Every year brings new challenges and surprises, and 1994 promises to be particularly eventful. Advertising Age has put together a list of 10 important developments to monitor in 1994, half of them involving the consumer market, half involving the business use of technology.
War is swell.
First came the PC wars. Now enter the CE wars.
The consumer electronics market this year is bracing for a price war blitz.
But as in the PC wars, soaring sales at low margins don't necessarily mean healthy profits, said retail consultant Seymour Merrin, president of Merrin Information Services in Palo Alto, Calif.
Unlike the personal computer wars, the battle in electronics is being waged by retailers, not manufacturers. At the center of the battle are up-and-comer Best Buy and Circuit City Stores, the category leader that vows to defend its turf at all costs.
The electronics wars will be most localized in markets where Best Buy and Circuit City go head to head, such as Chicago and Phoenix.
Circuit City's sales last year for the first three fiscal quarters ended in November moved up 25% to $2.7 billion; Best Buy soared 80% to $1.8 billion. This year could be the circuit breaker that moves Best Buy into first place. Circuit City is fighting to stay in front: The chain plans to enter every major city-except New York, a cutthroat electronics market-by the end of 1996.
What's all this mean? A burst in retail advertising, tight margins for retailers, more pressure on Japanese electronics marketers and, for consumers, a great deal of fun.
The three stores in Tandy Corp.'s fledgling Incredible Uni verse chain each offer nearly 4 acres of TVs and appliances, or the equivalent of about 70 of Tandy's Radio Shacks. Tandy will open six more of the "gigastores" this year.
But the biggest move at Tandy this year will be the attempted revival of sleepy Radio Shack. The ubiquitous neighborhood retailer wants to become the place to buy electronics gifts and to take electronic wares for repairs.
It's not an easy fix, but Radio Shack needn't go the way of the five-and-dime. If Radio Shack closes, where are you going to get those little doohickeys only sold at the Shack?
New wares, who cares?
Electronics purveyors are talk ing up new gadgets-Sony's MiniDisc vs. Philips' Digital Compact Cassette, Panasonic's 3DO CD-ROM player vs. Philips' Compact Disc-Interactive-but consumers have hit the mute button.
None of the new formats is poised to take off this year. The hardware costs too much, and there is too little compelling software. Consumers are confused. And consumers are quite content with older technology, such as a Sony Walkman.
"We think ultimately, [MiniDisc] will replace the cassette," said John Heenan, senior ad manager in Sony's Consumer Products Group. "[But] when you have to choose between an $18 cassette player and a $499 MiniDisc, it may take a while."
All these competing new standards should survive the year, analysts say,
postponing the shakeout for now.
Some of the hottest action this year in consumer electronics land is in existing technology-faxes, pagers-taking up residence at home.
Motorola pagers are available in a palette of pastels, and Sharp phone/fax machines are the latest kitchen accessory.
The old stuff sells better than the new stuff for simple reasons, said Ray Boggs, an analyst with BIS Strategic Decisions, a Norwell, Mass., market researcher. Standards were settled on years ago, and attractive prices make an easy sell.
Videogame marketers are re signed to labeling games for vio lence and hoping for self-regulation before Congress does the job.
While game sellers are willing to slap on labels, they're not much interested in cleaning up their act. Violence sells.
Politicians and other selfless arbiters of morals are watching closely.
"We certainly don't want people to use the ratings system to promote buying violence," a congressional aide said at the Winter Consumer Electronics Show in early January.
Why bother with advertising? Just stick on a "WARNING: AWESOMELY GRUESOME" label and listen to the cash registers ring.M
Bradley Johnson covers computers and consumer electronics for Advertising Age