Retail Digest
By ChannelMedia Staff

Sam Taylor has joined Best Buy as Senior Vice President of online stores and marketing. Taylor reports to John Thompson, senior vice president and General Manager of BestBuy.com. "As Best Buy continues its transformation to put the customer at the center of its business model, the Internet also is evolving to play an increasingly important role in engaging our customers," said Thompson. "Sam's leadership and expertise will prove to be extraordinary assets for BestBuy.com, our company's largest store. We are extremely pleased that he has joined Best Buy's online team." Taylor, age 43, most recently held the position of Vice President of e-commerce for Lands' End, one of the largest sellers of apparel online. In that role he managed all aspects of Lands' End's global e-commerce business, including consumer and business-to-business sites in the United States and five international sites. Under his direction, landsend.com won numerous awards for site design and customer focus. Previously Taylor served as Vice President of international for Lands' End, overseeing wholly-owned subsidiaries in the United Kingdom, Germany and Japan. Prior to Lands' End, Taylor worked five years with The Walt Disney Company. Based in France, he served as the European regional Director for The Disney Store Online and The Disney Catalog.

OctiVox, the volume matching and audio intelligibility experts, announced the OctiVox "Free Clear Call Reseller Demo Program" for resellers of the OctiVox Clear Call audio conferencing accessory. Audio conferencing resellers and integrators can qualify for a free unit by contacting any OctiVox Clear Call authorized distributor, including Review Video, DAS and T2 Supply. The OctiVox Free Reseller Demo Program was launched in response to sales data that shows a 90% sales rate once a customer hears the Clear Call audio conferencing difference for themselves. "We are confident that getting units into the hands of conference call users will immediately translate to sales for the resellers," explained Jack Peterson, OctiVox Senior VP of Sales & Product Management. "This is a no-risk proposition for the resellers to hear first-hand this new technology that can quickly and easily improve the conferencing experience for many of their corporate, small office and home office customers." Clear Call plugs directly into any analog conference phone to provide automatic volume matching and enhanced intelligibility for all incoming callers. No matter how many people are on the call, all can be heard loud and clear. For more information, contact OctiVox, a Division of Octiv, 2246 Sixth St, Berkeley, CA 94710 510-280-5000 www.octivox.com.

ChannelMedia Q&A - Merchandising Convergence
With Ed Belleba, VP Worldwide Channel Strategies, Insider Marketing

