Inside the Sharper Image / HD radio deal

Yesterday’s announcement that HD Radios will be featured prominently in Sharper Image stores and catalogs needs to be placed in a broader context.

And that broader context begins with the failing health of Sharper Image itself:

For the fiscal year ended January 31, 2007, total Company sales were $507.0 million compared to $650.3 million in the previous year, a decrease of 22 percent. Total store sales for the year were $311.2 million compared to $407.1 million in the prior year, a decrease of 24 percent. Comparable store sales for the year decreased 25 percent. Total catalog sales/direct marketing sales (including wholesale) for the year were $110.6 million compared to $135.9 million, a decrease of 19 percent. Internet sales for the year were $85.2 million compared to $107.2 million, a decrease of 21 percent.

And it continues with the role that free radio advertising plays in Sharper Image’s decision. “Supporting The Sharper Image will be part of the next phase of the Alliance’s $250 million dollar 2007 advertising campaign announced in December,” says the HD Alliance.

Now, to be fair, there’s nothing wrong with trading advertising for exposure. This kind of stuff goes on all the time.

What’s wrong, however, is to pretend that it’s any deeper than this. One can’t crow about HD Radio’s “incredible momentum” when iBiquity itself acknowledges sales are in the “low hundreds of thousands” and Sharper Image’s decision-making is motivated primarily by financial malaise and advertising opportunism, not by a sense that these items will fly off the shelf and profit the mother-ship directly.

From Sharper Image’s perspective, HD radio is barter.

Why hasn’t HD radio reached more retailers, more broadly, and faster? Perhaps because these big box stores value the floor space more than the free advertising. Perhaps because they know that promoting hot-sellers at favorable prices is what brings in the throngs. It’s not simply about their store name on the radio, or anywhere else for that matter.

Consider what Sharper Image spent their money on in past advertising. Was it a fast-seller or a slow one?

Can you say “ionic breeze”?

Now you could say “but this will create more distribution for HD radios, more visibility, and that will spike demand.”

But you’d be wrong. The problem has never been distribution. It has been the essential perceived need for the bundle of benefits that HD radio provides the consumer. The problem has been demand.

And while strong demand always creates wide distribution, wide distribution does not necessarily create strong demand.

This issue is bothering me more and more lately. Because not knowing the truth is one thing. Ignoring it is quite another. And not integrating it into a coherent product and marketing strategy is a tragedy.

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