By Ben Smith

It’s hard to have a conversation about consumer electronics without making the discussion relative to Best Buy.  While I assume most people know that Best Buy is the market leader, I don’t know if they understand their magnitude in the marketplace.  With their longtime rival Circuit City closing in 2009 this provided a slight “reset” for the market and it is worth taking a look at how things shook out.  I know that all the customers we met with had their own take / plans on how they were going after Circuit City’s market share.   The general market consensus was that Best Buy would gain the most, but that Walmart and Amazon.com would also benefit.

Well the dust has settled and results from the Q4 holiday season are in.  I realize that some of our readers are in the CE community and have ready access to retailer share.  Note that I’m not quoting anything from NPD that I have access to for my job.  I’m linking to a couple of public sources to point out that you can get a good idea of what is going on with a little digging (or you can get it from us)!  The data I’m sharing is from consumer surveys conducted by 2 different firms,  so take it with a grain of salt – it isn’t cash register data, but provides valuable perspective on where consumers look to purchase their electronics.

1) AD AGE ARTICLE SHOWS BEST BUY GAINING GROUND (WITH 33% SHARE)

Ad Age featured an article appropriately titled “Former Foes Gain Share From Shuttered Circuit City”.

Summary: Best Buy gained share last year and is up to approx. 33% consumer preference share.  Walmart gained also, and is up to approx. 20% consumer preference share.  They have further breakdowns in the article by customer’s income.  Those under $50K/year, Best Buy and Walmart are neck and neck.  But for those $50K & over, Best Buy is the overwhelming leader, over 40% share.

Store       Dec. 2008   Dec. 2009   +/-

• Best Buy    29.8%       33.1%       3.3
• Walmart     17.0%       20.6%       3.7
• Amazon      2.3%        3.6%        1.4
• Target      2.1%        2.8%        0.6
• Sears       1.6%        2.0%        0.4

Their data source: (data from BIG RESEARCH)

Notes: Of course they didn’t include Circuit City’s share in 2008, but I estimate it was between 8-10%.  I estimate that brick & mortar Best Buy and Walmart probably split Circuit City’s share pretty evenly, with Walmart gaining a little more due to a larger number of store locations.  Amazon.com gain’s were likely from Circuitcity.com’s absence, as Circuitcity was a strong dot com player (stronger than their retail presence in comparison).

2) RETREVO PULSE ARTICLE SAYS BEST BUY LOSING GROUND (BUT WITH 40% SHARE)

Retrevo Pulse featured an article titled “Best Buy Competitors Gained Ground This Year”.

Summary: Take it with a grain of salt that Best Buy lost ground in this survey, as they actually have an even larger share of preference in this one, at 40%.  I’m not disputing the source, but as you’ll see in my notes, I think you can explain away some of the differences.

About Retrevo & their data source: The Retrevo Pulse is a data source from a CE shopping website that conducts its own surveys and publishes them. What I like about Retrevo is the simplicity of their reports.

Notes: This article shows Best Buy with a even larger share of preference than the Ad Age article, at 40% – but that it slipped over the last year.  The article also makes it look like Amazon gained at Best Buy’s expense.  Perhaps it boiled the results down too much, and again, we don’t see what Circuit City’s 2008 numbers were to gauge how much there was for competitors to take.  They also show Walmart much smaller than the Ad Age survey.  And conversely, Amazon looks huge here.  Given that the survey was conducted online by Retrevo, a online shopping/comparison site, you can imagine that their population is probably more comfortable with relying on Amazon.com for their CE purchases.

TAKEAWAY: CONSUMER ELECTRONICS STILL REVOLVES AROUND BEST BUY

Best Buy is the dominant player in Consumer Electronics, a king maker that has influence with consumers beyond whatever its share actually is (33% – 40%).  Even as Walmart and Amazon grow share in the CE space, it is ultimately because people get more comfortable NOT making their purchase at Best Buy.  If you are a CE manufacturer, not having your products at Best Buy robs you of credibility with consumers and key influencers.  If you are an agency with clients who sell products at Best Buy, you need to know as much about Best Buy as your clients because it is your best route to success.  If the products you sell can’t succeed at Best Buy, you will have little leverage wherever else you go to peddle your wares.  Conversely, succeeding at Best Buy paves the way for success in other channels.   Best Buy does the heavy lifting for other retailers that sell consumer electronics.  They just have to look at what Best Buy assorts as a baseline and start from there.  So get it right in the first place and base your plans on success at Best Buy.  Retail leverage will flow from there.

