The statement that MOST analysts believe TWTR failed because of internet pressure simply is not backed up by factual data. If that was the case BBY and WMT would also have seen a decrease in their market share.

The most common areas cited by analyst for the failure of TWTR revolves around their inability to form an identity based on their rapid expansion during the late 90′s and early 2000′s on buying regional stores. And the problem faced of WMT making an aggressive move into consumer electronics, pushing BBY into higher end electronic sales (witnessed by the acceleration of the Magnolia model). TWTR simply was not positioned properly in the market place, the internet has not been cited in any of the analyst reports I have read…and sharing customers with TWTR and taking over some accounts I have dug in pretty deep to be able to fend questions.

My personal example is again a factual representation of how I along with members of organizations I belong to deal with “free riders”. We do not worry about the internet, we worry about BBY, CC, and the other CEDIA dealer down the street. Those are the competitors we hear on a daily basis…as I mentioned if the internet is brought up the argument is quickly killed.

I think you are making a general statement based on your industry and trying to tie it into the consumer electronics industry, which I don’t think you unerstand as well as your own business.

If you would care to share some of your findings on consumer electronics and free riding I would be very interested in reading the reports, I simply cannot find anything.

You may be in a situation where you do not encounter free-rider competition. However, I assure you that you are the exception. A personal example does not prove your point, and my consulting and analysis of numerous industries tells me that free-riding is extremely prevalent.

I would challenge the author’s statement that many analyst cite free riding as Tweeter’s main problem. Everything I have read referenced Wal-Mart and Best Buy forcing Tweeter to decide between gross margin or comp sales. The company failed along both fronts.

Free riding is not as common as what the author states…IF you provide value first service. I own a small company in Atlanta and compete heavily with some of local places, but experience very little if any free riding. If someone brings up the Internet I simply lay out the facts between buying locally for a few dollars more or ordering off the internet, not even an issue at that point.

Practically every manufacturer wants to protect their product from price cutting. Letting price cutting happen in order to increase volume is suicide because it eventually drives away most of the retailers–certainly the more important ones that make an effort to add value to the sale.

BTW, I do not know of many manufacturers/brand owners who do not already have a MAP (minimum advertising policy) either in place or in process of being implemented. Electronics is certainly no exception. Enforcement of such documents is the big problem.

I cannot think of a better way to destroy a brand than allow price cutting to occur. I am not proud to say it, but as an aggressive online retailer several years ago, we by ourselves basically destroyed the US market for a particular product. Except for overseas sales, the company would have gone under. We did this by cutting the price a bit, using our volume to get discounts that no one else could get, and repeating the process. It became a vicious cycle that reduced our cost by 90% and the street price for the product by 60%. We also became the only retailer online that had even a shot of selling the product.

I do not feel that I am overestimating the impact of online retailers on brick and mortar stores that sell electronics. The price competition is not coming from Wal-mart because they do not carry the high end offerings–only niche electronic online retailers do. People going to Tweeter to listen to different systems do not end up buying the system at Wal-mart–they go to the Internet.

Tweeter could have picked up some sales online by beefing up their education on their website. However, I am not sure that it would have helped them in the physical stores. To be online, pricing has to be competitive, and Tweeter would have ended up having to offer a different price online than they were comfortable selling at in the store.

I do not consider the comparison to Best Buy to be completely valid. Best Buy does not focus on high end electronics. They can (and do) sell their products in the store with minimal education. In such a commodity marketplace, a brick/mortar company can certainly survive especially by implementing multi-channel strategies.

On the other hand, I do agree that Tweeter is to blame for its own problems–they should have adjusted to the new era of price competition and changed their model. As already mentioned, I also acknowledge that free-riding is not a moral issue and has done much good for our economy.

One group has embraced the internet as a sales channel and is doing well. Selling mainly popular sizes, which are easily installed.

Another group either uses their site as a display for their services, but don’t sell products. They focus on complete solutions where integration is key. This allows them to monetize their knowledge of systems integration. From our product range, they sell customised products and higher priced (more exclusive) projection screens.

As for the third group of retailers, they can’t seem to make up their mind, fail to be really good at either one of the above-mentioned options and are in trouble.

It shows that adjusting to a changing environment is key for survival…

I feel that it was Tweeter’s flawed business model that led to their demise. Best Buy and others essentially began to offer the same high-end products along with installation services and drove Tweeter out of the market. If their demise is based around the idea of “free-riding” then why are the others such as Best Buy not facing the same peril?

I also feel that this ties into Andy’s idea of not having the web presence to back their upscale and knowledgeable service that they have at the stores. You can’t even compare products side by side or find too much information on their products. Take a look at Best Buy’s website and you will see what should be done by Tweeter.

I think that Tweeter’s bankruptcy was not due to these “free-riders” but instead due to a flawed business model that wasn’t able to adapt and a lack of vision for their own web strategy.

I also think that the recent ruling on minimum pricing laws wouldn’t help a company like Tweeter anyways. The manufacturers in an industry like electronics don’t have an incentive to adapt a model using minimum pricing. They trying to sell volume and are receiving the price they desire and leaving the rest for the retailers to worry about. Unless they are a prime brand in an industry such as cosmetics or a similar industry where brand recognition and higer-than-average customer service levels are required, I doubt many manufacturers would enact a price minimum.