Harman Group Embraces E-Commerce

The Internet offers unprecedented opportunity for manufacturers to bring their products directly to their markets, but many companies have been reluctant to embrace it for fear of upsetting their established dealer networks. This has been especially true of mid-to-high-end audio companies, who have traditionally sold their wares through specialty shops.

The current flatness of the audio business and the widespread and growing enthusiasm for all things Internet are making some of these manufacturers rethink the time-honored model of geographic distribution—or are at least inspiring them to find a way to bridge the 19th century to the 21st. Now one of the biggest names in the business, Harman Consumer Group (HCG)—the division of Harman International Industries that includes the Harman/Kardon, JBL, Infinity, Citation, Proceed, Mark Levinson, and Revel brands—has announced an aggressive new strategy intended to take full advantage of online retailing.

On August 13, HCG launched what it calls "the consumer electronics industry's most extensive consumer e-commerce and business-to-business Internet initiative." Harman has authorized several "rigorously selected" e-commerce sites through which to sell its H/K, JBL, and Infinity lines, and has set up its own virtual factory store to sell slow-moving products and discontinued models. The new arrangement is "designed to enhance customer satisfaction and overall operational efficiency," according to a Harman press release. A business-to-business "extranet" has been set up to let customers and dealers research Harman products online.

"With the creation of a unified e-commerce infrastructure, HCG moves well ahead of its competitors in the consumer-electronics industry,'' said Harman International CEO Bernard Girod. "Business-to-business e-commerce is the right direction for our company, and we will closely follow HCG's success in this area with an eye to implementing similar solutions for our international consumer and professional divisions.''

Of the several e-tailers now offering Harman products, HCG president Gina Harman said: "Each of our online retail partners has been chosen for its ability to enhance our brand image by serving consumers in a quality environment based on information and support. All of our authorized sites are leading the medium with their own strong brand identities while also communicating the core values of the manufacturers they represent. In this way, HCG intends to accelerate its own learning curve in the high-profile Internet marketplace while building new markets and new profit opportunities.''

Companies as large as General Motors have already begun publicly discussing revamping their sales operations to take advantage of the Internet. One scenario involves having consumers order vehicles online, then pick them up a few days later from authorized dealers, who would become more like franchised servicers. One major change in the retailing picture would be a diminished role for commissioned salespeople—resulting in lower prices for consumers and higher profits for manufacturers. Harman's strategy, while not as extreme, also points in this direction—and where Harman goes, the rest of the industry often follows.