Nokia Pursues Retail as Media

Discussion
Jun 20, 2006
Rick Moss

By Rick Moss


There are parallels that can be drawn between Finland-based Nokia, the world’s leading mobile phone manufacturer, and the darling of U.S. consumer electronic chic, Apple Computer.
Both companies finely polish their brand image with daringly innovative products and exploration of the “bleeding edge” of personalized, multi-media consumer experience. Now,
it appears the Apple doesn’t fall far from the tree as Nokia released news that the first of four U.S. retail locations will open on Chicago’s “Magnificent Mile.”


The announcement yesterday coincided with Nokia’s introduction of five new phone models that includes what is billed as the least expensive 3G phone on the market, giving consumers
access to the new high-speed wireless networks for about $56 U.S. The strategy here, for Nokia, is to provide a low-cost point of entry to draw consumers into the world of mobile
content that’s now being created for these networks. And, from Nokia’s advance description, their new retail environments are being designed to immerse current and future customers
in this world of interconnectedness in gleaming, stylish, experiential fashion.


According to a company release, Nokia’s Chicago Flagship store will elevate the mundane and often confusing task of phone-buying to “the kind of pleasurable shopping experience
normally associated with exclusive upscale boutiques.” Customers will be introduced to Nokia products via dramatic multimedia displays in a sort of sensory-intensive, interactive
setting, with personalized demonstrations of global connectivity.


The company’s excitement is palpable in its description: “These displays interactively walk guests through the features and benefits of a wide range of Nokia products and even
allow them to send text messages that can then be seen on not only the local store displays, but in other Nokia Flagship Store locations around the world.”


Why such a splashy debut? Although number one in worldwide sales, Nokia apparently suffers from a bit of an inferiority complex in the States due to its second place status here
after Motorola. Many see rough going for Nokia, however, because in the U.S. not as many customers are used to paying full price for phones. Most buy the devices at a greatly
reduced initial cost as part of a service provider package. Nokia is banking on its ability to sell full priced product by wowing consumers with an in-store experience, while
boosting its brand image in the process.


But, according to the company, this is far from a simple marketing ploy. “There is a business model behind it,” said Nokia retail strategist Cliff Crosbie. “Retail is one of
the biggest medias now. Stores are essential if you want to communicate directly with consumers.” And, yes, Crosbie pointed to Apple and Nike as direct-to-consumer brands that
have served as guiding lights.


Moderator’s Comment: Will the new in-store environments being designed by the likes of Nokia and Apple force traditional CE retailers to counter with
heightened consumer experiences of their own?


Brand retailers like Nike, Apple and Nokia have a huge advantage when it comes to creating an in-store experience. First of all, they’re able to more easily
create a unified merchandising presentation, since packaging and product design is already coordinated. Stack that up against the challenge of a consumer electronics superstore
that must find ways to tie together the visual cacophony of styles, logos, fonts and photographic images that adorn packaging.


Secondly, when well executed, there’s a unity of marketing strategy and logistics with the one-brand retailers, so that advertising, online efforts and
in-store activities coordinate well. (Not as easy when you’re working with hundreds of vendors at a time.)


Of course, when it comes to sales volume potential, we’re talking apples and oranges. But given the experiential punch this new wave of stores will expose
shoppers to, multi-vendor retailers may consider store-within-a-store boutiques that are brand-centric and could give them a chance to compete on an emotional level, as opposed
to strictly a price level.
– Rick Moss – Moderator


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12 Comments on "Nokia Pursues Retail as Media"


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Ryan Mathews
Guest
14 years 8 months ago

I don’t think it’s an either/or question. Nike comes to mind as a manufacturer who effectively used concept stores to drive sales through more traditional outlets. Nokia’s problem is that it is one of the most recognized brands in Europe (supplanting Coke several years ago) and yet is just another phone manufacturer in the U.S. The other issue is that for many Europeans their mobile is their primary phone where in the U.S. it’s still an accessory at worst and part of a personal digital ecology at best. Will Nokia stores help? Sure. Are they the full answer? Ask Gateway!

Jeremy Sacker
Guest
Jeremy Sacker
14 years 8 months ago

I applaud the idea, but what’s the upside of going on your own? Very few CE manufacturers are successful at retailing, AND, the idea of buying a full-price phone will not change over night. The beauty of this idea is that it will keep Best Buy, Circuit City, Target and others on their toes.

One other point, Nokia needs to make a splash in the US. Used to be that everyone had a Nokia. Does anyone you know have one today? Maybe this will help them win back market share.

