New year, same problems
It is said that the demand for luxury goods has never been higher. Estimates vary, but some reports (see diagram below) value the 2014 luxury market at around 1,1 trillion US dollars (or 1,100,000,000,000 $US), including consumers who were trading up. That’s a huge market by any standards.
Even Ferrari, the Italian manufacturer of luxury sports cars has in these last few years started to produce more vehicles in order to satisfy the über-rich, a move it has long-resisted.
Yet despite the seemingly un-abounding desire for quality and luxury, Bang & Olufsen is feeling the economic pinch, with its recent sales actually going downwards instead of upwards as economic trends would otherwise suggest!
Why is this? Is it because the company is no longer manufacturing what people need and want? Or is it that prices for the average Joe are just a little too expensive? A bit of both, we at BeoPhile suggest.
The company’s product line-up has never been so uninvolving, so drab and so unexciting. There’s always the case that where companies start producing ‘new, updated colours’ as ‘replacements’ for existing product line-ups which suggest that they have seriously run out of ideas, and in order to keep customers’ interest up, ‘this year’s colour’ or ‘this year’s curve’ is the best that they can come up with when they really cannot think of anything more to offer (as in today’s announcement by the company of ‘new, exciting colours’ for their recently-announced H2 headphones… “now available in Deep Red and Shaded Rosa” (yawn).
Bang & Olufsen will never survive if it is to manufacture only for the super-rich. There are just too many companies already doing that; many on a much more personalised & individualised basis. Bang & Olufsen needs to offer products which are both appealling to those who can afford a 20,000-dollar TV paid with loose-change, and those have to save up for products for which they aspire.
Bang & Olufsen used to be a ‘lifestyle’ company, where a broad range of products flavoured every moment of a customer’s daily life. With Bang & Olufsen no longer manufacturing domestic phones, mobile phones, light controllers or MP3 players, to name but a few, the ‘cheaper’ BeoPlay range has instead chosen to concentrate on ‘personalised music’. With six head- and ear-phones now available, it looks a case of overkill, especially when the next step up in the product range still requires a third-party gadget (i.e. smartphone) to get the gadget to work. Bang & Olufsen will never survive just on headphones alone, we suggest.
The 90-year-old company Bang & Olufsen A/S (B&O) ended last year in the red. The Danish maker of luxury stereos and television sets blamed the loss on production failures and weak markets.
The company posted a pre-tax loss of 224 million kroner. Revenue during the period came in at 759 million kroner compared to 822 million kroner last year – a decrease of 8%.
Late products and high costs
Despite the gloomy numbers, management said that they are still looking forward to ‘high single digit’ growth over the entire 2014/2015 period.
Company head Tue Mantoni said part of the explanation for the loss was that a number of new products, including the company’s highly-touted 55-inch TV, could not be delivered on time. Production costs have also been higher than the company had anticipated.
Mantoni said that he still expects a strong ’second half’, but that it won’t be enough to compensate for the slow start. Mantoni has had to downgrade expectations three times since he took the top job in 2012. (Source : 20 January 2015)
Technology is changing fast - and has always done so, especially over the past couple of decades. But Bang & Olufsen really does need to keep a very steady eye on current technology trends and develop products around what people really want, rather what they ‘think’ customers actually want.
There’s still a place for the company to exist in the market, but they need to be very sure about market trends and adapt themselves around customers’ needs and wishes, and at a price which they can afford. If not Bang & Olufsen will be the last in a long line of Danish companies to fail, which would be very sad in this, their ninetieth anniversary year. If the company is to go on to celebrate its centenary, then Bang & Olufsen needs to buck up its ideas… fast!