Consumer Electronics Manufacturers Retail Strategies Could Be Risky

Bypassing their existing distributors and retailers could prove successful for some, but might present challenges for others.

Oyster Bay, NY - July 26, 2006 - Major manufacturers of consumer electronics

equipment are embarking on a strategy that will disrupt traditional CE
retail networks, and may expose them to new risks, according to ABI
Research.

Companies such as Sony, Dell, Bang & Olufsen, Philips, and Pioneer are
establishing chains of own -brand retail stores and kiosks. Apple went down
this road years ago: today it has about 125 Apple stores worldwide, which
account for about 20% of the company's revenue. Dell has over 160 kiosks in
malls. Sony is partnering with Zoom Systems to deploy vendor kiosks,
targeting virtually all the leading malls in the US.

'OEM storefronts and kiosks represent a major change that will disrupt the
current retail ecosystem,' says research director Vamsi Sistla. 'Bypassing
their existing distributors and retailers could prove successful for some,
but might present challenges for others.'

Their motives are clear. Most of these vendors already have significant
online sales, and want fresh fields for expansion. They can provide a richer
and more customized experience for shoppers than the major retail chains
can. They can control and protect their brands: if consumer demand falls, an
OEM can take more effective countermeasures via its own outlets, while
maintaining better control of margins. And if appropriate, they can partner
with other vendors to offer complementary products and accessories.

But there are risks as well. For example, retailers' stock prices are partly
determined by their bricks -and -mortar performance. Wall Street sets share
prices using parameters such as the number of stores added or shut down, and
how much revenue per consumer the stores generate. By opening their own
stores, OEMs -which were previously rated on their ability to design and make
innovative CE products -subject themselves to new kinds of judgment from
financial markets.

OEM -owned outlets represent permanent cost centers, and must perform well
year -in and year -out. 'Stores mean ongoing operational costs as well as
infrastructure,' Sistla notes. 'Anybody can make money when times are good,
but when economies contract, retailers are the first to be tested. Some will
remain profitable, others may not. With this strategy, OEMs may be trying to
'boil the ocean.''

OEMs Launch Disruptive Retail Strategy: Their Own
Storefronts', the latest market update in ABI Research's Consumer
Electronics Research Service, discusses these issues in detail, and
includes detailed forecasts for all the leading CE device categories: HDTV,
HD -DVD players, PVRs, game consoles, portable audio and video players,
multi -room AV receivers, iPod Hi -Fi stations, iPod bookshelf systems and
more.

Founded in 1990 and headquartered in New York, ABI Research maintains global
operations supporting annual research programs, intelligence services and
market reports in broadband and multimedia, RFID and M2M, wireless
connectivity, mobile wireless, transportation and emerging technologies. For
information visit www.abiresearch.com, or call +1.516.624.2500.

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