Q.	So you have been talking about the notion of a Digital Dilemma, what exactly do you mean by that?
A.	Our industry is going through a period of change unlike any we have experienced since the introduction of the personal computer. Waves of broad change disrupt the status quo while creating great new opportunities for those that are prepared to take advantage of the sea change. This wave of change is causing dilemmas for consumer, manufacturers, and Retailers on a number of fronts.
Q.	In your eyes, what are some of the dilemmas we're facing?
A.	Let's start with the consumer. Consumers are confused by the broad range of new technologies, products, and services available to them today. They are unclear on which products to buy, when to buy them, and most importantly, how to integrate and use them along with the rest of the things they have at home or in the office to be able to recognize the full, promised benefits of the technology. Clarity comes from understanding and understanding is made easier when the concepts, technology, operability, integration, interoperability, and all the related marketing messages are easy to understand and presented in a way that make sense and matter to consumers. Manufacturers and Retailers working together to clear up this confusion will pave the path to higher levels of customer satisfaction and faster adoption of the innovative new products and services available today and more importantly, tomorrow.
Q.	What role do you see Retailers playing as we go forward?
A.	I think Retailers face some significant challenges as we move forward. On one hand, traditional retail category identities have been thrown into the wind. As a result, Retailers are facing new competition from an increased pool of competitors. Information technology and consumer electronics markets have become one. This causes a challenge when considering how to create a strong retail brand identity that is different and relevant to consumers. Next, the positioning for most Retailers has been dominant assortment at rock bottom prices. Since everyone claims this, it has essentially become meaningless. I would suggest the race to the bottom is temporarily over. Major Retailers can buy and sell products at roughly the same price. But I say temporarily, because as the consumer electronics product categories have become hot growth categories again, they are attracting more and more attention from mass merchants. I think it is instructive to look at the toy retailing experience from last fall to see what might be on the horizon for some of our product categories. I am not suggesting running away from price competition, but I might be rethinking my positioning, value proposition and target markets if I can't win an intensified item/price game.
	Consumers need a higher level of sales assistance and support than ever before. Retailers are left as the sole integration point for consumers trying to equip their digital homes or make their technology work together. Low price retail strategies usually are accompanied by low or no service delivery because the payroll lever is one of the easier levers to pull and have impact on profitability. Select Retailers are moving toward building services organizations that hold great promise for new revenue and profit streams while supplying consumers with the greatly needed assistance they want.
	The final key challenge for Retailers I'd like to discuss is store design and merchandise presentation. Much of the value derived from many of the new products entering the market comes from integration rather than from a single device or piece of software. As a result, category merchandising doesn't give the customer a sense of how products compliment each other or work together. The challenge for the Retailer is to create holistic, compelling in-store experiences for consumers that communicate technology value in a relevant, experiential way - it's time Retailers reconsider adjacencies.
	To summarize, I think Retailers play a crucial role in accelerating the adoption of digital products but face significant challenges delivering the level of service, merchandise presentation, and after-sales support required.
Q.	So it sounds like Retailers have some work to do, what role can the Vendor community play and how should they most effectively work with the channel?
A.	Vendors tell us they are frustrated by the difficulty of communicating the value and utility of their products to consumers. This is complicated by the increasing complexity of products. In a quest for competitive advantage, products are packed with ever increasing numbers of features accessed through interfaces that are less than intuitive. This is complicated by the fact that competing standards and protocols further confuse customers. All of this can lead to delayed or no purchase. It is important to get attention for new products quickly as product lifecycles are continuing to shorten. Additionally, new competition is entering many markets with products built with widely available, inexpensive components available at commodity prices. This makes the goal of differentiation between the four, five, or six other competitors in a product category more challenging.
	As a Vendor, I would be focused on a number of things starting with simplifying product design and interoperability. Consumers consistently tell us they want things made simple. This includes coming up with ways to sort through technologies and products, feel comfortable with a purchase decision, and then not having to spend days installing and integrating their new purchase. Vendors can play a key role in all of these areas. Communicating what matters is another area in which Vendors can simplify complexity for consumers. The communication of product utility and value is really a joint responsibility of Vendors and their channel partners. Until the item/price retail advertising model changes, it's going to be up to the Vendor to explain product utility and relevance to consumers. This is a role Retailers could help play in a powerful way but need to be enabled by the Vendor community to be successful. Many Vendors would respond by saying they have great websites to do this but trolling websites is an inefficient way to do product comparison and certainly a poor way to experience products.
	Vendors working alone and with Retailers to advertise, present, demonstrate, sell, and support products in a contextual, relevant, educational way could improve the satisfaction level of consumers, drive deeper product usage, and increase brand loyalty. There are many variations of this type of relationship and understanding the roles each partner plays is essential to containing cost while delivering higher levels of customer service and satisfaction.
Q.	Sounds like we all have some work to do. Any other thoughts?
A.	This is one of the most exciting periods of change in our industry. When the status quo is disrupted, opportunity is created. Insider Marketing is working hard with both Retailers and Vendors to tackle the issues we've just discussed. We have developed points of view on channel, product, and retail marketing that we think will help us all move forward. We're celebrating our tenth anniversary of working with Vendors and their channel partners to meet the challenges presented by educated, demanding consumers. The Digital Dilemma insures that we can look forward to the next ten. I invite everyone to share their point of view. You can get in touch with me at ebelleba@insidermarketing.com.

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RESEARCH

Digital Photography Trends - An Untraditional Market
By Jennifer Gerlach, Industry Analyst, ARS.