Camille P. Schuster, PhD.
Guest
14 years 8 months ago

Apple and Nokia appear to be using a similar strategy: use the stores to highlight the brand and showcase their points of differentiation in the market. Certainly this is difficult for a retailer to do when selling many brands, but not impossible. As traffic in the Apple demonstrates, many consumers like this approach. When consumers find something they like in terms of products, merchandising, or store concept, they know it is possible and the level of expectation rises. Copying the concept is not usually a good strategy. However, thinking about the consumer experience and integrating the principle into your retail strategy is important to consider.

David Livingston
Guest
14 years 8 months ago

Yes Jeremy, we use Nokia phones and also have a few broken ones we use for spare parts. I agree with Jeremy that few CE manufacturers are successful at retailing. The outlet malls have a few and mostly they are just a novelty. It seems they always charge full price and never undercut the other stores that sell their products. Opening a handful of stores on the Magnificent Mile is nothing more than having a booth at the State Fair.

Mark Lilien
Guest
14 years 8 months ago

Nokia’s location strategy isn’t the same as Gateway’s former strategy. Gateway used retail stores as a major selling channel. Nokia is using stores as brand reinforcement. Most cell phones are actually sold to service providers who “give” them to their customers. It’s unlikely Nokia believes that fact will change. To reinforce a brand, Nokia needs only a small number of stores. To copy Gateway’s strategy they’d need thousands of stores.

Kai Clarke
Guest
14 years 8 months ago

This is not Nokia’s answer to increasing their success here in the US. The retail phone store concept is a very expensive proposition and does not answer the retail needs of expanding product and market growth. Nokia has not done its homework, since most phone costs here in the US are offset by subscription service revenues. Now it will be competing with its providers and this sends the wrong message to the channel. In addition to this, Nokia will quickly discover that without the “free” and low-cost phones which the subscriber model provides, they will be unable to compete in the retail market. Subsidies for phones through service contracts is the name of the game in handset churn and purchases.

Mark Hunter
Guest
Mark Hunter
14 years 8 months ago

Nokia’s move to opening a retail location is a logical extension of a company seeking to control and build their brand image. With retail continuing to consolidate and retailers of all types narrowing the SKU selection of every category it is hard for a manufacturer to develop new lines. This applies to the cell phone market as well as it applies to the toy market. In the years to come, look for many other manufacturers to open up retail locations; not so much to drive large volume but as a way to shape their image and gain valuable information from the consumer.

Don Delzell
Guest
Don Delzell
14 years 8 months ago
One key point being missed here is that both Apple and Nike have managed to transform themselves into lifestyle brands. The brand equity is as much a function of the product features and benefits as it is the lifestyle emotional connections created by ownership. Nokia has no lifestyle brand elements in the US. It may in Europe. Product specific upper end retail concepts do not work. They lack the emotional connection necessary to sustain consumer interest and loyalty, as well as justify the premium such products carry in price. High end electronics brands such as Bose, Harmon-Kardon, Bang & Olufsen and others have tried to build retail locations. Nike runs its stores as a marketing expense. Those stores do not make money in the classical sense and are not expected to. The inventory turn is too slow, the volume per square foot too low, and the overall return on investment poor. As a marketing expense, they are brilliant. Apple actually makes money, but does so by limiting distribution on hot products, introducing them first in… Read more »
Laura Davis-Taylor
Guest
Laura Davis-Taylor
14 years 8 months ago

I have to say, I find it interesting that they didn’t start with a store w/i a store approach within the CE’s. Regardless, I feel that the success of this play will be tied to the store execution and the products. Nokia spoke at a conference I chaired in May and they have some fantastic products set to unveil in the U.S. If they can bring them to our shores in a sexy, experiential manner, they may have a shot. I suppose we’ll have to wait and see!

Michael Tesler
Guest
Michael Tesler
14 years 8 months ago

Apple has a store that is exceptional. Their store is unique; their store relates to their target customers; their store does record per square foot business; their store is fun and interesting; their store breaks established rules regarding merchandising and marketing. Their store copied no other stores. Apple understands their brand and their consumer. What Apple has done takes more than a genius bar; it takes genius that we seldom see in retailers and these copycats who think it easy will all fail.

Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 8 months ago

Ryan M. is right on; the lifestyle point is most pertinent.

Nokia will build an excitement level within its new outlets, based on the shopping experience and sales associate’s approach (maybe, a Southwest fight attendant attitude). Now, the key is what new products will entice the consumer to bring Nokia into their lives, like Nike, Apple, etc.

Motorola has a new phone that is creating a buzz all over the world, and especially China. Nokia, are you listening? Hmmmmmmmmmm

peshwa acharya
Guest
peshwa acharya
14 years 6 months ago

The moot question is how do you have the premium identity and standardization … not when you are a single brand retailer … but when you are a big box retailer?

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