The Brick and MonsterCable Taking Add-On Merchandising Too Far

Don't get me wrong, as a retail business analyst, I understand the importance of add-on selling and value-added merchandising to growing both top-line sales and bottom-line profits for CE retailers. But it is possible to take things too far.

Exhibit A: This week, national retailer The Brick is offering a FREE $89.97 Samsung DVD player when you buy a $149 Monster HDMI Cable. This is exactly why I read the weekly flyers as the come out, to stay on top of what the major players are up to.

this week's ROP from The Brick

There are lots of ancilliary reasons to run a promotion beyond the obvious one of getting people to buy stuff: focusing on overstock, special push ("spif") incentives from the vendor, or just plain tactical offerings designed to piss off competing retailers. Regardless, offering the hardware "free" if you buy an accessory that's half-again the retail price of the original device wanders dangerously close to the Theatre of the Absurd. For starters, it confirms in savy customer's minds that you're more interested in the value-add than the sale. How about a FREE TV when you buy the extended warranty?

Also, what about the fact that the point of add-on sales is to build your margin, above and beyond what your hardware sales deliver? CE hardware margins are tough, we all know that. That's why retailers have to accessorize. But by scratching off the hardware margins to zero, and replacing them with straight accessory margins isn't growth, it's just shuffling the deck. Ask category managers from HBC and Sears how their margins on electronics are during their periodic "save double the GST" offers, plus the extra 10% off for signing up for their credit card. Hint: they're not good.

As you can imagine, I'm not a big fan of taking the "buying business at the expense of margin" strategy too far.

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Monster Threatens To Sue Blue Jeans Cable, Blue Jeans Cable Bites Back

Monster, deserving or not, has developed a reputation in recent years for pursuing bully litigation against small fish in the pond, ostensibly to protect their trademarks.

Audioholics has a fantastic news post that prints, in full, the written response to Monster's Cease & Desist letter from Blue Jeans Cable president Kurt Denke who, as it happens, spent 19 years as a pitbull-type damages attorney before he got into the wire biz.

Audioholics: Blue Jeans Cable Strikes Back - Response to Monster Cable

In informal legal speak, his response is called a PFO letter, and while lengthy it's worth every minute you spend reading it.

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Monster's accessories for AppleTV get to market before AppleTV did

TWICE: Monster’s Accessory Cables Beat AppleTV To Market
Monster has begun shipping a line of high-performance cables designed specifically for Apple TV, the forthcoming device that streams movies and other media to a TV from a Mac or PC.
The iTV cable line is shipping in advance of the Apple TV, which was originally slated for a February release but has since been delayed until “mid-March” according to Apple.


Love Monster or hate them, you have to give them their props for being on the ball. There's something oddly pleasing about the peripherals hitting the store shelves before the actual product does.

Besides, this blog has been dominated by real-estate talk for the past week, since not much had happened in the CE world to stir my interest.

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Official Response from Monster

Here's an official statement in response to my earlier editorial about Monster's future and direction:

Hello Lee,

I had a very busy Christmas season but all is well. I hope you had a great Holiday Season as well. I appreciate your point of view and your candid comments (from someone that knows what they are talking about). Although the competition continues to grow and improve, Monster is still as strong as ever and we continue to grow market share in both Cable and Power in North America and the rest of the world market. Global sourcing continues to plague the CE industry but Monster is certainly aware of the challenges and is ready to tackle these challenges head on.

Monster has indeed expanded their product line to include products such as Playstation 3 and Xbox cables, Apple iPod accessories, MDesign furniture, THX Speakers, Handheld Contollers and Lighting and we will soon be releasing another flagship product EINSTEIN which will allow plug and play wireless home automation from anywhere. Monster also continues to grow in areas like CI, ProMI and Performance Car.

Monster has been the leader in Cable and Power technology for 28 years and we are continually improving our product and technology to provide our Dealers and Consumers with the best and easiest to sell products in the industry. Keep up the great work Lee and we will talk to you soon. I hope to be coming up to Edmonton in early March and visit everyone there.

Monsterous Regards,
Richard Webber
Canadian Regional Manager
Monster

I'm grateful to Richard for taking the time to articulate Monster's position and their vision.

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On the rocks, Monster trying to put the cable business behind them

Industry watchers will have noticed that Monster quietly dropped the word "Cable" from their name sometime in the last year. Over that time, they've been branching out into other CE goods: furniture, remote controls and iPod accessories, of course.

The reason is fairly obvious: our industry is careening towards a largely wireless world. As more and more of our equipment is networked, that means less cables to buy, or perhaps (one day) none at all. I visited the Monster campus in California three years ago when they were putting the finishing touches on their first line of furniture, and even then it was clear that Monster's future would not be dependent upon selling cables.

Monster is a company that has generated no small amount of ill-will in the industry and among niche consumers, due mostly to their resounding success. For the record, I've never been one of the player haters who criticize Monster. They did, after all, practically invent an entire aftermarket accessory category that many others have also profitted from. I haven't always agreed with their decisions or directions, but that's their perogative. Rather, I have always liked the brand, and felt that a lot of the ill will was simply jealosy and misplaced outrage: lots of CE vendors make expensive products, but not all of them get called out as "over-priced."

Here's some interesting data points to allow you armchair analysts to ponder Monster's future:

Over the last year, the emails I get from our local Monster rep have become increasingly focused on offering dealer discounts. Every month there is a "Clearance Event" and we are offered "One Time Only" deals on selected skus. For a brand that in the past always placed itself on a pedestal and sold itself on its inherent quality and value, this new approach to getting dealers to buy stuff is a bit disconcerting. In the past four months, the tone of the emails has gotten increasingly more frantic; ALL CAPS, lots of superlatives and hyperbole about how great the deals are, and the frequency of the emails has ramped up dramatically. Additionally, the breadth of the skus being offered at a discount has grown to encompass at least half of their catalogue. From the outside, this gives the impression that they are sitting on alarming amounts of inventory, and are feeling the heat.

The second point to consider is that as the number of competitors in the cable buisness has risen, more and more retailers have been seduced away from Monster, resulting in a declining dealer network. Monster officials wouldn't give me numbers even if I asked, but annecdotally it seems to be happening all over. Last week, struggling western retailer A&B Sound dropped Monster in favor of Ultralink. An anonymous source (aren't they always?) confided that Ultralink skus give them the same margin dollars at lower retail price points (what was that about Monster being overpriced?), which are more in line with the price sensitivity of the A&B shoppers who come to buy generic Chinese plasmas.

As the number of competitors has grown, Monster has been working very hard at differentiating their offerings and trying to increase their ability to compete in the marketplace. I have been watching their evolution with some interest. While their future remains in doubt, I hope they find the answers they need.

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