In 2002, Retailers were still skeptical as to whether digital photography would become popular in the retail space. There were a limited number of manufacturers and products, as well as no real way of supporting the printing of the actual photographs. In addition, there was still limited capabilities in memory. Also the prices of the cameras were still geared more to a niche market place, ranging in price from $399 to $1,500. For example, products such as Kodak's 4.0 Megapixel (MP) EasyShare DX4900 were still priced in the $399, though average sale prices (ASP's) were beginning to see a 20% decline. Advertising of products was also done to the traditional tech-savvy target market, the 18-35 year old male. According to PMA Research Data by the end of 2003, worldwide digital camera unit sales saw a year-over-year increase of 64% totaling 50 million units sold. United States digital cameras sales growth saw a 48% rise in 2003, and analysts are projecting that 2004 sales of digital still cameras will reach the 60 million unit mark. The growth in digital imaging can be attributed to various trends, including Retailers increased focus in this product category, the increased availability of attach products, consumer product understanding, increasing declines in product ASPs, increased digital photo printing options, and expanded memory availability. In addition, there are some notable trends occurring in the digital-still camera space, there is an increased growth in the sale of higher resolution models. The sale of 4 MP and above, are growing share around the world as seen in the United States where the high resolution product in 2003 accounted for nearly 28% of unit sales. As digital still cameras increase in popularity, it is no surprise that analogue-still cameras are continually dropping in unit sales. In addition, during 2003 companies such as Nikon, Fuji, and Kodak would no longer product anaolgue-still cameras turning their attention to the production of digital still cameras and Digital SLRs, though in the next few years, there will be an insurgence of the sale of analogue product into the third world countries.

Replacing the lower megapixel phones, digital camera phones have come to the market place with growing popularity. These phones range from 1 to 2 MPs and according to InfoTrends research will grow 16% to 51 million units by 2007.

The reasons that digital cameras have had such a large impact on the consumer space is its ability to allow for fast processing, archiving on cards, discs on computers, printing at home, and the ability to select pictures that are wanted to be kept causing manufacturers to increase the availability of memory cards, and flash memory printing kiosks as well as photo printers.

Interestingly, one trend that is not technologically based is that women are the dominant users and purchasers of digital imaging products. According to the Digital/Analogue Market Survey by InfoTrends, women are the primary users of the digital cameras. Women are also the primary picture takers for the household, maintaining the family albums and scrap books. In addition, a higher percentage of prints are made by the women of the house (27%) than by the man of the house (23%).

The most successful Retailers of digital imaging products will need to take this fact into account, that women are still the dominant purchaser of digital cameras. These companies will need to increase targeted advertising and POS, in addition to having more style driven lifestyle products available for sale. This is in addition to maintaining a competitive pricing strategy. For further information about this article please contact Jennifer Gerlach, Industry Analyst at (858)752-4473.

Jennifer Gerlach served as the Channels Industry Competitive Analyst at ARS, a wholly owned subsidiary of Current Analysis, where she was responsible for Retailers, direct resellers, and e-tailers currently in the market. Jennifer has spent nearly her entire professional career as an analyst, and is regarded as an industry expert in the areas of next generation telecommunications, digital wholesale pricing, subscriber growth, and the retail and e-commerce markets. She has held the following positions: liaison to the Board of the Wireless Communications Division, Chair of the Database committee, member of the Promotions committee, and member of the Market Research Committee of the Consumer Electronics Association (CEA).

