in which the previously PC-only Dimension brand was opened up to include notebook models and the previously notebook-only Inspiron brand was expanded to include PCs. The Dimension brand and the Inspiron brand are now both sold through mass retailers and through Dell's traditiona direct channel.
Retailers and E-Tailers Bow Video Downloads
Amazon.com and Tivo partnered to sell downloads of video programs to TiVo DVRs for playback on household TV screens via a new service called Unbox on TiVo, an extension of the Unbox service launched by Amazon the previous year.
The companies initially offered content from sources including CBS, Fox Lionsgate, Paramount Pictures, Universal Studios Home Entertainment and Warner Bros. and planned to add content from other sources as the service developed.
Pricing for TV episodes was set at $1.99 each, and pricing for movies was set to range between $9.99 and $14.99. The service also offered movie rentals starting at $1.99.
A day after the TiVo/Amazon announcement, Wal-Mart also entered the video download category, launching a beta version of its own video-download service. The service offered content from many of the same partners, save for Disney/Pixar.
Wal-Mart's videos, available in protected WMV format, were playable on multiple portable media players and video-capable MP3 players.
Nationwide Dealers Report Market Share Gains
Despite weakness in the white-goods industry and heightened competition in consumer electronics, member dealers of the Nationwide Marketing Group grew their market share last year by surpassing industry unit sales averages in both categories, according to organization executives at the buying group's biannual PrimeTime! Convention held this month at the Walt Disney World Dolphin Hotel in Orlando, Fla.
CompUSA Closes 126 Stores
CompUSA announced planes to close 126 of its 229 locations over a period of two to three months, as part of an ongoing restructuring at the chain. Other major changes included a management shakeup, widespread layoffs and a $440 million cash infusion to buoy its balance sheet.
Sirius, XM Announce Merger Plans
Sirius and XM announced plans to merge the two companies to create a $13 billion company. The deal was originally expected to close sometime this year. At press time the majority of shareholders from both companies had voted in favor of the deal, though the companies were still awaiting federal approval.
Wal-Mart Offers In-Store Pickup
Following a three-year pilot program, Wal-Mart launched a national rollout brining its "site to store" service to most Wal-Mart locations in the 48 contiguous states by late summer. The service allows the world's largest retailer's online customers to retrieve their purchases at a local Wal-Mart store and save on shipping costs.
Costco Limits Returns
Costco put the kibosh on its open-ended return policy on consumer electronics and capped the time limit on CE refunds to 90 days. The move came after the company lost tens of millions of dollars in returns, mainly in big-screen TVs that consumers couldn't operate or which they exchanged for better and cheaper models as prices fell.
Tweeter Closes 49 Locations
Tweeter Home Entertainment Group announced it would cut its store base by one-third, exit four states and trim 20 percent of its workforce in a massive restructuring aimed at stabilizing the business, focusing its best performing markets, and converting its remaining 104 stores to its new "CE playground" format.
The move was prompted by the holiday drop in flat panel pricing that severely injured the company financially.
NTIA Sets Digital TV Converter Coupon Rule
The U.S. Department of Commerce's National Telecommunications and Information Administration (NTIA) issued its final rule for a digital-to-analog converter box subsidy program to aid consumers who need the equipment in order to prepare for the Feb. 17, 2009 conversion.
As of Jan. 1, 2008, all U.S. households will be eligible to request up to two $40 coupons to be used toward the purchase of up to two converter boxes. The coupons will be issued to qualified applicants until $990 million in initial funding has been exhausted. Once the initial fund is used up, Congress can authorize spending an additional $510 million to fulfill coupon requests.
The Consumer Electronics Retailers Coalition (CERC), an industry association that addresses public policy issues affecting CE dealers, applauded the rule.
Brand Source Kicks Up Marketing Effort
Brand Source/AVB, the $11 billion home products buying organization, announced plans to step up its advertising to build brand awareness, drive traffic and increase its market share in a sluggish sales environment.
The group's plan was to build upon its multimedia marketing strategy to get the Brand Source name before female consumers.
The announcement came at the 3,000-member group's fourth annual spring Summit, held this month at the Hilton Anatole Hotel in Dallas.
CEO Bob Lawrence told attendees "Our primary goal is to get footprints in the store, because without a customer, nothing else matters.
Circuit City Continues Overhaul
Still dealing with the fallout of the holiday flat-panel pricing battle, Circuit City made a series of major strategic maneuvers including a highly-publicized and often-criticized act to replace 3,400 of its highest-paid sales associates with new employees to be hired with lower wages.
A week after this announcement, the retailer announced plans to make additional cuts on expenses like travel, overlapping responsibilities and the like. It also said it was planning to launch a new store format.
