Best Buy Seeks First Forever Status with 3-D TVs
Best Buy is betting that by being first out out of the gate
with 3-D television offerings, it will establish a hold on the category that
competitors will not be able to shake once the technology becomes part of mainstream
America.
To help get it off to a fast start, Best Buy has signed an exclusive
deal with Panasonic to sell that company’s first 3-D TV home entertainment
system. The system includes a 50-inch plasma 3-D Viera set priced at $2,499.95,
a Blu-ray disc player at $399.95 and viewing glasses for $149.95. The complete
system went on sale this week at Best Buy’s upscale Magnolia Home Theater stores.
“We
were again impressed by the technology and do expect it to be a strong traffic
driver for Best Buy in the near term,” Credit Suisse analyst
Gary Balter told MarketWatch.
While it is generally expected that it
will be years before large numbers of American households have 3-D sets, many
see Best Buy’s move as giving it an advantage.
“It’s important for Best Buy to maintain a positioning as a destination for
the greatest and latest consumer technology,” said Ross Rubin at The NPD Group. “It’s
a statement to establish leadership in the new television technology."
“That’s
one way they differentiate from Wal-Mart and other competitors. We see a disproportionate
interest from younger consumers in 3-D TV,” Mr. Rubin told MarketWatch. “This
is clearly something Best Buy can pitch to the early adopters.”
While Best Buy
seeks to get an early start in the market, it is not the only retailer moving
into 3-D. Sears and Amazon are selling Samsung 3-D models. Best Buy also sells
Samsung 3-D TVs and is looking to add other manufacturer models, as well.
Discussion Questions: Do you agree that it is important
for Best Buy to get out in front as the leader in 3-D televisions for it to
succeed once the technology achieves widespread adoption?
[Editor’s Note] Only 17 percent
of respondents to a RetailWire poll
in January thought 3-D televisions would be widespread in American households
in the next five years. Thirty-eight percent said it would take six to 10 years
and 30 percent said it would take longer than a decade. Thirteen percent said
never.
The 17% survey result (that 3D sets will be widespread in the next five years) is probably a low number compared to what will really happen. Time and time again, there is a back-and-forth between the spreading of new technology and lower prices to consumers…as this happens, new technology invariably reaches mass appeal. Look at the popularity of Blu-ray players…and, for that matter, large-screen TV’s as an overall category.
That being said, it’s vitally important for the category leader in consumer electronics retail (Best Buy) to establish a beachhead in 3D televisions. Credibility among “early adopters” is a must for Best Buy, and the long-term commercial potential for 3D sets is significant (even if it reaches “only” 17%).
They don’t necessarily have to be first to succeed with this product but it’s about building the brand. To be the “technology know how/be all” stop for consumers, it’s very important. This is what they did with Geek Squad. Others followed but which one do you remember?
If Best Buy wants to be the leader in consumer electronics, it must get in front of all newly released technologies, whether the new technology represents a sea change or a fad. Failing to do so would yield market share to competitors both online and brick and mortar.
Short of establishing a permanent monopoly on certain 3-D TV brands or product lines, I see no way for Best Buy to turn first-mover advantage into a permanent lead. Once 3-D TV becomes mainstream, there will be no reason for reasonably-savvy shoppers to buy from Best Buy versus Wal-Mart, Costco, or Amazon.com, just like they do today with 2-D TVs, MP3 players, computers, and all other technology products.
One way Best Buy *can* establish and keep a lead, however, is by leveraging their knowledge of their existing customers. Best Buy’s loyalty program is a gold mine of knowledge about who their shoppers are and what they buy. For example, they know who among their shoppers tend to buy cutting-edge technology, yet don’t have a 3-D TV: the people who bought high-end plasma and LCD TVs from them 3-5 years ago. Best Buy should be aggressively marketing to those shoppers and selling the benefits of the new wave of 3-D TVs.
It is absolutely necessary for Best Buy to be a leader in 3-D. And for that matter, all mainstream consumer electronics. Best Buy separates itself from the rest of the competition by being more than an electronics retailer. BB is also the electronics expert. That is how they make their margin. They can’t compete with Wal-Mart nor Amazon on price, but Wal-Mart and Amazon can not be the experts. And, you can’t be an expert if you are not on the cutting edge.
With regard to the poll…innovation adoption has accelerated significantly. In the U.S. it took 35 years for 25% of the population to adopt the telephone, 13 years for the cell phone. It took 26 years for 25% of the U.S. population to adopt the TV, 15 for the PC, 7 for the internet and only 5 for the iPod.
