Gl Gi Wade Fenn Seminar Final
Upcoming SlideShare
Loading in...5
×
 

Gl Gi Wade Fenn Seminar Final

on

  • 579 views

 

Statistics

Views

Total Views
579
Views on SlideShare
579
Embed Views
0

Actions

Likes
0
Downloads
1
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Gl Gi Wade Fenn Seminar Final Gl Gi Wade Fenn Seminar Final Presentation Transcript

  • GLGi: Consumer Electronics Industry Overview Wade Fenn January 30, 2008 New York
    • Council Member Biography
    • Wade Fenn is the Managing Partner of Retail Masters, a consulting firm that specializes in the consumer electronics industry, where he has been since 2002. Prior to this, Mr. Fenn was with the President of Business Development and Entertainment for Best Buy where he worked from 1980 until 2002. Mr. Fenn began is career as a Store Manager working his way up to a variety of positions including, VP of Retail Stores, SVP of Retail Sales and Operation and EVP of Marketing. Mr. Fenn also founded Navvo, a consumer electronics company that specializes in voice applications for the consumer, in 2002.
    • Topics
    • Evaluation of Best Buy’s current business and US vs. International retail strategy
    • Assessment of Circuit City current business state and strategic options
    • Analysis of the current TV cycle and the implications across retail channels
    • Overview of the Consumer Electronic Show
    • About GLG Institute
    • GLG Institute (GLGi SM ) is a professional organization focused on educating business and investment professionals through in-person meetings. It is designed to revolutionize the professional education market by putting the power of programming into the hands of the GLG community.
    • GLGi hosts hundreds of Seminars worldwide each year.
    • GLGi clients receive two seats to all Seminars in all Practice Areas.
    • GLGi’s website enables clients to:
      • Propose Seminar topics, agenda items and locations
      • View and RSVP to scheduled and proposed Seminars
      • Receive a daily briefing with new posts on your favorite tickers, subject areas and from trusted Council Members
      • Share Seminar details with colleagues or friends
    • IMPORTANT GLG INSTITUTE DISCLAIMER – By making contact with this/these Council Members and participating in this event, you specifically acknowledge, understand and agree that you must not seek out material non-public or confidential information from Council Members. You understand and agree that the information and material provided by Council Members is provided for your own insight and educational purposes and may not be redistributed or displayed in any form without the prior written consent of Gerson Lehrman Group. You agree to keep the material provided by Council Members for this event and the business information of Gerson Lehrman Group, including information about Council Members, confidential until such information becomes known to the public generally and except to the extent that disclosure may be required by law, regulation or legal process. You must respect any agreements they may have and understand the Council Members may be constrained by obligations or agreements in their ability to consult on certain topics and answer certain questions. Please note that Council Members do not provide investment advice, nor do they provide professional opinions. Council Members who are lawyers do not provide legal advice and no attorney-client relationship is established from their participation in this project.
    • You acknowledge and agree that Gerson Lehrman Group does not screen and is not responsible for the content of materials produced by Council Members. You understand and agree that you will not hold Council Members or Gerson Lehrman Group liable for the accuracy or completeness of the information provided to you by the Council Members. You acknowledge and agree that Gerson Lehrman Group shall have no liability whatsoever arising from your attendance at the event or the actions or omissions of Council Members including, but not limited to claims by third parties relating to the actions or omissions of Council Members, and you agree to release Gerson Lehrman Group from any and all claims for lost profits and liabilities that result from your participation in this event or the information provided by Council Members, regardless of whether or not such liability arises is based in tort, contract, strict liability or otherwise. You acknowledge and agree that Gerson Lehrman Group shall not be liable for any incidental, consequential, punitive or special damages, or any other indirect damages, even if advised of the possibility of such damages arising from your attendance at the event or use of the information provided at this event.
    • Gerson Lehrman Group Contacts
    • Randi Reiner Culang
    • Vice President, Consumer Goods & Services Global
    • Research Head
    • Gerson Lehrman Group
    • 850 Third Avenue, 9th Floor
    • New York, NY 10022
    • 212-750-1229
    • [email_address]
    • Aaron Liberman
    • Managing Director, Sales and Marketing
    • Gerson Lehrman Group
    • 850 Third Avenue, 9th Floor
    • New York, NY 10022
    • 212-984-3684
    • [email_address]
    • Carly Pisarri
    • Process Manager
    • Gerson Lehrman Group
    • 850 Third Avenue, 9th Floor
    • New York, NY 10022
    • 212-750-1435
    • [email_address]
  • Wade Fenn January 2008
  • Key Themes
    • TV Cycle past prime…5 th inning and still not stable. Everyone feeling pain from Suppliers to retailers. High teens margins
    • Game Cycle at peak…biggest 12 months of hardware and software…
    • CC struggling with management and strategy issues…Wattles takes a 6% position…attempts to shake up the board
    • BBY China a wildcard…adding Mexico, Turkey, Puerto Rico…Weimin Lu resigns from China