HHGregg Goes Public
Gregg Appliances, the privately held white- and brown-goods chain, announced its plans to take itself public. It also planned to revert its company name to its trade moniker, hhgregg, under a corporate reorganization.
The company completed its initial public offering on July 19, raising $48.8 million, and began trading on the New York Stock Exchange on July 20 under the symbol HHG.
Micro Center Eyes Ex-CompUSAs
Micro Center announced plans to add at least three new stores this year in addition to the one it had just opened in Patterson, N.J. The chain's merchandising VP told TWICE that it was looking to pick up as many as 10 recently shuttered CompUSA locations for use in its expansion.
At the time TWICE originally reported on the story, Micro Center had plans to open up in a former CompUSA in Rockville, Md. in May. The company had also already signed letters of intent to occupy two other closed CompUSA locations and that it was looking at seven more.
Buying Groups Grow Share
In spite of more than half a year of challenges in the CE and majap industries including rock bottom flat-panel pricing and a soft housing market, independent buying groups found a way to gain ground while some national and regional chains took a major hit. While researching for its buying group report, TWICE found that these organizations were able to accomplish this kind of growth through consolidation, specialization, centrized marketing programs, providing discount services and council to members, and more.
Top 100 Retailers See 7% Uptick
The nation's largest CE dealers saw their collective revenue rising 7 percent to more than $113.6 billion in 2006.
The annual TWICE Top 100 CE Retailers Report, a study conducted in partnership with The Stevenson Company, found that the primary factors behind this growth included seemingly insatiable consumer demand for flat-panel TVs, growth within the GPS category and mass-market adoption of personal entertainment and communication devices.
Wal-Mart Bows CE Initiatives
The world's largest retailer made several moves to improve its CE departments including editing and upgrading its product offerings, introducing customer service and product training programs for employees, and redesigning its displays and in-store signage.
Circuit City Restructuring Continues
Circuit City dismissed 200 employees at its company headquarters in Richmond, Va. and began realigning store workers around the country. The announcements came only a few months after the retailer's April house cleaning in which 3,400 of its highest paid and most experienced sales clerks were dismissed.
The headquarter layoffs affected departments across the board and were implemented to control costs and eliminate duplication, spokesperson Jackie Foreman told TWICE. In the months leading up to the layoffs, Circuit City had been reorganizing its corporate workforce into cross-functional teams to promote teamwork and allow the company to react more quickly to marketplace changes, she said.
CompUSA Heads To The Office
CompUSA embarked on a new business plan under which the retailer dropped its mass consumer audience target to focus mainly on the small and medium business markets, as well as "technology enthusiasts" and "educated professionals."
The company said it had identified these groups through market research as its core customers and planned to adjust its product assortment, increase its technical services, tailor its marketing and explore new store formats to better serve them.
Staples Offers Nationwide Recycling Service
Building upon its existing in-store program for recycling items like ink and toner cartridges, cellphones, PDAs and rechargeable batteries, Staples began accepting used PCs and accessories in all of its stores.
Under the plan, the chain accepts an unlimited number of computers, monitors, laptops, printers, faxes and all-in-ones for a recycling fee of $10 per large item, regardless of brand or where the equipment was purchased. Smaller computer peripherals, such as keyboards and mice, are accepted for free. TVs and floor model copiers are not included in the program.
Ingram Micro Buys DBL
Ingram Micro entered a definitive agreement to acquire DBL Distributing at an estimated purchase price of $96 million.
The CE distributor now operates as a fully-owned subsidiary of Ingram Micro and retains its brand name and business model.
David Lorsch, DBL's founder was acting as both president and CEO before the deal, but once it closed, the distributor's chief merchandising officer Henry Chiarelli took over as president. Lorsch originally told TWICE that he planned to remain at the company through June 2008; however, he ended up resigning early without further explanation in December.
Best Buy Rolls Out Mobile Stores
Best Buy began a planned nine-month process of opening upwards of 180 Best Buy Mobile stores in 12 states, including 170 shops within Best Buy stores and up to 10 freestanding locations.
The stores began appearing in Manhattan late last year. They feature an expanded assortment of handsets, accessories and services for multiple carriers including Cingular, Sprint and Verizon, and MVNOs including Amp'd, Boost, Go Phone, InPulse and Virgin.
The concept is a joint venture with Britain's The Carphone Warehouse, possibly the world's largest independent mobile phone retailer with 2,000 stores across 10 European markets. As part of the pact, Carphone introduced Best Buy's Geek Squad service program into its trading areas.
In November, Carphone announced plans to have upward of 1,000 Best Buy Mobile in-store shops installed chain-wide by the end of 2009.
