Sony may expand direct sales on Web

Sony stopped online sales of all of its audio-video products by third parties about a month ago. In the meantime, a spokesman said Sony is preparing to launch a new e-commerce campaign, expected within three months, that will allow dealers to again sell its consumer goods over the Web and will "likely" involve direct sales from Sony.

The consumer electronics giant will have a wide and immediate impact across the retailing landscape, providing a model for other consumer electronics companies to follow if they succeed, or missteps to avoid if they fail, analyst say. Although e-commerce has generated hundreds of millions of dollars already, Sony will be blazing the trail in the consumer electronics space.

Sony now allows dealers to sell its Vaio PCs over the Web and sells Vaios to customers directly through a Sony Web site. The upcoming program would apply to the rest of the Sony catalog.

"These are early days overall," said Charles Smulders, an analyst at Dataquest, noting that to date, no other major consumer electronics companies are selling their products online.

The flip side of Sony's first-to-market advantage is the fact that there is no other consumer electronics company doing it, thus, no footsteps to follow in.

To make the online transition successfully, Sony must make significant changes to its infrastructure, revamping delivery and pricing strategies. "They need to have an integrated infrastructure between indirect and direct sales-- it's a significant challenge," Smulders said. "I think they will learn a lot of interesting lessons about costs as they go through this."

Although Sony has halted sales of its products through online resellers, eventually some type of consistent on and offline pricing strategy must be implemented, to avoid price wars between Sony and its resellers. "We're working out our e-commerce policy," a company spokesman said, acknowledging that the company is working on infrastructure issues such as delivery and pricing.

"Our e-commerce strategy is likely to include direct sales," a Sony spokesman said.

One possibility could be selling its products at the minimum advertised price and penalizing retailers who sell below that price point.

Compaq has recently instituted a similar pricing policy, after several public missteps as it attempted to create a hybrid distribution scheme, selling some of its computers direct through the Web while maintaining the traditional reseller channel. Although there are some obvious parallels between Sony and Compaq's situations, analysts say that Sony is in a much better position than Compaq was.

"Sony can lead by example," said Matt Sargent, a retail analyst with ZD Market Intelligence. "Compaq was chased down by Dell," he said, referring to the direct PC sales pioneer. "Sony's not in a situation like Compaq, reacting to everyone--what Sony can do is be the leader."

In addition, unlike Compaq, Sony sells products that do not require extensive servicing or education. "They're navigating the classic channel conflict between Web resellers and selling direct," Smulders said. "Clearly, consumer electronics retailers need to re-assess what their value is."

Although it may be a struggle to unify the disparate units of such an enormous corporation and point them in the same online direction, Sony's wide breadth of influence will also be a point in its favor. No other company has the potential to create a portal with branded electronics, entertainment and computer products.

For example, a Sony e-commerce site could easily leverage the company's successful movie studio and music label, the ultra-popular PlayStation gaming device, the cutting-edge Vaio notebooks, and Sony's well-known and well-regarded television and audio devices. Sony has already been selling some of its Vaio computers online in limited numbers to larger customers, a spokesman said.

"It's going to frustrate resellers, but Sony has such a strong brand name that it might not matter," Sargent said.