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12/22/2004
02:30 PM
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LG Wants To Sell You Some Cool Gadgets

Korean consumer-electronics giant LG Electronics has big ambitions for the U.S. market and aims to leverage channel partners.

Step into the LG Electronics booth at the Consumer Electronics Show this year and you’ll likely be watching “The Matrix,” “Star Wars” or another action-packed blockbuster on the showcase 71-inch plasma display the company says will support up to 1,920 x 1,080p resolution. The device, a mammoth jump in manufacturing capability, is eclipsed in dimension only by the company’s U.S. market ambitions.

Last year at the same show, LG announced its intention to enter the market with a branded high-end line of LCDs, plasma displays and other consumer-electronics devices, and backed up the commitment with a plan to spend $300 million in marketing over three years. At the same time, executives said LG would expand its dealer base, obtained through an earlier acquisition of Zenith, by 500 new companies in the second half of 2004.

The effort is part of a larger goal to be the No. 3 brand worldwide by 2010. To get there, the Korean CE giant knows it needs a good chunk of the U.S. market. Now in year two of its march toward that goal, LG is working to prove it has the manufacturing might and R&D commitment to hold a high-end position among fickle American consumers.

To reach the top of the high-end market, however, LG will need more visibility among home installers and integrators catering to the upper- and upper-middle-class customer sets. LG may claim to want a cozier relationship with home integrators, but many integrators say they have little knowledge of the company’s product line beyond what can be seen in retail stores and have never heard from a manufacturer’s rep. What’s still missing, many say, is strong programs, better partner outreach and products with significant differentiation.

“We have a couple of issues,” says Kirk Karpaitis, owner of NeoTech, a Jacksonville, Fla., home integrator. “LG products look great, but our customers aren’t familiar with LG as a high-end brand. We don’t have any motivation to change that. We’ve never heard from them.”

Robert Perry, vice president of consumer-electronics sales at LG Electronics U.S.A., counters that the company maintains a separate line for the custom-install market with features such as RS-232 and remote input jacks and these models have limited distribution. He adds that LG will step up partner training this year, including new Web-based options.

Moreover, Perry says a “substantial” sales force manages a large number of dealer accounts, although he declined to provide specifics about the number of field representatives or the number of dealer partners LG currently services.

David Mann, president of Acoustic Solutions, McLean, Va., a longtime Zenith partner who has been selling LG products since last year, says dealers have access to the entire breadth of the LG video catalog “from inexpensive DCRs all the way up to 60-inch plasma.”

Plasmas and LCDs are backed by solid technical support, and the addition of a manufacturing facility in Mexico should ease supply on plasma televisions, he says, adding that LG maintains a “no Internet” sales model to discourage deep discounting.

Chris Neff, director of marketing for LG’s U.S.A. IT brand division, says the unit is working to make up for inconsistent partner relations. “We’re the friendlier, gentler LCD company,” he says, noting the division does not have minimum sales requirements for its dealer program so as to provide partners with flexibility. LG is also working with Intel to cross-sell its displays to the chip maker’s roster of home integrators, Neff says.

Though there is varying feedback on LG’s efforts, most integrators acknowledge the company’s potential in the United States. They point to strong feature sets and positioning in retailers such as Best Buy as evidence of headway. Adding a 71-inch plasma demonstrates manufacturing prowess, though few units are expected to be sold. The model will be available in limited supply to about 25 LG dealers and will cost in the neighborhood of $75,000, according to an LG partner.

In recognition of its commitment to design, LG received 16 CES 2005 Innovations awards on the eve of the International CES. Several of LG’s new LCD and plasma displays and Ultra Silent DLP Projector won in categories such as digital display, home theater, video components, computer components and wireless communications.

In the past, LG suffered from a negative image because of its low-end Goldstar products, but integrators say the old brand from the early days of Lucky-Goldstar does not play into current sales discussions. “They’ve definitely moved past the $80 color television in the back of the store,” says one distributor familiar with the former Goldstar product line.

LG executives in Korea say that the company plans to spend more than $1 billion in R&D, up 20 percent from 2003. LG is one of only a handful of companies worldwide manufacturing its own plasma displays, giving the company first dibs on supply and the highest-quality glass. LG manufactures the displays in South Korea in a joint venture with Pioneer. It OEMs plasma and LCD panels for a number of top-tier CE brands.

In addition to the 71-inch plasma, LG is expected at CES to showcase through its IT division a line of flat-panel displays that feature a case as attractive as the screen quality. The white-cased LCDs feature an industrial design with a stylish back panel that many monitors lack. The idea is to offer a monitor that looks more like a CE product than a corporate computer monitor with a VGA cable and power cord hanging out the back. These types of designs are of particular consideration when selling displays into the home environment, LG executives say.

Also on deck is a sleek black design for new LCD flat-panel and plasma displays, intended to replace the current silver as the in-home trend for such devices. LG also is building in support for flash memory so home users can display digital images on large-screen TVs, and the company recently demonstrated a wireless LCD television that can be removed from its base and carried to other locations in the home.

Aaron Rosenbaum, a partner at Ambleside, a residential integrator in Hillsborough, Calif., believes the current LG line has too much exposure in retailers such as Best Buy and Sam’s Club to offer products to his upscale customers. But, he says, design and R&D could put LG on the dealer map.

“Samsung and LG are using industrial design as differentiators,” he says. “They are creating better products, and both are ahead of the major Japanese competitors [in display technology].”

Clearly, LG has manufacturing and design where they need to be. But integrators say the company could grab a bigger piece of the picture by increasing its efforts to service the home integration/custom-install market.

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