Revisioning Custom Retailing: Part 5: Disruptive Innovation Will Transform Home Integration
Last month we talked about Internet reselling, wiki-marketing and margin erosion. We continue now with more disruptive innovation that’s transforming our world. Next month, we’ll delve into the upside.
Fewer Manufacturers, More Distribution
In some product categories—video, for example—manufacturers are dropping like flies. In the last four years, Pioneer, Mitsubishi, Hitachi, Fujitsu and NEC have exited the flat-panel market—not to mention boutique brands like NuVision and Marantz.
Today, continuing operational losses in video by Sharp, Panasonic and Sony raise doubts about their future commitment to the sector. This would be a huge loss. Who’s doing well? Upstarts like Samsung, LG and Visio. Yes, Visio!
And while the number of manufacturers decreases, distribution channels continue to proliferate, making brand exclusivity a thing of the past. Both trends erode margins, and further blur the line between specialty dealers and mass market merchants in the consumer’s mind.
Today, poor products don’t survive long. We live in a highly commoditized market environment, due to broad improvements in product performance and features, coupled with (sometimes dramatically) lower prices. This is the cost of success through innovation. With little to differentiate brands on a performance basis, there is less need for buyers to compare products, much less visit a showroom. If even entry-level brands perform well, why not shop on the Internet?
With Prices So Low, How Can You Lose?
Will breakthrough innovations re-invigorate premium TV brands and restore product differentiation to our industry? 3D seemed promising at first, but has disappointed. Step-up features in smart TVs seem to be holding their own. And while 4K OLED video may provide temporary relief, it’s competing against products that are already very good and very inexpensive, at a time when everyone seems to be a value buyer.
When new developments do manage to penetrate the market, they too will rapidly drop in price, become commoditized, and enter the mass market. With today’s accelerated product cycles, this process will occur more rapidly than ever before, giving dealers less time to ride the brief (high margin) waves of innovation.