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Vendors Weighing Mass Channel Volume Against Independents’ Up-Sell

TWICE:At International CES we spoke about the need for greater vendor support to ensure a healthy independent channel. Have manufacturers been showing increased sensitivity to the needs of the independent dealer?

Steve Caldero, Ken Crane’s: Yes and no. Most vendors realize Circuit City going away was not a good thing, and they realize that they need the independent channel to sell their step-up products and new technologies, now and in the future. But realizing it and doing something about it are two different things.

Some vendors have established MAP [minimum advertised pricing] programs with real teeth in them, while others look the other way as their products are heavily discounted in print and online. Some manufacturers produce different products for different channels while others sell everything everywhere.

When it is all said and done, for many manufacturers it is only about moving boxes; they neither understand retail nor do they really care. Short term thinking — this month’s, this quarter’s, this year’s quota — is what has put many retailers and manufacturers out of business.

Tom Galanis, Sixth Avenue Electronics: Manufacturers are cutting back, trying to minimize the bleeding from within.

Jeannette Howe, Specialty Electronics Nationwide: I would say that the specialty manufacturers are showing greater sensitivity. The specialty niche is a much smaller slice of the entire CE business and the manufacturers and the dealer base are quite dependent on one another. We really are “people doing business with people.”

Dave Workman, PRO Group: Vendors are generally trying to be supportive of any channel they see as having a prospect for growth. This is not a one-size-fits-all answer, however. The reality is that many vendors have had to increase their presence in the mass market and Internet space. In this current economy some vendors are financially constrained from doing more, some are letting Best Buy make up the rules, and some are chasing business wherever they can find it and justifying the decisions.

Noah Herschman, The Consumer Electronics Association recently reported that 31 percent of all CE products are sold online. More and more, vendors are realizing the importance of having a significant online presence for their products. Not only is the online channel a convenient way to buy, it is a critical channel for customers to research — BIGresearch reported that 87 percent of all customers research products online before buying them.

We believe that CE vendors are starting to truly understand the power of online and are adjusting their overall marketing strategies accordingly.

Rick Souder, Crutchfield: I believe a number of suppliers are attempting to address the needs of specialists. They recognize that specialists have been instrumental in introducing, nurturing, servicing and teaching customers about new technologies for years. A number of suppliers realize that if the specialist channel can no longer afford to provide those services, the industry will be condemned to selling commodity products “by-the-pound” with no way to get the consumer to appreciate the technology and value of newer, more advanced products. A number of suppliers realize that specialty retailers exist in bricks-and-mortar and on the Internet.

There is no doubt that the biggest volumes in the industry will continue to be done in the mass channels. There is also no doubt that total dependence on these channels will stifle innovation and change customer expectations to the long-term detriment of the industry.

We are seeing renewed dedication from some key suppliers to address these issues. Many have implemented new policies or strengthened old ones that will support higher-end products and higher-end specialty dealers. Many have revisited distribution strategies and created better differentiated lines of product that recognize the contributions and abilities of specialists.

This is not purely altruistic on the part of the suppliers. Their laboratories and factories are producing new products and technologies that need extra support from retailers in order to repay their investment. Some suppliers are demonstrating the leadership necessary to position these products properly so they and their dealers can be profitable. They are to be commended for taking a stand when everyone is clawing for business.

Dan Schwab, D&H Distributing: We see vendors being focused on helping us drive their independent business and creating incremental demand. With Circuit City and other chains going away, the pendulum has swung back somewhat to make sure that vendors have adequate customer breadth and market penetration. Vendors are focused on ensuring their good retail partners have adequate margin on their products to be successful in merchandising them, and to try to protect them with MAP.

Ross Rubin, industry analysis director/consumer technology, The NPD Group: Yes, since the exit of Circuit City, which left the industry with two powerful national retailers with less national competition, manufacturers have had to carefully examine their distribution strategy. Independents have always been important but of course it depends on the product.

We’re also seeing e-commerce receive a lot more attention, particularly for less expensive, more portable electronics.