As the products we sell become commodities, C-tailers will look to manufacturers for differentiating innovations.
By Krissy Rushing
The home theater category is advancing at breakneck speed, resulting in unprecedented industry growth and, of course, corresponding challenges for A/V retailers. However, the not-so-obvious by-product of all of this activity is the shift in industry economics swirling in its wake.
For the dealer, sizing up a potential customer was once a relatively simple matter—customers were most likely enthusiasts. Home theater, however, isn't just for enthusiasts anymore. As a result, a retailer must often adapt itself from one type of customer to another, juggling competing interests and making rapid judgments while even more consumers flood the gates.
Push higher-end, higher-margin gear, and it may not be so easy to close as many deals. Go the other way and push mainstream product, and the margins could be as slim as a flat-panel display.
The dilemma is rooted in the commoditization of home theater products; the difference in the performance of products at both ends of the spectrum continues to dwindle. At the low end, even entry-level products now boast surprisingly sophisticated capabilities. At the upper end, an overall greater demand is driving prices of once-rarified technology downward.
One would think access to better quality products for the masses would be, as Martha Stewart says, "a good thing." And it is—for consumers.
However, the blurring of the line between low-end and high-end gear has dictated the need for all of the "ends" to get, well, even higher. Manufacturers must push the envelope in order to continue to mine in the land of margins. Many are finding the need to play ball with the mainstreamers and offer product that caters to that market's needs, putting themselves in highly shark-infested waters and risking their brands.