A Retail Perspective on the Format War

[teamerickson]

A Retail Perspective on the Format War by Jeff Kleist

This must be Bill's #1.

 

[Claude Greiner]

The guy makes a good point, sell the customer what you have available and in stock!

 

[TheForce]

Actually, the scariest point he made is regardless of the quality of the product, regardless of the desires and wishes of the consumer, the bigbox store will be deciding on what format will win, UNLESS the studios kill one of the formats real soon. But if that doesn't happen the bigbox store will kill off both. OK, I don't go along with the last part but I've always believed that the major retailers will decide what products end up in our hands. And, they do it based on the profit they can make.
I remember when I worked part time for a small chain audio store in NY area. The owner bought a trailer load of Akai QUAD receivers that had an MSRP of $900 each but he paid below $50ea in a closeout deal from an importer. These receivers were a real POS but we sold them in a couple of weeks for between $150 and $300 each. Quad audio became the big deal in NY that year. I don't think the consumer really ever cared but why not pay so little for a receiver with quad channels? Can you guess how many receivers a full trailer load is?

 

[Ronnie-]

Actually, the scariest point he made is regardless of the quality of the product, regardless of the desires and wishes of the consumer, the bigbox store will be deciding on what format will win, UNLESS the studios kill one of the formats real soon. But if that doesn't happen the bigbox store will kill off both. OK, I don't go along with the last part but I've always believed that the major retailers will decide what products end up in our hands. And, they do it based on the profit they can make.
I remember when I worked part time for a small chain audio store in NY area. The owner bought a trailer load of Akai QUAD receivers that had an MSRP of $900 each but he paid below $50ea in a closeout deal from an importer. These receivers were a real POS but we sold them in a couple of weeks for between $150 and $300 each. Quad audio became the big deal in NY that year. I don't think the consumer really ever cared but why not pay so little for a receiver with quad channels? Can you guess how many receivers a full trailer load is?

Don, while the stores will have an impact, these days that impact is lessened by the fact that no matter which format those stores decide to carry, people can easily get the one they want with a few clicks of a mouse button.

 

[allargon]

Don, while the stores will have an impact, these days that impact is lessened by the fact that no matter which format those stores decide to carry, people can easily get the one they want with a few clicks of a mouse button.

Sorry--most people still buy electronics at B&M. Most people still *gasp* trust the salesperson to steer him/her into the right purchase decision. I knew the Blu players had better margins. I didn't realize they were FIVE times the margins of HD-DVD players. No wonder Toshiba got no love. It wasn't just the number of manufacturers (Sharp, Sony, Philips, LG, Samsung, Panasonic, etc.) vs. mostly Toshiba (RCA barely counted--Onkyo didn't appear until recently). It was the damned 5x margin. Wow.

 

[Ronnie-]

Sorry--most people still buy electronics at B&M. Most people still *gasp* trust the salesperson to steer him/her into the right purchase decision. I knew the Blu players had better margins. I didn't realize they were FIVE times the margins of HD-DVD players. No wonder Toshiba got no love. It wasn't just the number of manufacturers (Sharp, Sony, Philips, LG, Samsung, Panasonic, etc.) vs. mostly Toshiba (RCA barely counted--Onkyo didn't appear until recently). It was the damned 5x margin. Wow.

Most normal people yes, I agree. The people that are buying now though are a little more tech savy, and want what they want. So if they have to get it online, I would assume thats what they WOULD do (if thats the only option they had) By the time the average person actually gets to buying these things on a regular basis from the stores the "war" part could very well be over (with either one or even both winning). I could be wrong, who knows

 

[cybertrip]

Most normal people yes, I agree. The people that are buying now though are a little more tech savy, and want what they want. So if they have to get it online, I would assume thats what they WOULD do (if thats the only option they had) By the time the average person actually gets to buying these things on a regular basis from the stores the "war" part could very well be over (with either one or even both winning). I could be wrong, who knows

Though alot of consumers are tech savvy, most are confused on which format to choose. When showing a picture of HD-DVD vs BD the consumer is not going to notice a difference. The consumer still needs the retailers to choose for them. When the prices are high the consumer is likely to choose whatever the cheapest player is that they can find such as $99 HD-DVD players at Wal-Mart or they are going to choose one that as better value such as a PS3 which can play BD and Vid Games and more. IMO retailers set the market in place unless there is a considerable difference in technology. They will also follow those which get them the most money such as the actual media. Disney holds a big chunk of the market. Retailers are going to sway towards the format that makes them more money.

 

[vurbano]

Sorry--most people still buy electronics at B&M. Most people still *gasp* trust the salesperson to steer him/her into the right purchase decision.

Only if they are idiots. 10 minutes reading the forums at AVS on BD or HD DVD makes you twice as qualified as one of those zit faced blue shirted salesboys.