BONUS: NAME TO KEEP AN EYE ON IN CONSUMER ELECTRONICS:

If you don’t live in the midwest or south, you probably haven’t heard of HH Gregg.  In the coming decade you will.  They are a regional consumer electronics chain that has national ambition.   Imagine the things that people liked about Circuit City (more experienced sales associates, ability to deal), but without the legacy burden’s that held Circuit City back.   This article in the WSJ lays out HH Gregg’s ambitious expansion plans. While HH Gregg has a small footprint and is only roughly 10% of the size of Best Buy (127 stores), in many ways this is an advantage to them.  They are ramping up expansion in a market where retail real estate has been decimated, including many former Circuit City locations that can easily be re-purposed.

By Vincent Young:

Whether you are the dominant brand player in your category or a challenger brand just trying to hold shelf position during a troubled economy, there are certain common realities that will bind us all in 2010. Some are current trends that will continue to increase in importance as the landscape of retail continues to evolve, while others reflect my humble opinion as an army of one.  So, without further adieu, I give you five Retail Leverage Predictions for 2010…

Five Retail Leverage Predictions for 2010:

1) The CMO Will Become the CCMO (Chief Customer Marketing Officer): It started years ago with opening price-point private labels, then we saw the premium positioning traditionally occupied by the leading national brands come under attack by the upscale “house-brand”- and then before any of us realized it, retailers themselves evolved from being simple margin-hungry supply houses to becoming incredibly influential consumer brand marketers themselves. With that change, marketing leaders (CMOs) of supplier brands to retail are forced to understand as much (if not more) about the retailers’ brand strategies as they know about their own stand-alone consumer brands. The implication here is huge – this means that, starting with the consumer and working backwards, brands who sell into retail will need to validate their consumer marketing strategies by proving that the supplier’s brand compliments and adds value to the overall brand goals of the retailer.

2) Creative Services Agencies Will Learn the Language of Retail: In 2010, a set of additional language will be added to the traditional “agency brief.” A description of the umbrella brand positioning & strategies of the key retailers that will sell your brand has to be relayed to the agency creative department as a way to insure that your messages, look, feel, and recommended programs not only support your individual brand architecture, but are also complimentary to the retailer’s overall brand approach. Creative agencies that fail to understand retail branding as the highest order of supplier brand hierarchy will lose billings to those who speak the language of retail.

3) It Will Take a Village to Make Social Networking a Relevant Marketing Tool for Retail Leverage: Let me give an example: I love sports, I love potato chips, I love beer, too! In the world of social networking, why do I then need to follow/track/keep-up with both Frito-Lay and Anhueser Bush in the world of Twitter and Facebook?  I shouldn’t have to – they should combine their efforts, partner with a national grocery chain and create ONE community for people looking for great tailgating ideas/new products/offers! Brands who partner with retailers to create and manage consumer “solution” based social networking strategies stand a much better chance of keeping consumers within the sprawling world of digital communities engaged. This will create totally new processes and paradigms for social networking administration, promotion, and advertising. But remember, the brand that gets it right and co-creates relevant sized social networking communities within partnership with retail gains a significant amount of leverage with the given retailer.

4) “Co-operative Planning” Content Will dominate Best Selling Marketing Publications: Currently, most marketing textbooks serve as roadmaps for how to build brand strategies and supporting marketing plans for the largely inexperienced.  The classic “Kotler” marketing instructions still apply and are sound for learning marketing in a pure environment. However, if your brand is a good or service sold via today’s world of retail where your brand is more like a building block that supports a retailer’s umbrella brand, then the classic approach will need a little tweaking. In 2010, the new “best seller” will be dedicated to providing strategic marketers with the tools, best practices, and measurement systems that allow for retail leverage strategies to become institutionalized within the standard marketing planning process.