Supreme Court Ruling Could Affect CE Prices
The Supreme Court ruled in a 5-4 decision to make it easier for manufacturers to require retailers to stick to minimum advertised prices (MAP), a move that could raise prices at retail, the dissenting justices said.
The high court's decision overrules a previous anti-trust statue that said MAP agreements were illegal. In the future courts will decide on a case-by-case basis whether the MAP agreement violates anti-trust laws.
iPhone Launches Amid iFrenzy
The iPhone debuted at retail last month amid what was likely the most hyped CE product launch of the year.
As the smartphone hit the market, analysts predicted 2007 sales would reach 2 million to 3 million or more units in the United States.
The product launched exclusively through Apple's stores and AT&T's nearly 1,800 stores and AT&Ts direct-mail operations, much to the dismay of many other CE dealers who were denied access to the cell phone.
Magnolia Redesigns, Plans Expansion
Regional A/V specialty chain and Best Buy subsidiary Magnolia Audio Video is planning a national expansion that could build the $160 million business into a $1 billion business over five years.
CEO Jim Tweten said the plan is contingent on a successful transformation of the 53-year-old Northwest chain from its current retail model to that of a service oriented provider of whole-house systems.
The new Magnolia models would operate out of a smaller footprint — 3,000-square-foot showroom/design centers located next to Best Buy stores with Magnolia Home Theater shops — and would target architects and luxury home developers in addition to well-heeled consumers.
The transformation began this summer and included plans to close six underperforming stores and remodel the remaining 13 by early November. The chain then planned to spend a year tweaking and evaluating the new operation before embarking on its expansion plans.
Proposed Harvey, MyerEmco Merger Fails
Harvey Electronics, the metro New York-based chain, made a bid to purchase Washington D.C.-based MyerEmco Audio Video in May in a $10 million deal that would have given the combined operation 19 stores stretching from the Northeast to the Mid-Atlantic states.
The deal was originally scheduled to close in June, but was finally called off this month by MyerEmco's management after the closing date was repeatedly pushed back by Harvey's owners, private-equity firm Trinity Investment Partners.
"This dragged on way too long," Jon Myer, CEO of MyerEmco, told TWICE. "It's not good for your company. The staff was up in the air too long, and we have a business to run."
Myer also told TWICE that he wasn't actively shopping the 52-year-old family business, although "it's always on sale for the right price."
Tweeter's Parent Cuts Corp Staff, Names New CEO
The leaves weren't the only things changing in Massachussets this month. After filing for bankruptcy this summer, Tweeter saw half of its corporate staff cut back, the resignation of its president and CEO Joe McGuire and the naming of his successor, George Granoff, following its acquisition this month by investment group Schulze Asset Management.
George Schultze, principal of Schultze, told TWICE that approximately 80 staffers were let go, most based at Tweeter's Canton, Mass. headquarters in an effort to reduce excess corporate overhead that was "choking stores."
Schultze also said that McGuire, who had helmed the A/V chain for two years, was "unable to execute the turnaround strategy."
Granoff, McGuire's replacement, had held the roles of president and COO at both Ames Department Stores and at Bradlees. He had also been CEO of Party City, CEO of art specialty retailer The Art Store, and founder and CEO of Sherborn Optical.
Ultimate Electronics Enters White Goods
Ultimate Electronics added major applianced to its largely video-based assortment.
The A/V specialty chain began testing the category this month in Oklahoma with a 350-SKU selection of laundry and kitchen products that filled upwards of 40 percent of its three lab store sales floors. Depending on the results, the company said, Ultimate planned to possibly begin rolling out majaps in its other 29 locations by early next year.
Apple Updates iPod Line, Cuts iPhone Pricing
Apple introduced its latest line of iPods this month in an effort expected to stimulate holiday traffic, encourage replacement sales in a mature market and test whether music-playing MP3 phones will eventually dominate MP3 player sales, retailers and analysts told TWICE following the launch.
The new line included the iPod Touch (an iPod-only version of the iPhone with motion user interface), new nano models that feature video capability for the first time, and renamed versions of the traditional iPod, now called the iPod Classic.
The new model announcements coincided with an iPhone pricing adjustment. Just months after launching the phone, Apple dropped the 4G model and dropped the price on the 8G model from $599 to $399. Early adopters who had already paid $599 were each given a $100 Apple store credit.
Wal-Mart Updates Tagline
Wal-Mart, a retailer that built its reputation on its price-based appeal, replaced its 19-year old tagline "Always low prices" with the lifestyle-conscious "Save Money. Live Better."