    • Wal-mart and Costco gain share… compression with Vizio to tier one brands brand loyalty
    • Connected TV…the next big thing
    • Apple providing the best integrated solution…Apple Retail setting the bar
    • Slowdown post Christmas…
    • Even though product cycle trumps economic cycle, CE stocks have underperformed the market during downturns
  • The Digital TV Revolution
  • Flat Panel Competitive Situation Source: Company Websites, Sunday Circulars TV Type Lower Tier Tier 1 Differential Name Brand Premium 50" Plasma 720p/1080i 1,250 $ 1,700 $ 450 $ 36% 42" Plasma 720p/1080i 900 $ 1,160 $ 260 $ 29% 42" LCD 720p/1080i 1,000 $ 1,310 $ 310 $ 31% 42" LCD 1080p 1,200 $ 1,600 $ 400 $ 33% 37" LCD 720p/1080i 760 $ 1,080 $ 320 $ 42% 32" LCD 720p/1080i 600 $ 800 200 $ 33% Average Premium 34% Median Price by Manufacturer 2007 TV Type Lower Tier Tier 1 Differential Name Brand Premium 50" Plasma 720p 2,000 $ 2,900 $ 900 $ 45% 42" Plasma 720p 1,400 $ 2,100 $ 700 $ 50% 42"/40" LCD 720p 1,400 $ 2,100 $ 700 $ 50% 37"/32" LCD 720p $ 900 1,475 $ 575 $ 64% Average Premium 52% Median Price by Manufacturer 2006 TV Type Lower Tier Tier 1 Differential Name Brand Premium 50" Plasma 720p/1080i 1199 $ 1,499 $ $ 300 25% 42" Plasma 720p/1080i $ 799 999 $ $ 200 25% 42" LCD 720p/1080i 1099 $ 1,249 $ $ 150 14% 42" LCD 1080p 989 $ $1099 $ 110 11% 37" LCD 720p/1080i $ 699 $ 899 $ 200 29% 32" LCD 720p/1080i $ 549 $ 699 $ 150 27% Average Premium 21% Median Price by Manufacturer 2008 $
  • 1080p Premium 1382 1065 BBY 1600 1000 CC 1200 900 Tiger Direct 1080p 720p LCD 1600 1032 BBY 1600 900 CC 1300 850 Tiger Direct 1080p 720p Plasma Median Price for 42” Screen Size & Technology
  • Best Buy Inventory Yield Source: Company Reports
  • Circuit City Inventory Yield Source: Company Reports
  • Margin Declines and GMROI
    • Plasma TV…32-36 points… 2001
    • Average declines 200 basis points per year after year 1
    • GmROI declining in boutiques 2004
    • GmROI declined in Mass Specialists beginning fall of 2006
    • GmROI of Mass will increase once price points hit 999 …spring of 2007
  • Product Lifecycle
    • Products typically migrate from high end to mass over time, compressing margins while dimensions of value change
    Boutique Large Specialty Mass Merchants Convenience Cedia/ Pro Group Price Time
  • Product Lifecycle…current examples Boutique Large Specialty Mass Merchants Convenience Cedia/ Pro Group Price Time Satellite Radio Flat Panel TV DVD Hardware/ software Compact Disc Home automation Integrated remotes
  • Profit Curves by Segment
  • Dealing with Change Best Buy
    • Attempting to maintain momentum by attracting new customers
      • Best Buy for Business – Bringing business customers the benefit of the master brand
      • Magnolia Home Theater and Geek Squad
      • Geographic expansion to China, Mexico, Turkey
  • Dealing with Change Best Buy
    • Has killed many of its internal concepts which were not producing, rationalizing costs
    • Is over-expanding US store base
    • Has the digitization of content coming at key businesses, offset by the peak of the game cycle
    • Continues to have the best overall depth of management talent
  • Dealing with Change Circuit City
    • Adopted non-commission late
    • Attempting store remodels and relocation
    • Struggling to retail management… 3 of top 6 left…
    • Employees sense a need for change of strategy
    • Limited experimentation
      • Firedog, The City
    • Surprisingly conservative given past corporate strategy initiatives
      • CarMax
      • Divx
  • Dealing with Change Circuit City
    • Management feels its problems are operational
    • Customer value proposition declining…no space between Best Buy and Wal-mart
    • Anti-Apple or Mobile store possible solutions…needs vision
    • Supplier credibility strained
  • Can Best Buy and CC co-exist?
    • No, not as CC is positioned today.
    • Yes if CC commits to creating a new position, that while being number two overall, is number one with a desirable set of customers
  • Can Best Buy and CC co-exist?
    • CC vs. BBY today = Kmart vs. Wal-Mart
      • Insufficient differentiation
      • CC is playing catch up (too late) and trying to own the same position
      • Unable to overcome inherent structural advantages
    • Kmart kept fussing with store layout, pricing, color scheme, store signage, but never created a unique position that was number one with a desirable customer
  • Can Best Buy and CC co-exist?
    • CC vs. BBY possibilities: = Target vs Wal-Mart
      • Focused on a different customer target
        • Smaller, but more desirable
      • Able to command a premium for goods through integration of content, hardware, interface
      • Clearly number one with their customers
  • Surviving as #2
    • The Home Depot
    • Lowe’s
    • Wal-mart
    • Target
    • Dick’s Sporting Goods
    • Sportmart
    • Sports Authority
    • GART Sports
    • Oshman’s
  • The Need For Positioning
  • The Need For Positioning
    • “ The best way to predict the future is to create it.”
          • Peter Drucker
  • The Need For Positioning
    • Brands bypassing traditional retail channels to reach customers
  • Categories to Watch from CES
    • Digital Television OLED
    • Digital media vs. Physical media …NBC booth
    • Wireless network peripherals and portable devices
    • In Home Services
    • Set top box Revolution
    • The Interface: Voice
    • The Gaming business
  • Appendix
  • CEDIA and Pro Group
    • Typically high-end, custom installations
    • 6.3 billion annual sales, 5.3 to consumers
    • Most don’t have bricks and mortar
    • Growth in integrating CE, IT, Networking, and Telephony
                                 
