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Disconnected Products Cost Gadget Shops Billions

By John P. Mello Jr. TechNewsWorld ECT News Network
Jan 4, 2006 7:30 AM PT

Cool electronic gadgets can be seductive not only to consumers, but to the makers of the gadgets themselves. And that is costing those makers money.

Disconnected Products Cost Gadget Shops Billions

According to a report released by Forrester Research yesterday, consumer technology companies are leaving some US$3.8 billion on the table today because they're failing to leverage their knack for selling cool gadgets into sales of accessories, services and content.

Forrester challenged the consumer electronics industry in its report to "Stop selling standalone products and start selling digital experiences that integrate products, services, and content in a way that's easy for consumers to buy, install, and use.

"This strategy," the Boston-based research firm asserted, "has the potential to provide an additional $13 billion in revenue in 2010."

Broken Sales, Cross Consumers

"Consumer technology sales are broken," Forrester Vice President Ted Schadler said in a statement. "Consumers are being forced to assemble the different components of their digital lifestyle themselves, and they're not equipped to do it.

"Retailers' traditional approach of lining up racks of products at the lowest price isn't cutting it," he continued. "Digital experiences are too complex, and technology is changing too rapidly."

Forrester cited Apple Computer as a company that knows how to navigate in the new consumer electronics landscape. "Today," it reported, "Apple Computer, with its highly successful and tightly integrated iPod and iTunes, is the only consumer technology company that has perfected the digital experience playbook."

Schadler added: "Apple's legacy is not just about cool products; it's about recognizing the need for an end-to-end digital experience. The iPod's impact is reverberating across every sector of the consumer technology industry."

Apple Small Bite of Pie

Michael Gartenberg, vice president and research director for Jupiter Research in New York City, noted that fragmentation in the market has worked to Apple's advantage.

"Integration and the completeness of the Apple solution is one of the reasons why it has been very successful with the iPod," he told TechNewsWorld.

But while Apple has had flashy success in the consumer electronics field, it remains a small part of the big picture, according to Stephen Baker, an analyst with the NPD Group in Port Washington, N.Y.

While the company's devices may operate seamlessly in its own ecosystem, that's not the case outside that system, he argued. "I can't buy music from Yahoo or Wal-Mart or Napster to play on my iPod," he said. "So I don't know how seamless a solution it is.

"I'm not sure you're ever going to see one company able to give you a seamless digital experience," he contended. "The fact is it's all going to have to be interconnected and it's going to have to be offered by multiple companies and you, as the consumer, are going to have to be the integrator."

Beyond Cool

Jupiter's Gartenberg maintained that consumer electronics makers need to look beyond mere cool gadgets.

"The head of Black and Decker once said that consumers didn't buy its products because they wanted one-inch drills; they bought its products because they wanted one-inch holes," he observed.

"A lot of consumer electronics companies seem to forget that basic axiom," he continued. "Consumers don't care about technology. They care about functionality."

Forget the Software?

According to Rufus Connell, research director for Information Technology at Frost & Sullivan in Palo Alto, Calif., Apple is one of the few companies in the consumer electronics field that "gets it."

"Another company that also seems to get it is TiVo," he told TechNewsWorld via e-mail. "Everyone is familiar with pause, record and rewind live TV, everyone understands time shifting, but TiVo has added all sorts of cool features."

Those features include displaying photos and streaming music through the TiVo from a PC and downloading content from the TiVo to the PC.

"What it all boils down to is that it has taken a long time for consumer electronics makers to realize that digital media needs software," Forrester's Schadler told TechNewsWorld.

"It's not just the manufacturers' fault," he added. "A lot of these gaps are really the retailers' fault. They don't see it as their job to make a product work."


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