A company spokesperson told TWICE that the new tagline is "about storytelling," and explained that the retailer is looking to convey the message that it is not only concerned with providing the lowest price, but also with showing customers how the savings they receive "translate into their lives."
The launch of the new tagline and its accompanying advertising campaign quickly followed a series of key brand additions to the retailer's product assortment across a variety of categories. Some notably higher-end additions in the electronics realm included brands like Dell, Sony, Samsung and Toshiba.
Amazon Sells DRM-Free MP3s
Amazon launched a public beta trial of its new digital music download store, claiming it offers the biggest selection of a la carte DRM-free MP3 music.
The store, called Amazon MP3, has more than 2 million songs, all available exclusively in MP3 format without digital rights management. The songs can be downloaded to any MP3 player and most songs are priced from 89 cents to 99 cents.
NATM Seeks TV Alternatives
At its annual meeting, NATM Buying Corp. announced it was looking to offset diminishing TV margins by directsourcing a wide range of supplementary products from China.
Categories under consideration include housewares; TV furniture; seasonal items like fans, heaters and outdoor grills; and CE accessories including surge protectors and remote controls.
TWICE Announces 2007 Retailing Awards
This month TWICE awarded the winners of its fourth annual Excellence in Retailing Awards.
The winners and their respective categories follow:
- Best National Retailer : Costco Wholesale
- Best CE/Appliance Dealer: P.C. Richard & Son
- Best A/V Specialty Dealer: Starpower
- Best Consumer Direct Dealer: Newegg.com
- Best Vendor Retailer: Sony Style Stores
Target Revamps CE Departments
Target rolled out its latest CE department prototype this month with the soft opening of 61 new stores around the country.
The redesigned departments are larger, feature a number of assortment upgrades and place renewed focus on the TV wall.
CompUSA Bows New Format
CompUSA opened a new-format store in McAllen, Texas this month, elements of which will be incorporated into other CompUSA locations across the country.
The 25,000 square-foot relocation includes an Apple shop, a full-length LCD TV wall, expanded gaming and business services sections, and a redesigned IT support area.
Best Buy Exits Analog TV
Best Buy stopped selling analog TVs effective October 1 and will participate in the federal converter-box coupon program as part of its DTV transition strategy.
The chain claimed to be the first CE retailer to publicly announce an exit from the analog video business, although it said it would continue to support analog TV owners by carrying coupon-eligible converter boxes beginning early next year under the U.S. Department of Commerce's voluntary National Telecommunications and Information Administration (NTIA) DTV Converter Box Coupon Program.
P.C. Richard Celebrates 98th Anniversary
P.C. Richard officially opened its 50th superstore on October 11. The day was doubly significant as it also marked the retailer's 98th anniversary.
P.C. Richard is the nation's largest independently owned white-and brown goods chain.
The City Opens Its Doors in NYC
Circuit City opened a new format store, The City, on Fifth Avenue between East 44th and East 45th Streets in Manhattan last month.
The 20,000-square-foot concept store, one of seven around the country, offers a tightly edited assortment, new fixturing, enhanced customer service and a more interactive shopping experience. The format also "makes it easy for consumers to swing by and pick up" their online purchases, according to CEO Phil Schoonover.
Black Friday: Traffic Up, Ticket Down
After a lukewarm autumn for retail, shoppers came through in record numbers on Black Friday weekend, marking the traditional start of the holiday selling season with traffic jams and long checkout lines.
Notably, pricing appeared more rational than last year, with older models and private-label products comprising much of the door-buster specials.
At the same time, however, shoppers spent less on average than they did the year before, generally favoring small, grab-and-go consumer electronics over flat-panel TVs, which fueled 2006's Black Friday frenzy.
E-Tail Traffic Heaviest On Thanksgiving
Thanksgiving Day remained the busiest online shopping day of the holiday season for the fourth year in a row, according to a study by Hitwise, an Internet measurement service.
The report, based on a sample of 10 million Internet users in the United States, found that Thanksgiving traffic to the top 100 retail Web sites surged 20 percent year-over-year, while online traffic on Black Friday increased 16 percent over the corresponding day in 2006.
Office Depot Goes Mobile
Office Depot has begun offering customers a host of mobile shopping services including a store locator, RSS feeds, text-message coupons and offers, and sweepstakes capabilities.
Jackson Leaves Best Buy
Darren Jackson, Best Buy's longtime chief financial officer and more recently head of its customer operating groups, left the company Dec. 7 to become president/CEO of Advance Auto Parts.
CompUSA Sold For Closeout
CompUSA was bought by an affiliate of liquidator Gordon Brothers Group, which has plans to eventually close out the chain by selling off its assets.
At press time, the terms of the transaction had not been disclosed. (See p. 1)