i3 | April 25, 2017

Sony Partners with Retailers to Prioritize Profits

Steve Smith

No matter how CES and the technologies introduced there have changed over the years, one challenge remains the same for the manufacturers unveiling products and retailers who try to sell them: making a profit. Achieving sustainable growth and profitability has always been elusive in this business, even for established brands.

That issue became evident once again during CES this year at Sony’s press conference. Kazuo Hirai, president and CEO of Sony, commented on the progress of his company’s strategic changes. “We are on a path of sustainable growth,” Hirai said.

Specifically Sony has slimmed down its expansive CE line and focused more on premium products. For instance, Sony said in its worldwide financial report for fiscal second quarter ended September 30, operating income for its TV and audio products increased year-on-year “primarily due to an improvement in product mix reflecting a shift to high value-added models.”

In his remarks, Hirai saluted Mike Fasulo, president and COO of Sony North America, for the turnaround in the U.S. The transition for Sony was not an easy one, especially in a changing marketplace. Hirai noted, “Some asked, ‘Can Sony actually remain relevant?’ Consumers that are far more tech savvy than ever before, probably know more about specific features and pricing of specific SKUs they are interested in, and have more choices where to buy those products.”

With more CE sales volume generated online, usually based on price, Fasulo has focused on regional CE retailers, independents and custom installers who can explain and demonstrate more upscale products. That’s why when both Hirai and Fasulo were running late to their own reception, this reporter and a couple of others quipped that one or both of them quickly went to a buying group reception crosstown first. And it could have been plausible because retail buying groups, whose members are specialty CE retailers and installers, are key to Sony’s retail strategy.

The issue of selling features versus price eventually came up, particularly for Ultra 4K TVs. One reporter asked about retailers selling the category based on price and that established brands need to be more active to change the dynamic. Fasulo indicated the key for Sony has been to partner with retailers and custom installers who are willing, ready and able to sell, explain and install upscale products with margins in mind.

All the promotions in the world won’t help if a manufacturer doesn’t position its brand in the marketplace correctly and picks the wrong retailers to sell its wares. The threadbare strategy of selling certain SKUs on price by suppliers and retailers and hope they can “make it up in volume” or via market share still happens. For instance, one story making the rounds at CES involved an up-and-coming TV brand which was selling an excellent over 50-inch Ultra 4K TV at retail for at least $300 less than comparably featured TVs during the Holiday season.

The model sold out nationally before Christmas, but now the unnamed supplier is in the unenviable position of trying to introduce a new Ultra 4K TV at the same size, and convince its retail partners to sell it for a higher price.

As for Sony, it seemingly has done the impossible. Unlike several other major Japanese CE brands that drove the industry for the past four or five decades, it has been able to get back to its roots of introducing innovative CE products, and selling them profitably. Sony has done it in partnership with retailers and custom installers that aim for profit – not just volume – which has always been a rarity in this business.

March/April 2017 i3 Cover Issue

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