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TWICE Panel Projects Strong Demand For New Technologies, Services

Each year TWICE convenes a rountable of leading CE merchants to examine crucial issues facing the industry. In Part II of the proceedings, recorded during the recent Consumer Electronics Show, top executives from Circuit City, CompUSA, RadioShack, Tweeter,, Home EntertainmentSource and The NPD Group point to the product trends and consumer behaviors that should bode well for business this year. An edited transcript of the discussion follows.

TWICE: What’s your outlook for the year ahead in terms of consumer sentiment, exciting new products and technologies, and how your businesses will leverage both to generate sales?

Tony Weiss,CompUSA: We’re encouraged by what we see, how 2004 finished, and how 2005 is starting. Relative to the other mass specialists out in the marketplace, we had one of the largest increases on a year-over-year basis in our business, so we’re really happy with how we finished 2004. And if the first few weeks of 2005 were any indication, we’re optimistic about what this year has to bring for both Good Guys and CompUSA.

There are going to be a lot of technologies that drive it, including anything that has a mobility-type orientation that allows customers to communicate anytime, anywhere, anyhow. That will be a real strength for us and everyone around this table. Broadband will continue to drive the business. Ultimately, that’s the tree that everything hangs off of and that will allow the opening for lots of other services and content.

If you look at the end of the year versus where we start, I think you’ll see a dramatic change in customer adoption of satellite services, voice-over-IP, and any kind of music services that can be delivered across the broadband.

TWICE: Does digital imaging have any headroom left to maintain its dramatic growth curve?

Weiss: You’re going to see two things. From an ASP perspective, top line revenue growth will be challenged in some places on imaging products. The average selling prices will continue to decline and you’ll see more feature-rich, robust technologies getting in the consumers’ hands. That’s the core mainstream of digital imaging.

On the upper end, you’ll see rapid growth this year on digital SLR for the consumers. That will help drive the top line revenue as well, along with the accessories that can be purchased with some additional SLR technologies.

TWICE: Will you resume opening new stores?

Weiss: Yes. Most people know that we hadn’t opened a lot of CompUSA stores over a period of time. Last year we opened about 10. This year, right now we’ve got about 15 new stores on the books. We’re also looking at some store expansion and obviously relocations as well. [See sidebar, p. 18 for what’s in store for Good Guys.]

Jim Ristow,Home Entertainment Source: During the last year, we grew to over 500 locations of A/V specialists around the country. You’re going to see us try to leverage those locations to get footprints in the stores. Also, we feel we have one of the best installation networks in the country and look to partners to utilize our expertise nationwide.

We also did some unique things last year in that we started, for the first time ever, warehousing for our members. That equated to our having allocation in the fourth quarter, when traditionally the independent dealer didn’t. Our numbers were up in the upper teens, and with many of our major video suppliers we were up 30 to 40 percent.

We are extremely excited about 2005, specifically with some of the flat panel factories that are opening or about to open and with what that’s going to mean for the LCD business.

TWICE: Is HES interested in direct sourcing?

Ristow: We’re looking at all different options right now. We have some great partners and there might be some opportunities in different segments or price categories to do some different things.

Frank Sadowski, From a product standpoint, we like to talk about the technologies that are over the horizon, but on this side of the mountain, I think you’ll continue to see incredibly rapid adoption of flat panel TVs of all kinds, shapes, and sizes. Digital cameras have a couple years of robust growth left, maybe decelerating slightly, but still very dramatic growth. I think Apple’s competitors will field some impressive products that maybe do things a little differently and will carve out a little niche there and keep that business growing. Everything wireless — phones, email devices — continue to be exciting and have a high degree of acceptance.

TWICE: What’s Tweeter’s take?

Judy Quye,Tweeter: As you know, we launched an advertising campaign this year around “untangling your mind.” We’ve had great consumer response to it. To fulfill that promise, we provide that great Entertainment Architect person who can come into your home, help figure out your needs in your life, and come back and design a solution for you. In-home installation is growing at over 50 percent a quarter and we’re running to keep ahead of it. That’s a huge indicator of the great technologies available, and of the need for folks who love this business who are available to come into your home and put it together. That’s very much our focus.

Don Carroll,RadioShack: I think the digital revolution continues. That’s a long-term trend more than a short-term trend. We also have a great outlook on consumer confidence, with the economy starting to come back stronger. Also, people are becoming more comfortable with technology, which bodes well for all of us.

At the same time, the cost in the business keeps coming down. As you get manufacturing efficiencies, these products become more available to more people.

From a RadioShack perspective, we’re going to aggressively go after our C3 concept store, which continues to do well for us, and will continue to execute against our retail services program, which now includes 542 Sam’s Clubs wireless kiosks and our mall-based Sprint kiosk program. We see a very good year ahead. Knock on wood, if the economy hangs in there, we’re going to do well.

Ross Rubin,NPD Techworld: From a category perspective, I agree with the other folks in terms of mobile portable products being hot. Consum want the “rich and the thin:” rich experience and thin form factor. It’s also exciting to hear about retailers moving forward with different kinds of concept stores.

At some point, as these products come into the home independently, and we build that home network piece by piece, we’ll figure out how it makes sense to bring them all together.