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Learnings from CES 2011

January 19, 2011

Shipwire attended the International Consumer Electronic Show (CES 2011) this year.   CES is mainly for buyers and distributors to find new products and for product manufactures to meet with their customers and push new products. Only the last day do they open it up to the general public. I skipped this day because it can be a mob scene while people try and buy floor samples.

I would agree with the general consensus that not much cool was released at the show this year; but, there were a few highlights for me. A few things were just baffling, every TV vendor is going 3D; but everybody I talked to at that show, that wasn't selling TV's, could care less. I got suckered into trying on a lot of 3D glasses, the bulk of which just gave me a headache.

I. Lots and lots of similar products, not a lot of clear winners.

If you have never been, the shear size of CES is overwhelming.   Many of the exhibitors didn't really get to walk around and see the full size of the place. I was wandering all over the North, South and Central wings as well as the Venetian Hotel (high end audio and the AVN were there). Like Magic (my apparel industry tradeshow blog post) all halls of the LVCC were occupied; however, while Magic's north and south hall were 1/2 full, CES was at capacity and the name brand exhibitors were going all out.

iPad/iPhone accessories were basically an entire hall unto themselves. There was an iLounge section that CES as trying to concentrate them into; but, they were everywhere. Because there is only one form factor for each (size and shape) the accessory market is massively competitive. Android accessory makers have to contend with hundreds of medium selling form factors; so many of the obvious winners at the show designed holders and cases with some ability to adjust for form/fit.

Lets be honest, there was so much product with similar features and value propositions that it isn't all going to sell. So many of the new products sellers in the concentrated product categories (iaccessory, tablet, phone accessory, low end audio) will struggle. Speaking of tablets, they were everywhere. Wired's writeup of good and bad tablets and their call that most will fail.

II. "Will you be my distributor…please come over here Mr. distributor…can you sell is product for me?"

Its amazing how many product sellers are building their entire business around sales to distributors. Not saying that selling to distributors is bad, it's good business….if you can get it. Perhaps exclusively relying on distributor sales is not a good focus. For many new products, you may be the best able to generate buzz around your product and get end-buyers to understand how come your product should be purchased over another product.

The other reason I don't get it, is that all the distributors were attracted to the products with the most retail success in at least 1 market. Those products have a proven value proposition, pricing and marketing generating conversions. If you have a new product, learning how to sell direct in 1 market seemed to attract the distributors of the other markets.

Clearly, finding a distributor and selling wholesale is one way to enter a market. But, if you don't have a product with some track record, how are you going to attract the better distributors? Great design and marketing is clearly important. Finding and managing distributors can be hit and miss and be more expensive than many retailers expect. Clearly, the top distributors in each niche category know what they are doing; however, look at the underlying businesses of these distributors and you find some interesting trends that many new product sellers may be able to recreate in part on their own. if you can get the good distributors then they will make your life easier, provided you can work on their terms.

”¢ Distributors that sell well online. Selling online to consumers, small retailers and VAR's (Value added Resellers) with efficiency is what makes some distributors incredibly strong partners. These are the same distributors what will ask you if you can "drop ship" to their buyers.The truth is that these tools are available to any product seller.   Get an online store from one of our partners to sell to consumers. Create a category on your store that has your wholesale products and a form for small retailers. VAR's want to know how to build a solution from small business or home market around your products; you can do that with a simple blog attached to your website.

”¢ Selling in overseas markets. Going overseas has challenges, so I can understand why many product sellers want a strong distributor for overseas sales. When negotiating with an international distributor look at the core challenges and who owns the cost and risks to determine if you are getting a good deal.   Example: Product localization and international packaging, who picks up freight costs, strength of the overseas distributors online or small retailer sales channel. Big hint for product localization – make all your instructions and box packaging icons. For example, stick figures, clear images and links to wordless set-up videos. No need to translate.   All the import restrictions can be stickers and hang-tags so you don't modify packaging.

”¢ Drop shipping, vendor managed inventory (VMI) and smaller wholesale purchases. Smaller product manufactures should be aware that only the strongest distributors will be buying wholesale in large quantity.   And they will only do it for product they know will move. The more expensive products and the unproven products that they want to add to their product catalog could be introduced with different buying terms. You may be asked to drop ship to consumers, in which case you need pick/pack facility. Some distributors may ask you to consign inventory to them or work under VMI (Vendor Managed Inventory) terms where they only pay for what they sell and you (product manufacturer) retain the risk of inventory sale.

Give Shipwire a call if you need some help selling direct or meeting distributor terms.

III. The Suppliers that got off supplier "row" did so with savvy sales, marketing and brand awareness.

Most of the big trade shows have an entire section or many rows of overseas suppliers that are selling everything from component parts to finished goods. Supplier row is usually a comedy of errors: People asleep at their booth, people sitting with their backs turned to you, full family meals on the main table with the products on the floor, you name it.

They never seem to get much traction and their products really seem to be targeted at the lower end of the consumer market. If they are not selling components or finished goods they are looking for product designers and manufactures that will have them custom build a hot new product design. The problem is, most of the hot new product designers don't trust most of the suppliers not to rip off their product designs and sell them to others. So, trust is huge.

Clearly, there is a market for things like android phone accessories for Verizon, where Verizon just needs a simple product design and they know they will sell them.

In an age where many consumers are increasingly drawn to brand and form factor, I struggle to understand how low-end manufacturers will stand out. Many of the smarter manufactures got tired of no foot traffic at their booths and changed their business model. They took the best products, built a brand around it and tried to enter the market directly.   They are moving up market to compete in the search for distributors. Some are even selling direct to consumers online.

It wasn't all work. Here were a few things I remembered from the Show.

Google previewed the new version on Android for tablets called HoneyComb.

I finally got to see Lady Gaga with my own eyes. She's the new creative director for Polaroid as they try to recover their brand. I'm a fan of maybe 5 of her songs; but, I respect her in the same way I have deep respect for Jay-Z. They are entrepreneurs that "go big" and have an incredible focus for what they do. That which they apply themselves too, they do so with intense passion, so I wish her luck. She was introducing some camera glasses which were kind of cool and Polaroid released a small portable bluetooth/wireless Polaroid printer that works with any smart phone. Basically, the bottom 1/2 of every Polaroid camera to date that does the printing. No need for a camera anymore because every phone has one. Best part of seeing Lady Gaga was that she had her gray hair and was dressed for a funeral. You know it wasn't Canon's.   Hopefully for her, it isn't Polaroid's. You Tube View

The Audi booth was a giant white box that looked like a cross between an apple store and a Mac G4. The new Tron Car was pretty cool; but, personally I thought the booth display was pretty Feng Shui.

Last but not least, the number one product at CES that went viral this year was …. the flu. So, for everybody we met at CES, I hope the show was lucrative and I hope you are feeling tip-top a week later.

Nate Gilmore

Nate is the Vice President of Marketing & Business Development at Shipwire. He oversees channel development and the developer network, as well as our marketing and public relations. Previously, Nate spent six years at Concentric (acquired by XO Communications), where he ran product management, sales, and marketing. Nate has also held various legal positions in intellectual property and business law. He holds a B.A. in History and a J.D. from Santa Clara University.