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Boys and Their Toys
By NPD


Boys ages 5 to 12 are spending more time playing video games than with each of the traditional toy categories in an average week, while girls in the same age group tend to spend more or comparable time with several toy categories as they do video games, according to The NPD Group's recently-released report, "Toying with Video Games: An In-depth Report on the Impact of Video Games on Traditional Toys." According to the report, the average time children among the ages of 5 to 12 spend playing video games is 4.2 hours per week, with one-third (32%) of boys and only 10% of girls playing more than six hours per week. Nearly half of the children in the study began playing video games between the ages of 4 and 5, with 20% beginning at age 3 or younger. Older boys, ages 9 to 12, show a tendency to gravitate away from specific traditional toy categories in favor of spending more time playing video games, while girls in the same age group continue to show little to no difference in time spent between playing with video games and toys. However, as girls get older, they are more likely than boys to find interests outside of both the traditional toy and video games markets. The toy categories being most threatened by video games for older boys are Action Figures, Building Sets, Games/Puzzles and Vehicles. Those toys not as affected by video games include Learning and Exploration toys and outdoor-oriented categories such as Summer Seasonal and Sports Toys/Ride-Ons. Not surprising, region plays a key role in determining the amount of time being spent playing video games. Children in the South and West regions of the United States are more likely to play video games on a consistent basis throughout the year, while kids in the Northeast and Central regions are likely to play video games more often in the winter time. "Video games demand the attention of toy manufacturers who want to understand their implications to play time with traditional toys," said Michael Redmond, Senior Industry Analyst, The NPD Group. "For toy manufacturers, determining how to leverage the 'power' of video games in order to take advantage of their popularity through different marketing tactics is essential. By researching which types of video games are most popular among children, toy manufacturers can discover new licensing opportunities." For boys, licensed properties such as Spider-Man, Harry Potter, Pokemon and Scooby-Doo, tend to do well for both video games publishers and toy manufacturers. For girls, Barbie is extremely strong across both toys and video games, as it ranks number 1 on both lists.

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Top-Selling Software Week of June 20 – June 26, 2004
All Categories
1	Norton Antivirus 2004	Symantec	$42
2	Norton Internet Security 2004	Symantec	$66
3	MS Office 2003 Student/Teacher Ed	Microsoft	$142
4	MS Windows XP Home Ed Upgr	Microsoft	$96
5	Spy Sweeper	Webroot	$29
6	VirusScan 8.0	Network Associates	$49
7	Norton System Works 2004 Pro	Symantec	$66
8	Joint Operations: Typhoon Rising	NovaLogic	$36
9	City Of Heroes	NCsoft	$41
10	Harry Potter & The Prisoner Of Azkaban	Electronic Arts	$29
Games
1	Joint Operations: Typhoon Rising	NovaLogic	$36
2	City Of Heroes	NCsoft	$41
3	Harry Potter & The Prisoner Of Azkaban	Electronic Arts	$29
4	The Sims Mega Deluxe	Electronic Arts	$34
5	Rise Of Nations	Microsoft	$36
6	Battlefield Vietnam	Electronic Arts	$39
7	The Sims Deluxe	Electronic Arts	$20
8	MS Age Of Mythology	Microsoft	$33
9	Far Cry	Ubisoft	$38
10	The Sims: Superstar Expansion Pack	Electronic Arts	$22
Business
1	MS Office 2003 Student/Teacher Ed	Microsoft	$142
2	QuickBooks 2004 Pro	Intuit	$278
3	QuickBooks 2004	Intuit	$200
4	AD Guard	Valusoft (THQ)	$20
5	MS Office 2003 Pro Upgr	Microsoft	$305
6	Norton AntiSpam 2004	Symantec	$40
7	Defender Pro 5 in 1	Global Star Software (Take 2)	$21
8	MS Office 2003	Microsoft	$392
9	Pop-up Stopper Companion 3.0	Panicware	$30
10	MS Office 2003 Pro	Microsoft	$466
Home Education
1	Snap! Typing JC	Individual Software	$5
2	Instant Immersion Spanish JC	Topics Entertainment	$11
3	Dora The Explorer Animal Adventures	Atari	$20
4	Adventure Workshop 4th-6th Grade	Riverdeep Interactive	$18
5	Shrek 2 Activity Center	Activision	$20
6	Adventure Workshop 1st-3rd Grade	Riverdeep Interactive	$19
7	Finding Nemo: Nemo's Underwater World Of Fun	THQ	$17
8	Mavis Beacon Teaches Typing 15.0	Riverdeep Interactive	$17
9	Jumpstart Toddlers JC	Vivendi Universal Publishing	$10
10	Jumpstart Preschool Classic JC	Vivendi Universal Publishing	$10
List is based on units sold by twenty-three channel partners. For more information, please contact The NPD Group at (703) 376-6226.

