Japanese consumer electronics companies like Panasonic, Hitachi, Toshiba, Pioneer, Denon and Sony have traditionally relied on providing great value and great engineering. A great example of this is to look at the amount of ‘Made in Japan’ products that feature in hi-fi collectors stores like Audioscope.
However Japan can no longer compete on great prices because products can be made cheaper abroad in places like Vietnam, the Philippines and China. Many consumers are hip to the fact that most of the products that they buy come off the same production lines with largely the same components due to the Japanese brands rebadging reference designs by Chinese companies.
This practice was fine 30 years ago when it was Ferguson video recorders coming off JVC production lines, but when your brand is already on top following this model will only bring you down over time. I can’t imagine the damage being done to the German premium optical brand Leica with its low end compact cameras being rebadged Panasonic models.
Part of the problem is that there is now a mindset that since everything has gone digital there is no differentiation any more in the products so why not just differentiate on marketing. This has meant that the likes of Panasonic and Sony are now pursuing media convergence, which they have mistook to mean undifferentiated products and abandoned market sectors. Like the media industry they are looking for blockbuster hits in the world of the long tail.
Lets break this down:
- Everything hasn’t gone digital: vinyl sales have started to climb from 2007 according to the RIAA and Amazon and have kept on climbing. This is the example of a small market, but one which a growing global niche – a nice long tail market. Ironically the internet has made it much easier for record purchasers to buy vinyl, record labels are waking up to the fact that they can sell a reasonably priced premium analogue product and its cool to collect. Generally if you have money to spend on vinyl, you are dedicated and you are likely to want a good quality turntable to play it on – like the Technics SL-1200 series. Yet Panasonic is supposed to be looking at shuttering the brand and the product line?
- 1s and 0s need good engineering too. Not all equipment is created equal, there is something comforting knowing that an optical drive will work well no matter what. ALPS Electric Co. capacitors and switches still sell well because they are so much better than other manufacturers components for certain jobs, as do DAC chip sets like Burr-Brown (now TI’s high performance analog semiconductor business). Components still need shielding from interference, displays still need to be legible and easy to understand. Having control flaps that don’t fall off and a pleasant tactile experience is still just as important in selling a product
- There is no product differentiation on products any more? Ironically, Apple; the company that has given the Japanese consumer electronics industry the most pain in its disruption of the portable audio player market is proof that there is a differentiated opportunity. Mac sales are healthier than they have ever been and the iPhone has disrupted the phone market by re-inventing the smartphone concept
- Choose and focus: US analysts have often criticised Japanese businesses of having ‘attention deficit’ disorders. To a certain extent that is valid when you look at the breadth of products that they have such as credit cards, medical devices, microwave ovens and AV consumer electronics. I would argue that these businesses don’t have enough depth in their product ranges. Just go and have a look at Sony’s video camera range: its unbelievable the amount of SKUs they have for what is essentially the same model camera. Lots of different colour choices and support for one memory standard over another, but a lot less choice in the quality and specification department. This is one of the reasons why Nokia had some many problems in its mobile handsets business
This post isn’t just talking about products at the prestige end of the market either. Whilst brands like McIntosh Labs and LUXMAN will continue to have a demand for their premium products, new start-ups like Schiit are coming in to reinvent the hi-fi market for the new world.
Schiit are interesting because they are focusing on the headphone experience rather than the floor-standing speakers. They realise that people who have listened to music on headphones understand the difference that a bit of money makes. Try binning the white stand issue iPod headphones and beg borrow or steal a set of beyerdynamic DT 150s to hear the difference.
So they have reinvented the headphone amplifier for the 21st century. They have managed to build down to a price point without compromising sound through exceptionally clever design and are bypassing distribution networks by selling directly over the internet.
If you look at the shanzhai electronics businesses in China, they provide consumers with both breadth and depth of choice, through utilising small batch production runs. There is no reason why a Japanese consumer electronics company couldn’t take a similar approach.
Consumer behaviour is changing away from products that are so badly engineered that they fall apart soon after the warranty expires to audiences who are genuinely interested, and willing to pay for a product that lasts longer. Environmentalism through careful consumption. This means that playing to the traditional strengths of Japanese engineering and leveraging marketing smarts will deliver long term business benefits. In markets like China ‘Made in Japan’ means quality, Chinese consumers will often reject Japanese brand products that have been made outside Japan.
It’s pretty damning and indicative of the state of Japanese electronics companies, that when people think of Japanese innovation and enterprise now they are more likely to think of the likes of FAST Retail (Uniqlo), Muji or Nowhere Limited (A Bathing Ape).