  • Boutiques
    • Business models under substantial pressure
    • Too inefficient for product centric model to survive
    • Lost their ability to make markets
    • Must become service or fashion stores
  • Mass Specialists
    • Efficiency of the mass with better selection
    • Attempting to move to services
    • Under siege by Wal-Mart/Costco expanding into middle high-end
  • Convenience
    • Products sold everywhere (Batteries and Coke)
    • Categories don’t define the store any longer
    • Categories become convenience after supplier consolidation
                                                
  • Mass Retail
    • Pressuring Suppliers for mid/hi end products
    • Dominate commodity categories…
    • Female based shoppers
    • Wal-Mart and Best Buy in heated competition for Chinese supply
  • Brand Name Opening Price Point decline from 2006/2008 42” TV Source: Store visits and company websites N/A 999 949 Wal-Mart 2199/2199 2199/999 2299/999 Costco 1799/1199 1799/996 1899/1099 Best Buy 1799/999 2199/999 1799/1169 Circuit City DLP Plasma LCD
  • Private Label Opening Price Point decline from 2006/2008 42” TV Source: Store visits and company websites N/A 899 899 Wal-Mart 2199/2199 1699/1099 2299/899 Costco 1699/1199 1698/899 1799/996 Best Buy 1498/999 1669/899 1799/899 Circuit City DLP Plasma LCD
  • Average Price Point Decline from 2006/2008 40’-65’ TV Source: Store visits and company websites 2624/2924 2859/2032 2699/1715 Costco 2929/2011 4541/2844 3180/2132 Best Buy 2474/2070 3953/1710 3536/1891 Circuit City DLP Plasma LCD
  • Retail Mix by Technology 40-49 TV Source: Store visits and company websites 0 0 2 2 Plasma 1080p 0 3 7 Wal-Mart 2 1 7 Costco 6 6 38 Best Buy 6 10 40 Circuit City Plasma 720P LCD 720p LCD 1080P
  • Retail Mix by Technology 50+ TV Source: Store visits and company websites 0 1 7 7 Plasma 1080p 3 0 2 Wal-Mart 3 0 3 Costco 7 1 9 Best Buy 7 0 9 Circuit City Plasma 720P LCD 720p LCD 1080P