 

[db2]

He makes a few good points but I disagree with his suggestion that the retailers ultimately decide what we buy. He's forgetting that which product a retailer stocks can also be driven by consumer demand. For example, if Best Buy really would rather sell Samsung TV's but everyone wants Panasonic TV's then they might as well stock Panasonic since they can move them easier and faster.

That being said he is correct about profit margin and shelf space. Also, the hardware support from BD manufacturers that he mentioned plays a huge part. Obviously nobody knows who will win at this point but I don't see how a victory for HD-DVD is possible without significant changes.

 

[diogen]

A Retail Perspective on the Format War by Jeff Kleist.

I think he is right when talking about an established market.
In terms of creating a market, retailers can be as clueless as J6P.
Hasn't DIVX (the DVD competitor) offered a textbook proof of that?

Diogen.

 

[cybertrip]

He makes a few good points but I disagree with his suggestion that the retailers ultimately decide what we buy. He's forgetting that which product a retailer stocks can also be driven by consumer demand. For example, if Best Buy really would rather sell Samsung TV's but everyone wants Panasonic TV's then they might as well stock Panasonic since they can move them easier and faster.

That being said he is correct about profit margin and shelf space. Also, the hardware support from BD manufacturers that he mentioned plays a huge part. Obviously nobody knows who will win at this point but I don't see how a victory for HD-DVD is possible without significant changes.

That comes in to the same category of the consumer leaving it up to the retailer. Most consumers don't know the differences between the TV's, they want the retailer to help them make the "right" decission, or they are just going to buy whatever is cheapest because they really don't know the differences and there are so many brands they don't know what generic is any more. It's no longer like the days when Sony ruled the CRT market and Zenith was the cheapo TV. Although as consumers who do research we know that Samsung and Panasonic dominate the LCD market and brands like Polaroid and Westinghouse are the cheapo LCD's.

 

[allargon]

Only if they are idiots. 10 minutes reading the forums at AVS on BD or HD DVD makes you twice as qualified as one of those zit faced blue shirted salesboys.

You think the average insurance salesman, middle manager or attorney is going to spend 10 minutes reading AVS?

 

[haertig]

The point of the article seems to be that the product with the highest profit margin for the retailer will win. Sales volume doesn't count, only per-item profit margin.

Then how do you explain Walmarts success? Not that I'm a great fan of this chain, but it's getting hard to find an intersection anymore that doesn't have a Walmart on its NW, NE, SW, and SE corner. Walmart is not known for high end, high profit merchandise.

Per the articles logic, HDDVD could win this if only retailers would raise their prices on HDDVD players to $500 and keep the excess as pure profit. What a simple solution! I wonder why the retailers haven't done that?!

The articles premise seems silly to me. Granted, all other things being equal, retailers will surely push the item with the higher profit margin. But you can only get so far with that. Consumers won't fall for the trick of two things doing basically the same thing, and one of them costing twice as much - for no reason other than retailer profit. Consumers may be dumb, but not THAT dumb. Some elitists may bite on this sales tactic, but not normal people. Now once the two items sell for the same price to the consumer, the retailers can push the higher profit margin item and the customers won't worry too much about it, unless the higher profit item is so poorly made that it falls apart and gets a bad reputation.

 

[Zookster]

I seriously doubt the big box retailers would ever kill the HD video format. Unless a better format comes along that is more consumer friendly (i.e. cheaper/less confusing), the big box retailers need a product like HD video to drive HTS upgrades (and all the accessories that go along with it).

I've only had a PS3 for two months, and I'm already looking into getting a bigger 1080p-capable TV and an HDMI-capable AV receiver (speakers and cable to follow)... not to mention all the software to go along with it.

 

[JoeSp]

Just a quick count in my local Costco -- they sold out of the Samsung BD players before XMAS and only sold about 2/3rds of the HD-DVD players they had. They still had about 30 HD-DVD players on the floor but were waiting to be restocked on the Samsung as of Jan 2nd. When they wheeled them on the floor I walked in and started counting and the guy putting them out said that their store received 100 of each player. So at least at my local Costco BD had a better XMAS on standalones then did HD-DVD even though the HD-DVD player was $125 less. Also, they are still running the BD display but they have taken down the HD-DVD display.

 

[David_Levin]

Using the profit logic, would a couldn't a retailer ultimately make more money if he could move a higher volume of the cheaper HD player?

That's more consumers to start buying Hi-Def DVDs.

At this point I think it's either Blu-Ray or Dual Format players. With so many exclusive titles on both sides dual-format has a good chance.

 

[vurbano]

You think the average insurance salesman, middle manager or attorney is going to spend 10 minutes reading AVS?

I think most are idiots. Of course thats just me. I think half the population is too stupid to vote also, and 3/4 of them shouldnt be allowed to reproduce.

 

[Zookster]

I think most are idiots. Of course thats just me. I think half the population is too stupid to vote also, and 3/4 of them shouldnt be allowed to reproduce.

Or could it be that most people are just too intelligent and have better things to do than to give a rats ass about a video format war driven by greedy corporate execs and shareholders.