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COMMUNITY

Finding Global Sales Partner Requires Global Thinking
By G. A. "Andy" Marken, President, Marken Communications

For a number of reasons, including the fact that the U.S. represents one of the largest and most lucrative technology markets on the globe, foreign firms have always been more aggressive in their efforts to gain a foothold here first and then expand their activities to other countries. American companies on the other hand have often taken a defensive posture and retreated from activities outside the U.S. According to leading economic indicators, the result has been record trade deficits of nearly $1.3 trillion. By circling the corporate wagons rather than bravely moving into new territories, U.S. businesses have sent clear signals to these major competitors that we aren't interested in selling to 95% of the world's population. Granted, sales in most of these areas are only now showing strong promise but the potential is enormous.

As important to a firm's long-term global success in its respective market area is that by retreating from markets outside the U.S., they also abandon vital intelligence outposts. Outposts that can keep firms abreast of plans and actions of foreign competitors as well as provide solid inputs for next generation products and solutions.

As foreign firms become more aggressive in the U.S. market as well as on a global scale, many American companies continue to struggle to determine how they can increase their global activity, presence and profits. Firms usually have three choices:

• Establish their own corporate presence in key countries
• Acquire a local competitor
• Establish a relationship with a local, established distributor

For years, we have seen European and Asian manufacturers fail in the U.S. market. They open their own offices, send in their own people and launch programs and activities that worked at home. Rather than being deluged with sales, they have been overwhelmed with disappointment. Individual countries and cultures are well…individual.

International distribution often appears to be an easy way to increase sales, but more is involved than simply signing up a distributor in each target country. It is seldom - if ever -- achieved by Korean, Japanese, Taiwanese, Chinese and European firms that set up outposts in the U.S. By the same token, those firms that have attempted to impose U.S. policies, programs and activities have found that rather than providing a blueprint for success, they became a roadmap to disaster.

Although it's almost unheard of for their U.S. counterparts, international distributors develop and carry out their own marketing and promotional plans and programs. In many instances, they take almost total ownership of the products and their success in their respective countries...including sales, support and service.

Because the distributors are so important, U.S. firms that establish a relationship with them must view it as more than simply signing on a distributor; it's a strategic alliance. Too many firms fail internationally - in any country -- because they fail to fully come to grips with this important distinction, its requirements and its ramifications.

U.S. firms often lack a clear, concise set of international objectives. They often haven't determined which products/services have international appeal. They haven't considered product modifications to meet the application needs in the specific countries. They haven't considered the training and support that will be required. In addition, they haven't set down the physical and fiscal commitments they will have to make to ensure the program's success.

Equally important for the company is the development of a strong profile of the ideal distributor or partner they want/need...even for domestic markets. Overseas, the selection process becomes even more difficult. The biggest distributor in a given market isn't necessarily the best organization to represent your products.

Since you are establishing a strategic alliance, it is extremely important to ensure that management styles can co-exist and thrive together and that sound personal relationships can be developed.

In making the choice, it is important to understand how distributors operate in different parts of the world. In Europe, distribution varies dramatically from country to country, region to region and often from city to city. The same is true in the Pacific Basin, South America, and the Middle East except in these areas the distributors are often national in nature. While numerous distribution organizations have expanded their global reach, their "image," influence and penetration is usually quite different from country to country.

In most of these international markets, distributors not only play a key role in the sale and distribution of goods, they are also a strong marketing and support factor.

They stock inventory. They have extensive lists of important contacts at the governmental and sales level as well as in-depth knowledge of their target markets. At the same time, they spend considerable time and money developing and maintaining their technical, training, and support expertise. Even as the Internet has eliminated country borders to produce a global economy and global marketplace, too many U.S. manufacturers fail in overseas markets. They never fully come to grips with each area's important distinctions, their requirements, and the ramifications of these differences on how it affects the image, sale and use of their products. Instead, they rush to sign up distributors, fire them, and then sign up new distributors, much as they would in their own backyard.

This trial-and-error process delays sales success and in some instances has caused marketing and financial disasters. On the other hand, firms that carry out a careful selection process, conduct positive support and training programs, and continually monitor their foreign relationships are likely to increase sales and profits.

There are several other reasons for choosing international distributors with care.

