Beware big box: Showcases on the march

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A consumer-electronics trend is afoot in the heart of Manhattan. Not a hot wireless phone or digital music player, but rather a new way to experience those latest products: manufacturer showcases. Within a dozen blocks of the towering Time Warner towers, consumers can find showcases for Samsung, Bose, Sony and Bang & Olufsen. A short subway ride gets them to the Apple store in SoHo.

Although standalone brand stores are de rigueur in the high-end fashion industry and common in Europe and Asia for electronics, the one-brand technology showcase is only now becoming a preferred way for electronics makers to control the consumer experience in the U.S.

BEST LIGHT POSSIBLE

"You never really know how you're going to be represented at retail," said consumer-technology-marketing consultant Adam Levin. "Consumer-electronics manufacturers want to make sure they're presented in the best possible way. It's also very expensive to be at retailers ... at a certain point, it makes [financial] sense to open your own stores."

The type of showcase varies by manufacturer and fits a wide range of styles from holiday kiosks and storefronts like Dell and Nextel; permanent one-only showcases like Samsung and RadioShack; and growing chains of retail outlets such as Apple, Bose and Sony.

"There are showcases and stores and there are crossovers, but the idea is it's a very low-pressure atmosphere, unlike Circuit City or Best Buy or Sears. The environment is designed to let you take your time with the brand," said analyst Richard Doherty of the Envisioneering Group.

Most of the stores are more than just marketing plays or test labs. Apple and Bose, for instance, landed at No. 26 and No. 32, respectively, on the This Week in Consumer Electronics Top 100 consumer-electronics-retailer list.

That may serve as warning for big-box retailers, especially if you look at what has happened in the department-store industry. Twenty years ago, department stores set the agenda for how and where brand-name apparel would be displayed. Brands like Coach got tired of being marginalized and decided to open their own stores. Today, brand-name apparel stores are common and traditional department stores are on a steep decline, surviving only by mergers such as the recent Federated purchase of May Co. Circuit City and Best Buy beware: Today more than half the shops in Columbus Circle are standalone fashion-apparel brands like Thomas Pink, Tumi, Hugo Boss, Cole Haan and Stuart Weitzman.

Samsung is the only one that doesn't sell any of its products at its Samsung Experience showcase in New York. It will lend digital cameras to tourists who plunk down a credit card, help users download tunes from partner Napster and even give out free ring tones, but won't sell anything at its "un-store."

"We believe in our partners and we believe in our alliances and we are not going to sell direct. We don't think that's a good way to play," said Peter Weedfald, Samsung Electronics America senior VP-sales and marketing for the consumer-electronics division. "While the competition opens up stores and competes with their channel partners, we're driving and figuring out ways to make people smarter about digital technology."

Although the others do ring sales, education is a key component for them as well. Mike Fasulo, president of Sony Electronics eSolutions Co., said education is one of the "top priorities" at the 15 SonyStyle stores. The goal is to demystify technology for consumers so they'll be at ease and make informed purchases, no matter if they buy at Sony stores or partner retailers, he said. Still, the broader objective for the Sony stores, which are all purposefully located inside high-end fashion malls, is control of the Sony brand experience.

"The real objective here is to take control of the Sony brand and Sony products," Mr. Fasulo said. "We control the message; it's not diluted and it's not filtered."

The Apple stores were born out of the frustration that comes with that lack of control. Mr. Levin, who has worked with Apple on and off for 25 years, said CEO Steve Jobs was unsatisfied with retailers and always wanted his own stores. "He saw it as a lifestyle; and you can't represent the Apple lifestyle if you're sitting on a shelf with 8,000 other brands," Mr. Levin said.

Of course, that doesn't mean it makes sense for every consumer-electronics brand. But as Mr. Levin pointed out, for brands marginalized at retail, or ones already spending a lot of money at retail with little result, the direct retail store may be an option worth trying. He said Philips Electronics, for instance, might benefit from a store in the U.S. where they have a wide variety of unique and interesting products, but little brand power with consumers and even less bargaining power with retailers. Philips, in fact, is experimenting with the idea through its cooperation at the "Bose Home Theater Store with Philips" located in Chicago. A Philips spokesman said the company is learning from the experience and is quite pleased with results so far, although he was quick to add that Philips is also very happy with its retailer partners.

TEST LAB

RadioShack, one of those retailers but also a maker of its own branded products, will open its showcase called StoreOne at its new Fort Worth, Texas, headquarters in April. At 8,000 square feet, the one-of-a-kind concept is almost four times the size of an average RadioShack store. More test lab than sales outlet, RadioShack plans to use the concept to test product, marketing, merchandising and training ideas that if successful could be rolled out to its 7,000 stores. Partners like Motorola and Samsung will also test and launch products at StoreOne.

"We look at StoreOne as much as a technology experience for customers as an experience and experiment for us and our partners about what consumers want and desire," said RadioShack Chief Marketing Officer Don Carroll. "That one-on-one experience with customers allows you to move so much faster."

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