updated 03:50 pm EDT, Wed July 26, 2006
Dell, Sony look to Apple?
Large electronics manufacturers such as Dell, Sony, and Philips appear to be attempting to following Apple's lead by establishing their own chains of branded retail stores and kiosks, according to one researcher. Those endeavors could turn sour, however, as OEM storefronts and kiosks represent a major change that will disrupt the current retail ecosystem. "Bypassing their existing distributors and retailers could prove successful for some, but might present challenges for others," said ABI Research director Vamsi Sistla. Most of those vendors already boast significant online sales, but want fresh fields for expansion and the ability to provide a richer, more customized experience for shoppers than retail chains can.
Control and protection of brands make the move to own-brand retail storefronts a tantalizing option for some manufacturers, for should consumer demand fall, an OEM can take more effective countermeasures via its own outlets while maintaining better control of margins.
Retailers' stock prices are partially determined by their bricks-and-mortar performance. Wall Street sets share prices using variables such as the number of stores added or closed down, as well as how much revenue per-consumer the stores generate.
By opening their own stores, OEMs such as Sony and Dell -- which were previously rated on their ability to design and make innovative CE products -- subject themselves to new kinds of judgment from financial markets. OEM-owned outlets represent permanent cost centers, and must perform well year-in and year-out.
"Stores mean ongoing operational costs as well as infrastructure," Sistla said. "Anybody can make money when times are good, but when economies contract, retailers are the first to be tested. Some will remain profitable, others may not. With this strategy, OEMs may be trying to 'boil the ocean.'"