How Can Retail Leverage Help Garmin?
Garmin, the maker of GPS systems, is getting hit with this double-whammy. The majority of their problems center on their Automotive/Mobile business segment, which includes the main product that comes to mind for Garmin, the portable GPS for your car. Just as Tivo has watched the cable / satellite companies erode their share with generic DVR’s, smart phones are poised to erode the stand-alone portable GPS business. How big of a problem is this for Garmin? Take a look at their business by segment:
- Automotive/Mobile, 73% of sales, 62% of profit
- Outdoor/Fitness, 12% of sales, 18% of profit
- Aviation, 9% of sales, 13% of profit
- Marine, 6%, 7% of profit
DENIAL IS NOT A RIVER IN EGYPT (OR GARMIN’S STRATEGY):
Look – It’s not that they don’t know that they have a problem and aren’t doing anything about it:
“As evidenced in our nüvifone line, Garmin intends always to be part of new markets, not be replaced by them. Garmin’s intuitive turn-by-turn directions can be delivered in many packages, whether a PND, a mobile phone or a yet-to-be-created device of the future.” -Garmin 2008 Annual Report
So their answer seems to be to develop their own Smart Phone, the nüvifone line (an extension of their popular nüvi GPS naming). I’ll be the first to admit, I like Garmin and have relied on their products (portable GPS – loved it til it got stolen; GPS running watch – love it). I bought those products for a dedicated purpose / application. Unfortunately for Garmin and lots of other manufacturers, “there’s an app for that”. Most smart phones provide GPS mapping capabilities, and most do it good enough to serve as substitutes. In addition, they key benefit of smart phones, led by the iPhone are the wide variety of capabilities enabled by applications. GPS is but yet one of many useful functions, albeit an important one.
Will consumers select a phone because it is the best at providing / integrating GPS functionality? I don’t know. I’m not hopeful. Then again, I don’t think a Facebook phone would make much sense either (contrary to what this AdAge article suggests). Ultimately the market will decide.
WHERE DOES GARMIN GO FROM HERE?
The central question for Retail Leverage and our readers is “What can Garmin do to gain Retail Leverage with its nüvifone line?”
They’ve already launched their first nüvifone in the US as an exclusive via AT&T. Early results have not been promising. I’m not sure if this is due to typical problems with a 1st generation product (lots of kinks to work out), or getting lost in the shuffle behind iPhone and Blackberry. They recently announced new models that will be available soon in Europe, and the expectation is that they will make their way to the US in time for Holiday 2010. I would expect that the new phones will offer typical 2nd generation improvements you expect from any product (key lesson from my dad – never buy the 1st of anything unless you can afford to buy the 2nd also).
THE ANSWER IS:
So I already admitted that I didn’t have the answer. This article is our first attempt to get our heads around this problem. Got ideas? Share them with us. See that comment section below – it’s open for business. We welcome ideas from our fellow arm-chair marketers. The real value in this exercise, and in Retail Leverage in general, is the continuing education you get from observing and thinking about challenges to marketing at retail. We’ll revisit Garmin’s problem later after we’ve had a chance to crowd-source and refine some ideas.
- The market not too optimistic about Garmin’s future
- Article about mobile phone GPS and future of location based services (it’s why they are giving you the maps for free)
- Speculation on Garmin nuviphone
- Garmin’s 2008 annual report (where I got my sales/profit data and insight into their strategy)
- Ad age article suggesting a Facebook phone would succeed (call me crazy but I disagree)