Summary
Sony is probably not cutting out retailers as much as facing the market realities of retail shelf space and diversifying to build brand loyalty with online engagement
Analysis
The appearance is cutting out retailers, but Sony might be trying to solve another problem as indicated by Best Buy's results presentation last week. The problem is shelf space. The consumer electronics retailers want traffic-getters and inventory turnover which implies price discounting. Best Buy reported an almost 4% decline in same-store sales, and commented about the softness in games. Apple's consistent success has been to not depend on retailers or basically any partner as shown by maximizing its own-branded stores with the iPhone, AT&T and Synchronoss self-activation. Apple's first goal is to deliver to customers, and then support retailers as an alternate channel. Sony also learned from its Sony Ericsson handset venture of being too dependent on music and imaging. Sony has to shift to mobile Web connections, and that can be accomplished through online engagement with customers. As Apple showed with the iPhone launch, brand loyalty created historical demand for one handset in a cellphone market dominated by the product lineups of Nokia, Samsung and Motorola.
Gregg Kail consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