Once you can get a 42 inch 3-D TV for less than $1,000, it will be quickly adopted.
For a retailer, being first into a category or technology is a positioning/image move–not an ownership move. If the new technology is worth being first in, then Best Buy will most certainly not be the last, and there is no guarantee that they will be the best.
It is important ONLY if Best Buy associates are knowledgeable and helpful. It seems that the level of service at Best Buy is comparable to that of Wal-Mart. Without the expertise of knowledgeable associates at Best Buy in all locations it will go the way of Circuit City. It doesn’t matter what they sell…it matters how they sell it!
I suspect Best Buy is close to the bleeding edge with its 3-D TV push. The technology works OK (if you sit still), but it comes at a stiff price for most American families, many of whom are still paying off the credit card bills for the flat panel sets they bought last year. And those glasses sure are dorky.
But the real limiter may be available content. There are only a handful of feature films shot in 3-D so far. More are coming, and 3-D sports broadcasts are probably around the corner, but for all but the videophile crowd, buying first-generation hardware today may seem like a large investment with limited short-term payoff. (Add a star if bragging rights matter.)
Best Buy’s calculus may run differently, of course. Early adopter purchases yield top margins, and these may be difficult for Walmart to snag, at least at first.
This is another example of the market pitching a technology that consumers may or may not be ready for. The overabundance of new technologies and fads has and will cause the consumer to retrench. All one has to do is look at the lack of engagement and participation in Twitter over the past 6 months.
There is no doubt that Best Buy is the place people expect to go and will go to see/touch/feel 3-D. Now whether they think it is worth it is another story.
What I still can’t get past is that 3-D is where the bet is being made. Seems more like flavor of the week. There is still huge untapped opportunity for Best Buy to promote internet-connected TV, leveraging their unique ability to educate in-store and install in-home via Geek Squad/magnolia.
Perhaps I read too much into the recent activity in the connected TV space–Walmart’s recent acquisition of Vudu and Best Buy’s partnership with TiVo.
The net is that it is important for Best Buy to be out in front of any big technology that can drive sales because once it becomes widespread they lose their advantage to Walmart & Amazon. Best Buy, just like the brands fighting in their aisles, is trying to advantage itself versus its competition.
HDTV just became “main stream” a year or two ago. Now BB and the CE companies expect us to shill out thousands more for a new tech? Give me a break. The current tech isn’t even standardized yet…720P, 1080i, 1080P, 4:3, 16:9, 2.35:1. Jeez, let’s get everyone on the same resolution and aspect ratio before adding something new. Enough with the black bars and varying resolutions! And don’t forget the still evolving HDMI specifications.
Two thoughts:
1) No one has any clue how widespread this technology will be. Until it actually starts going into people’s homes, no one will have any real idea.
2) The first mover advantage is almost irrelevant. For such a big ticket item with a long replacement cycle, adoption just can’t be that fast, so the early sales won’t be that high a number. Beyond the early days, there is no reason future consumers will assign special value to Best Buy’s being first.
Consumer electronics is all about the next cutting edge technology. Being on that cutting edge is essential for Best Buy. They must win the early adopters consistently in order to maintain their market dominance, and pick up the downstream adopters as the technology takes hold.
After seeing Avatar in 3D I would actually consider purchasing one of these new fangled contraptions. And guess what, there just seems to be one format. Sony hasn’t come to market with theirs and every body else with another system. Good for Sony, either they learned something or really got caught behind the curve on this one.
Best Buy has assumed the leadership position in the electronics market in much of the USA. Other retailers like Fry’s, Gregg, etc, are nipping at the fringe and the old tried and true Sears is still playing catch up. I believe it is in Best Buy’s interest to push the envelope and help build markets.
I disagree with the majority of my colleagues here. Consumer electronic success has nothing to do with being a destination location for cutting edge, early adopter technology. Instead, it has to do with offering great prices, on mainstream products, and a proven return policy. The numbers to support this are everywhere, including major retailers like Wal-Mart, Costco and others, which do NOT offer destination, new-technology products for early adopters.
Electronics retailing isn’t rocket science. A handful of manufacturers come out each year with a new technology and the retailers put that on sale. Of the 50+ TVs on display, a few of them this year will be 3d. So what? Is Best Buy supposed to sell VHS recorders from 1998?