Mass market retailers are set to come under threat from consumer technology vendors who are now designing products and services that take business away from retailers as opposed to generating repeat business.
Mass market retailers are set to come under threat from consumer technology vendors who are now designing products and services that take business away from retailers as opposed to generating repeat business.
Among those set to be affected are those retailers who sell games, music, movies and software such as antivirus and security products.
Last week in a move deliberately aimed at stripping business from retailers Sony last week announced a new portable Playstation product called PSP Go.
Currently Sony is selling a PSP that includes a drive which means that consumers have to visit a retailer to buy a game, or a third party software program for the device.
In the new PSP model which goes on sale later this year in Australia Sony has removed the UMD drive. Instead the device will have a Wi Fi or Internet connection which will force consumers to go online and buy from a Sony owned online store if they want to buy games or other software that will run on the device said handheld expert and analyst Michael Patcher.
Also taking business away from the likes of Harvey Norman, Officeworks and JB Hi Fi are antivirus and PC security Companies who are using the retailer to sell an initial software package and when registered are automatically and often without the consumers consent getting the consumer to buy their next license online as opposed to having to go back to a retailer.
JB Hi Fi Chief executive Richard Uechtritz said that currently between 30 and 35% of their sales was either music, movies, games or software and that he was well aware of the move to sell content online by mainstream vendors.
He added “It is inevitable that we will see change at a retail level, 10 years ago we saw the emergence of Napster and despite sites like iTunes 80% of music is still sold via retailers like JB Hi Fi. Yes change is coming but we are still selling products like iTunes cards. According to Apple we are one of the biggest retailers in the world for this product”.
He said “I believe that at this stage we still need to work with the vendors who are moving online, we are still working with Apple and BigPond and both these organisations are selling content over a broadband network. I believe that there is still value in us getting a clip of the ticket on the way through”.
The new PSPgo has a slider design and is slimmer than previous models. However, despite the product being cheaper to produce Sony is expected to charge up to $100 more for the product than the previous PSP-3000 model that is currently being sold via retailers.
Recently ChannelNews revealed that Sony Australia has registered 19 Sony Central Store names and that in partnership with retailers they are still opening Sony branded retail stores in Australia.
These stores say analysts will compete with mass retailers like Harvey Norman and JB Hi Fi while also delivering for Sony higher profits because of reduced margins and marketing expenditure associated with doing business with mass retailers.
Recently Sony Computer Entertainment unveiled a new PS3’s online network that will allow consumers who own a PS3 or the new PSP Go to download content from a Sony store as opposed to buying content from a local retailer.
This service is also expected to be available on Sony Bravia LCD TV’s that come equipped with a Sony web browser, storage slot and online Ethernet capability.
A leading retail analyst said “It is clear that retailers are set to lose business as vendors start selling content and services direct. Once Australia has a faster broadband network and reasonable pricing you will see an explosion in online content such as games, music, movies etc. What consumer electronics retailers in Australia are not doing is capturing customer data. This will hurt them over time because online vendors like Sony, Apple and BigPond are all collecting customer data when a trade is done”.
“Woolworths and Coles via their loyalty cards are collecting data and if either of these two organisations start to take consumer electronics seriously they will be a real threat to Harvey Norman and JB Hi Fi because they can offer download deals at several retail points such as when a consumers buys petrol, liquor or groceries”.
“there is no doubt that Sony wants to sell direct both online and via bricks and mortar stores. This model is significantly cheaper for them as they eliminate several layers of costs that they are currently paying retailers. They and vendors like Samsung, Panasonic and LG are already building online capabilities into their products that over time will take business away from retailers. Once these vendors have a customer they will also start selling hardware to them directly”.