5) The New “All-in-One” Brand Will Dominate the Retail Landscape: Historically, consumer brand managers had the ability to choose how to best position their brands within a given category – price, value, or premium were the traditional options available to brand marketers. In many cases today, retailers are looking to consolidate vendors while expanding their own brands across all of the traditional positioning lanes (not just opening price-point), thus driving national brands to become a niche player if its focus is only on one positioning segment. As a result, the new power brand will have to be able to generate volume across all three positioning segments in order to remain viable on-shelf. “Price-leading” national brands will be forced to become viable in higher-end segments, while historically premium national brands will be forced to make offerings within the lower-priced segments of most categories.

WRAP-UP:

We will revisit these predictions as the year progresses and hope to provide examples of brands who are successfully adapting their go-to-market strategies and programs to reflect the ever-changing realities of retail in 2010. Feel free to share your examples of how you plan to increase your leverage with retail in 2010 and what predictions you have that have guided your thinking!

LIKE WHAT YOU SEE HERE?  FOLLOW US:

If you find our content of value, please follow us & then spread the word. Lots of ways, including:

1. Twitter – follow us, and re-tweet us.
2. LinkedIn – share with your connections and/or groups via the button we put on every article.
3. LinkedIn – join our group to get connected to like-minded individuals who get the concept of “Retail Leverage”
4. Facebook – follow us.
5. Email – Sign up to receive an email every time we have a new post.
6. RSS – if you are fancy enough to know how to use RSS feeds, add our feed

By Steve Marzio

One of the most overused terms in marketing conference rooms and on title slides of agency presentations is to have a “360 Marketing Plan.”  Wow that sounds good doesn’t it?  The thought that your target consumer might see your TV spot while drinking coffee and watching her morning talk show then hear your spot radio while schlepping the kids to daycare, soon passing a billboard showcasing a supersized image of your product as she enters the grocery store to see your product on the front endcap while standing on a colorful floor decal of your brand certainly makes for a powerful powerpoint presentation!

DON’T FALL FOR THE TRAP

The 360 Marketing Plan is a dangerous trap.  As marketers, we love the sizzle don’t we?  Be honest with yourself….its why you’re in marketing isn’t it?  You recall that business school course where you first learned about what a 360 marketing plan even was.  Surely this makes sense, my professor (who has a PHD!) taught it to me.  There are so many ways these days to reach your customer, why not dabble a little in all of them?  In this way, we are sure to reach our target…right?  Hereby lies the trap.  What looks great in powerpoint, using your budgets, doesn’t cause even the smallest ripple in the ocean of clutter that exists in the marketplace….especially when you are a challenger/up-and-coming brand.

The powerpoint presentation can look dreadfully similar on the number of marketing communication vehicles you can use whether you are on a $5M Marcom plan or a $50 Marcom plan.  The difference is in an excel chart on the last page that shows the budget numbers by line item.  This chart often gets lost in the sizzle of the 360 marketing plan (which were the first 30 slides of the presentation).

Put simply, unless you are the Geicos or Capital Ones of the world that have MARCOM budgets that dwarf the size of most companies’ total revenues and the GDP of some small countries, pick a…one…uno…a SINGLE communication vehicle that meets these criteria listed below to deliver maximum impact.

REQUIREMENTS FOR YOUR ONE COMMUNICATION VEHICLE STRATEGY:

1. Makes Sense Strategically - (long vs. short story to tell? Reach vs. Frequency goals? Close to a Retail Sale? Etc…)
2. Reaches Your Target Audience – (obvious you want to shout where your target customers can hear you)
3. Penetrates Enough to Be Heard – (your budget should be able to support a high level of reach/frequency over time)

TAKEAWAYS:

To quote a previous article of mine on RetailLeverage.com….OWN SOMETHING.  As much as $10M may seem like a lot on paper, but in the marketplace, this is hardly enough to support a 360 marketing effort.  Actually, let me rephrase.  You could certainly execute activities on a 360 marketing plan, but you will fail to break through the clutter in any one single vehicle.  Better to go narrow and deep to break through than to go broad and shallow.

Don’t be ineffective in reaching your target 5 times on the way to the grocery store.  Be effective in reaching her hundreds of times over several weeks/months during just one of her daily activities.  You will see consumers beginning to pull your product.  Save your 360 grandiose plans for a later time.