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As sales fall, makers of computers, software, and other tech gear are experimenting with unusual marketing gambits
At the new Teen Vogue store in Short Hills, N.J., amid the prom dresses and vanities, marketers have sprinkled some more unusual confections. Alongside rows of flowers arrayed on the shiny countertops sit red and pink Hewlett-Packard (HPQ) laptops. Brochures urge girls to "Say hello to computer couture."
Girls can use HP-designed software to play editor, smacking their photo on a mock magazine and typing in cover lines using the machines. The computer company views the store as a way to showcase technology aimed at girls and women, like its Vivienne Tam-designed mini laptop and touchscreen TouchSmart PCs. Conde Nast Publications says the campaign has spurred an increase in foot traffic at the Teen Vogue Haute Spot.
HP's marketing impresario, Senior Vice-President for Global Marketing Satjiv Chahil, is embracing other unorthodox sales tools. The company in April is sponsoring flower gardens spiked with laptops among the peonies at Macy's (M) stores in New York, Chicago, and San Francisco. At Chicago's O'Hare International Airport, HP has installed 50 touchscreen computers loaded with software that points to tourism information and panoramic city views.
The efforts are among a handful of new approaches technology vendors are taking to shine a more flattering light on their products and reach new customers at a time when PC and software sales are sluggish and retailers are viewed as short on new ideas. "Stores still present products as they did in the '90s: like toasters in a hardware store," says Chahil.
But tech vendors that try to improve store displays and impart better information to customers are fighting entrenched forces. Retailers are hesitant to tinker with tried-and-true merchandising approaches. Sales staff on the floor are often inexperienced and lack extensive knowledge of products. And Best Buy (BBY) and other big-box stores look askance at vendors' efforts to get too close to customers. "There isn't any real effort to shake things up," says Richard Shim, an analyst at market researcher IDC (IDC).
Even Apple (AAPL), whose stores are seen as paragons of computer retailing done right, may not have all the answers. Apple stores feature upscale touches, such as hardwood floors, hands-on support, and educational sessions in small theaters on the premises. But some say the company still could do a better job showing customers how its computers and related products, such as Apple TV, work together. "There are big chunks of the digital experience missing from Apple stores," says Stephen Baker, an analyst at NPD Group, a market researcher. Apple did not respond to a request for comment by the time this story was published.
Trying It on Their Own
Some companies are doing the spadework to fill in the gaps. Microsoft (MSFT) is planning to open its own retail stores and in February hired executive David Porter, a veteran of Wal-Mart Stores (WMT) and DreamWorks Animation SKG (DWA), to lead the effort. Microsoft declined to comment on its plans, but a company statement issued Feb. 12 says the stores will aim to demonstrate the company's software and "value proposition" better than retailers do currently. The affordability of Windows PCs is front and center in Microsoft ads these days. A recent TV spot shows a young part-time actress shopping for a laptop that meets her specs and budget—then declaring herself "just not cool enough to be a Mac person" after a fruitless visit to an Apple store.
CompUSA, now owned by TigerDirect (SYX), is trying to bring the online shopping experience into its stores. The chain is experimenting at a handful of stores in Florida and North Carolina with PCs and laptops that display videos and charts with information about themselves, reducing the need for shoppers to quiz sales staff. "The machines are doing the talking," says Intel's (INTC) U.S. retail marketing manager, Steve Peterson, who points to the program as one of the more inventive approaches to tech-product merchandising right now. Retail innovation, he says, is "less to do with a futuristic sales environment that looks like it came out of Scandinavian design," and more about getting consumers pertinent information during the typical month-long shopping period for a PC.
Some companies are teaming up to get their messages out. Comcast (CMCSA) and Sony (SNE) opened a store in Philadelphia on Mar. 17 to demonstrate how consumers can pair Comcast cable and Internet service plans with high-definition TVs and other electronics from Sony. AT&T (T) and Dell (DELL) have offered consumers discounted netbooks bundled with cellular service, and the phone company has said it's considering carrying mini laptops in its wireless stores.
The Slide in Sales
The new approaches to tech retailing come at a time of waning PC sales and fewer first-time buyers. IDC expects worldwide PC shipments to decline 8% in the first half of this year and fall 4.5%, to 282 million machines, for all of 2009.
There have already been casualties. Circuit City closed its stores and liquidated its inventory earlier this year. Sony's PlayStation store in San Francisco's Metreon is slated to close June 1 due to a lack of interest from the developer buying the mall.
"Retail just hasn't had any foot traffic," says Brad Smith, chief executive of Intuit (INTU), which makes QuickBooks and TurboTax software. Yet consumers are responding to promotions. In January, Intuit discounted QuickBooks from $199 to $99 and picked up 4% share as the accounting software category grew for the first time in a year, Smith says. "Left to its own devices, foot traffic hasn't shown up, but promotions will get people in the store," he says.
Amid the tough environment at home, U.S. tech companies are looking overseas for new ideas. HP has opened company-branded stores with retailers in Mexico, Brazil, and South Africa. Local retailers hold the inventory, reducing HP's risk, while the computer maker provides merchandising and sales-staff training. The stores have yielded higher-than-average sales and profit margins, and HP has pitched the concept to Best Buy and Office Depot (ODP), says Chahil.
Yet the weighty influence of Best Buy and other large stores can also stifle innovation. For example, consumers have had a hard time finding HP's Vivienne Tam computers at Best Buy, since the chain stocks only high-volume items, HP says. Best Buy couldn't be reached for comment. That frustrates Chahil, who wants to push the retail envelope even further, reaching more women by presenting products in environments that look like shoppers' homes. "We are not presenting our products to consumers in places they want to buy," he says. "We've been very sensitive to cutting out retailers, to the point where it upsets consumers. This is an internal challenge we've had forever."