Was it only one year ago that the biggest single concern of conventional consumer electronics retailers attending the International CES was how to survive against e-tailers?
They were springing up like dandelions in my lawn. Venture capitalists were rushing to pump in investments, and the dot-com gurus were confidently predicting that no-overhead 24/7 online dealers would out-price and obsolete those poor wretches whose fluorescent-lit selling floors were only available to customers on a 9-to-9 basis.
Since then, e-tailers, and e-tailing itself, has bumped heads with the marketplace reality. A number of lessons were learned. One big one was that Internet shopping is not something that everyone does, or even wants to do, particularly for electronics.
There’s a reason why Best Buy carries a dozen brands of TVs. Yes, in all probability half the customers will walk out with an RCA, Sony or Zenith, but they want to look at what else is available in a hands-on, or at least an eye-balls-on, environment.
Second, as I learned early on in Marketing 101 at NYU, you can eliminate all the distribution steps between the factory and the consumer, but you can’t eliminate the function or the related expense.
If the manufacturer is willing to ship small quantities to an e-tailer, then the manufacturer is performing the function of a distributor, not doing away with it. The e-tailer may not have a retail location, but he does have to pack and ship and do double the paperwork for returns.
No overhead? Who are we kidding? Forget the Maytag repairman, the operator of an e-tailing website is the loneliest guy around, unless he sells his soul to AOL or Yahoo or some other access provider. So you’re selling Panasonic boomboxes? So are 50 other sites, as well as the 12 local retailers in the customer’s shopping area.
How to get noticed is one problem. Radio advertising isn’t national, network TV is too expensive. Do catalogs work? They sure do, but what’s so high-tech/ low cost about that?
Capitalization became a problem when investors finally recognized that, contrary to the old joke, you don’t make it up in volume. There certainly is an e-tailing business out there, but an e-tailer has to have the funding needed to stay alive while building a customer base.
So over the past year, we have all discovered that traditional electronics and appliance retailers could not only live, but also thrive, in the face of e-tailing.
Another issue is obsolescence. My local paper recently reported that in one nearby city of 68,000, 97 percent of PCs in its public schools are so outdated they can neither be connected to the Internet nor run any current educational software. The solution proposed by the local superintendent of schools is to call for a multimillion-dollar bond issue to buy new PCs, though district voters just approved $24 million in bonds for school repairs.
He calls for the funding despite knowing the district has only one repair technician and two individuals responsible, on a part-time basis, for technology programs. I know that at Cahners, in just the smaller of the two buildings it occupies in New York City, it takes a team of 12 to hold training classes and maintain the approximately 500 computers and file servers that make up the network. And bear in mind that at some of the publications, some of the editors are PC-knowledgeable, and so the computer help desk is only called as a last resort.
Unless that school district is ready to also budget upward of $1 million a year for computer support-a sum it frankly can’t afford-another bond issue isn’t the answer to its computer problem.
Finally, my local Gannett paper did a comparison of pricing at the time of the last two Subway World Series. Here’s the rundown, with 1956 pricing first and 2000 pricing in parentheses: hot dog at game 25 cents ($4); reserved seat $7.35 ($110); average player salary $14,776 ($1.9 million); subway fare 15 cents ($1.50); Chevrolet V8 convertible $2,595 ($20,000); newspaper 7 cents (50 cents); house, 3 br.w/pool in Chappaqua (home of the Clintons) $46,000 ($1.1 million); GE TV, 19-inch b & w $169 (19-inch color $169).
So, as you sally forth into the new millennium, give some thought to what bargains we are offering our customer.
Bob Gerson, TWICE editor-at-large, has covered the CE industry for more than 30 years. He is founding editor of the paper and its longtime editor-in-chief. In recognition of his work, Gerson received one of the first Consumer Electronics Association Lifetime Achievement Awards.