Philips' Online Strategy: Link Customers, Dealers
Philips' online plans figured large in a speech made by Philips Consumer Electronics Mainstream CEO Guy Demuynck on the opening day of the recent Consumer Electronics Show. "The Internet has transformed the way we do business," Demuynck told reporters at CES. "The Internet dominates all our thinking—it will expand from a browsing activity to an always-on, integral part of daily life."
Unlike Sony Corporation, which last summer announced plans to launch an e-commerce site called SonyStyle.com that would have had the manufacturer competing directly against its own dealers, Philips plans to connect customers to the nearest Philips dealer. "We have a commitment to our resellers. We have invested too much in them to just throw them away," said Alistair Jenking, Philips vice president for e-commerce. "Those trying to sell to consumers directly online forget that some equipment is not easy to simply deliver to a consumer's home." While Sony decided to revamp its Internet strategy after dealers threatened a boycott, Philips followed a conservative tack of observing what its competitors were doing online before embarking on a plan of its own.
Hoping to get all its dealers online by the end of this year, Philips has spent more than $8 million on software made by San Francisco's iMediation, Inc. After successful trials of the software in Sweden and Spain, Philips decided to sign a contract with iMediation, whose system lets customers browse products, compare features, examine service agreements, and contact dealers.
Although online sales accounted for only about 6.5% of Philips' business last year, the company recognizes that the Internet is clearly the future for product promotion. "We want to enable our resellers and dealers," said Ruud van Vessem, who heads Philips' European e-commerce venture. "We offer to build or support their Web site, and for many of the small and medium-sized retail outlets in our distributor network, this is a very attractive proposition. We expect both sides to benefit, since the costs of doing business should decline while we can provide more services."