Sony May Open Stores, Worrying Retailers

Monday, October 18th 2004, 10:38 am
By: News On 6

COSTA MESA, Calif. (AP) _ Few people took notice when Sony Electronics Inc. opened a tiny storefront last year here at South Coast Plaza, a swanky mall south of Los Angeles.

As it turns out, the small store would represent a big change in how Sony sells its televisions, DVD players and other gear.

Since opening its first store last year, Sony has quietly opened stores in seven other cities. The Japanese giant will open in its 11th and 12th U.S. stores this month, in Denver and Las Vegas, and expects to have about 30 Sony Style stores in the United States by April 2006.

Some retailers that sell Sony products worry they will lose sales. They also worry that if the stores are successful, other manufacturers will open stores, too.

``We're going to watch very closely what they do with these stores,'' said Tom Campbell, vice president of Ken Cranes Home Electronics Inc., a chain of eight stores in Southern California. ``The manufacturer is becoming a potential competitor.''

Apple Computer Inc. has opened 84 stores nationwide since 2001. Dell Inc. has its own kiosks, but neither depends much on other retailers to sell product _ at least not to the extent that Sony, Panasonic Consumer Electronics Co. or Samsung Electronics America Inc. do.

Abt Electronics, which has a large store near Chicago, isn't hiding its displeasure.

``We want our vendor to be a vendor, not a retail competitor,'' said Mike Abt, president of the company's Internet unit.

Sony is moving into ritzy shopping malls based on a widely held belief that conventional electronics stores do a lousy job with women. Its storefronts sit next to Tiffany, Louis Vuitton, Sephora and other boutiques that appeal to women _ a stark contrast to the big-box electronics stores in strip malls.

Dennis Syracuse, vice president of Sony Style Retail, crashed a Tupperware party as part of his research to watch how women shop. His conclusion: women do more homework than men.

At every Sony store a ``concierge desk'' greets shoppers, because company research suggested the feature appeals to women. The aisles are wide enough for strollers. Televisions are perched on different stands, instead of lined in rows at the same height, to give shoppers a better sense of how they will look in their living rooms.

One thing is certain: you won't see crowds of men huddled at the televisions to watch college football on Saturday afternoons.

``It's a cardinal rule _ don't show sports,'' Syracuse said. Even during the Olympics, televisions were tuned to the Discovery Channel and clips from Sony Corp. movies.

Syracuse, 56, worked for years in women's fashion, where it's common for manufacturers to have hundreds of their own stores even as they sell to department stores. By contrast, it's rare for an electronics company to set up shop next to its retailers.

When Samsung opened a 10,000-square-foot showroom in Manhattan last month, executives insisted they weren't going after anyone's sales. They called it an ``unstore'' and promoted free admission, as if it were an amusement park. Anyone who wants to buy the wares on display is sent to a nearby retailer.

``Our moral conscience, our business conscience, says our goal is to support (our retail) partners,'' said Peter Weedfald, Samsung's senior vice president of marketing.

The Sony boutiques are a departure from two large stores the company runs in New York and San Francisco. Sony closed a big store on Chicago's Michigan Avenue this year.

Sony says it hasn't been hawking bargains, and comparison shopping around Costa Mesa confirms that. Prices at its closest competitors were strikingly similar, although Sony sold a 42-inch plasma TV for $8,000 _ $250 more than a Circuit City eight miles away. Best Buy matched Sony on two plasma TVs; one DVD player was $10 more while another was $10 less.

Sony's store carried a few gadgets that weren't sold at Best Buy or Circuit City, including its new 20-gigabyte $400 digital music player, Sony's answer to Apple's iPod, and its latest lightweight Vaio laptop for $3,000.

When scouting locations, Sony looks at shopping malls with the most sales in the nation's top 50 markets and bargains for the busiest sections of those malls.

The Costa Mesa store, which is next to Gucci, is about 6,000 square feet, roughly one-seventh the size of a Best Buy. The tight quarters means selection is limited to about 18 televisions, 15 computers and 12 camcorders. The stores offer everything from $20 headphones to a $20,000 projection television.

On a recent Wednesday evening, men outnumbered women about four to one.

Armand Darbish, a 44-year-old engineer, left empty-handed in his search for a wireless networking card, disappointed with the small selection.

``They don't really understand the techie stuff,'' he said.

Alan Savitz, a Los Angeles physician, inched closer to buying a high-definition television after browsing with his wife for a half hour. He said the research was helpful, but he would never buy from a Sony store _ would likely have the best price.

Savitz, 68, left a bit puzzled by Sony's experiment.

``Why would they compete with their own retailers?'' he asked.

The stores appear to be an effort to burnish Sony's image, which has suffered from a growing crowd of lower-cost Chinese manufacturers, according to Wade Fenn, a consultant and former executive with Best Buy Co.

Sony has yet to show, though, that it can master the mechanics of retail in the United States, such as making money off warranties and installation, but it may prove more adept than traditional chains at explaining certain products to consumers, Fenn said.

Sony's stores probably won't hurt Best Buy and other huge retailers, but they may harm smaller chains, he said. Representatives of Best Buy and Circuit City Stores Inc. declined to comment.

Mike Fasulo, president of Sony's eSolutions unit, which oversees the stores, invites nearby retailers for a sneak peak whenever he enters a new market. He cites Sony-commissioned studies that show the stores mean better-educated consumers _ and more sales for them, too.

Still, Sony executives expect the stores to be profitable and acknowledge that some retailers may be unhappy.

``I haven't gotten any complaint letters but I haven't gotten any thank-you letters either,'' Fasulo said.