Because of the distances involved in these strategic alliances, as well as the language and customs barriers, U.S. producers, by necessity, relinquish a part of their marketing and sales authority to the local distributor. Thus, it is important to ensure that their respective management styles can exist and thrive together.

It is also advisable to document a potential local country's partner's market connections. As aggressive as the global market is today, a company simply can't afford the luxury of establishing a relationship with a firm that doesn't understand its target markets or doesn't have strong relationships in those markets. Management has to keep in mind that one of the key things they are "buying" is the distributor's ability to quickly and economically tap into their markets...with your products.

In most areas of the globe being "the new aggressive, hungry kid" on the block is not the desirable image you want to align with. Usually you're looking for an established (dare we say entrenched) organization that has extensive, long-term relationships with senior management and key technical personnel at prospective customer organizations. Key personnel in most countries make less than their U.S. counterparts but they have often come up through the ranks and move less frequently from company to company.

Finally, because of the distance between a U.S. company's headquarters and an overseas distributor's territory, it is important to ensure that the distributor's sales force has solid technical expertise, as well as the ability to service customers. With the slim margins firms are forced to deal with today, it is seldom economically feasible to fly service personnel across the country, let alone across the ocean to handle customer problems. When the supplier doesn't or can't respond to the overseas customer's or distributor's requests, the relationship sours quickly. This is especially true when the company is focusing all of their resources on protecting their market position at home rather than trying to build marketshare in the new territories.

Whether corporate management likes it or not, the local firm will be the company in that country. As we are all coming to realize, service and support are becoming increasingly important for future sales. They become pivotal decision factors on the long-term success of a company and its products. If the company isn't willing to commit the time, money and effort required in helping the individual country distributors become successful for your products and services, management will be wiser to forget about looking at the greener pastures on the other side of the fence and focus on staying in their own back yard.

It's better to be considered fairly good at home rather than a fool on a global scale.

You may contact G. A. "Andy" Marken at andy@markencom.com.

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There's an Ad on My Banana By ChannelMedia Columnist Steve Cross

Man, do you people have dirty minds. I meant there was an Ad for the movie "Garfield" pasted right on my bunch of bananas, purchased at the grocery store this week. Think about the implications: the movie industry (a 6-8 Billion Dollar annual business) thinks they have put ads on fruit to break through the advertising and media overload. That's in addition to the advertising they already do on TV, radio, newspaper, trailers in other movies (selling to the most rabid fans of movies), product tie-ins/co-marketing, billboards, buses, taxicabs (in major metropolitan areas), the Internet, search engine optimization, paid search, etc.

Now think about where Mr. and Ms. Software & Hardware Vendor advertise: R.O.P. with a couple computer Retailers. Do ya' get why it's not working, folks? The best marketers in the world use multiple modes of advertising to make maximum impact on potential customers, and they do it fast! Do you have any doubt that your products are in the mainstream? After household computer adoption rates became 75%, the industry became mainstream, by definition.

Just like people choose what channel they prefer to use to buy products, they also self-select the advertising medium they pay attention to. The companies that have professionally designed ad campaigns with multiple media are the ones that are prospering. Why are there only a few CPU manufacturers? Because nobody but HPQ, SONY, Gateway/eMachines (not for long, baby, IMHO), and a couple others have enough dough to advertise all over the place and make sufficient impact on enough potential customers.

Much of our industry is just selling to an ever-decreasing group, in the old ways. Look, ROP is great and all that, but what about the other advertising methods? How's your online strategy? What are you doing in co-marketing, and product tie-ins? When was the last time a TV show had your product lying around on camera, or had a character pick it up so the camera could see it (along with 11 or 15 million viewers)??? How the heck did we make the QuickCam a household icon….think about it! We were doing this stuff almost 10 years ago. And a lot of you guys weren't paying attention. Still aren't.

Let me explain: if you guys aren't thinking about this kind of stuff, Microsoft is. Logitech is. HPQ is. SONY is. And they're going to eat your lunch. Consolidation is king. Good luck boys and girls.

Steve Cross
From Vegas, where COMDEX 2004 is cancelled (as I predicted here last year).
steve@crosschannel.com

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