Revisioning Custom Retailing: This Crisis Still Won’t Quit
Last month, CustomRetailer and George McKechnie debuted Re-Visioning, a new column dedicated to examining the challenges custom integrators face, as well as new strategies for the future. The first column began by profiling three of seven critical areas: housing starts, consumer buying power and Internet retailing. This month, we continue with the remaining four areas: changing consumer values, vanishing profits, new competition, and the marketing revolution.
Buyers today are interested in price, convenience, useful apps and quality service. If you doubt this, visit an Apple store and observe for yourself how that company is revolutionizing our industry—and in the process training a generation (or two) of consumers to expect products and features that are easy to use, elegant and cost-effective. In the process, they’re helping to undermine the value of our industry’s legacy brands.
Other factors are also at play. The consumer electronics industry is a very “efficient” economic market. With short product cycles, manufacturers can catch up with competitors on new features within a matter of months. Because of this, it’s now harder for the average consumer to differentiate between most electronic brands on the basis of sound, picture quality or feature sets. And with so many of these products coming out of the same factories in China, it’s hard even for the dealer to differentiate among them. When efficient markets force manufacturers to design products that are more alike, brand identity is undermined.
Manufacturers’ distribution policies have also contributed to the problem. When B&W cancelled marginal dealers during the Great Recession, then added Magnolia/Best Buy stores, they lost some credibility and goodwill, both inside the industry and among consumers. When McIntosh decided to encase certain Denon digital products under their proud logo and iconic metal and glass cosmetics, their legacy and distinctive “Made in America” story was compromised. And the more manufacturers expand their distribution channels in search of revenue, the harder it is for consumers to differentiate among these brands based on exclusivity, and the fewer protected brands there are for dealers to support.
Everywhere we look, profit is shrinking: Inexpensive wireless A/V distribution systems are squeezing out tried-and-true hard-wired units. Dedicated $10K touch panels are being replaced by cheap iPhone apps. High-end video sales (of flat-panel TVs and projectors) are being undermined by mass-market products. These trends hurt dealer profit in multiple ways:
• Lower profit margin on the product itself
• Fewer skilled labor hours to invoice
• Reduced programming markup
• Less need for a specialty dealer