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Retailers See Renewed Opportunities In Audio

TWICE: What products and technologies are going to sizzle this year?

Mike Linton, Best Buy: We still like digital imaging, and wireless looks good. Last year we saw a big run in DVDs and TVs, and TV envy still has a long way to go. In general, we think the industry looks good.

TWICE: Why the optimism?

Linton: You have a lot of great content out there, and, as was mentioned earlier, there’s never been a better time to listen to music, from the perspective of sound, choice, everything. We saw a real strong movement in music, and we like a lot of the content coming out. We hope that continues.

Neal Bobrick, Ultimate Electronics: Anything television, digital and wireless. I think home networking is going to start making its way in. HD radio was just announced, and it will be interesting to see where that goes. We will be showing a lot of support there.

We believe the industry has done a great job of dumbing down our customers in audio, and we believe there’s a great opportunity to get customers back and involved. We’ve got some significant plans to do that — ways that we can differentiate ourselves from all the competition sitting here — that will expose customers again to the benefit of component audio.

Andy Berman, RadioShack: DVD, wireless, and the convergence of technologies onto ubiquitous devices. I think we will see some strides there. The networked home will be a more seamless, easier exercise as time goes on. Ubiquitous delivery of content to a myriad of different devices will be a leader as well.

Bill Parker, Gateway: We find that what works for us is to get into the more specialty computer business, like the media PC. Our portable growth has also been extraordinary, although unfortunately it’s been at the expense of desktop. But as we introduce more innovative and creative products, that’s where business is doing the best.

I would also look at home-theater-in-a-box as an entertainment center, not necessarily hooking it up to TVs on an integrated basis, but as a separate component.

And we have really neglected the service side of the business. That’s where margins are, and our time will be spent more on warranty, financing and education access. That’s the direction we want to go in overall.

John Schlenner, Sears: It’s video for us. The consumer is looking for the TV and everything that supports that TV.

We are also looking at technology convergence. The example is the digital camera and camcorder coming together. We need to continue to find exclusive products like that, like the DVD and VCR combination. That was a huge hit for us. That’s what we have to do, and it’s all centered around digital.

TWICE: Within video, where are you placing your bets?

Schlenner: Micro LCD, plasma and regular LCD. Those will be huge as product becomes more readily available.

Noah Herschman, Tweeter: For the first time, we are going to have to take a long, hard look at our current vendor partners. We have to figure out who the players will be in the next few years. People have to be able to evolve their businesses to keep up with technology. It’s a relentless marketplace, because just as there will be a fallout of retailers, there will be a fallout of manufacturers. We’ll have to see. We have been very loyal to manufacturers over the last 32 or 33 years. For the first time, we will have to make some very hard decisions, and say, “Is this a person who’s going to take us into the future?”

TWICE: Is there still a place for audio?

Herschman: Sure. People will listen to great music and have fabulous fidelity. It just won’t look the same as it does today. The days of having speakers and a turntable are probably over.

With delivered audio, music has no physical medium, and with satellite and the new wireless technologies coming out, you’ll be able to have music on demand in your car, maybe with no physical medium there either.

Tom Edwards, Pacific Media Associates: Digital audio has shifted to the personal listening devices, and Generations X and Y particularly are resisting buying whole albums. They want to buy single plays. They want to be able to download a 99-cent or 89-cent item, and that trend will continue. There is still life at the very top end of the component audio segment, but in the middle, everything is collapsing.

Frank Sadowski, I think price compression is the biggest danger to our business. It shouldn’t really shock anybody that opening price points for DVDs, for example, have gone way down. The healthy categories don’t compress really rapidly, though. DVD is remarkable because even high-end DVD players are $79, while VCRs have maintained that price range for years.

Yet there are also categories that have declined at the opening price points, but haven’t really compressed. Those are huge opportunities for all of us. A great example is digital cameras. Digital SLRs are breaking $1,000, and we are selling as many as we can find.

The commoditization that brings these products to the masses is not necessarily a bad thing. I’m very bullish on this, because not all categories are subject to dangerous compression.