Post-CES blues: Cash crisis shifts power in the consumer electronics supply chain

This is the worst CES in decades, according to some who've been exhibiting that long. Vast sections of the floor were unsold. You could walk without getting crushed. There were few traffic jams. Shorter lines for food. And easy parking. Attendance was down. Those who came left early and spent less.

So I'm looking at all these exhibiting factories, brand name manufacturers, wholesalers, and the retailers shopping for products to put into their sales pipeline.

The retailers are playing it safe, cutting back on the number of SKUs and how much they're ordering. The ones they're buying from are over capacity and starved for cash. That's bad during a credit crisis.

Strapped manufacturers can't count on loans they once got to afford the months of delay between order and payment. Some are giving up equity for working capital. Others are paying higher rates with harsh terms.

Say you're Wal-Mart, sitting on billions in cash. How many of your suppliers will run out of cash before delivering product? Or will be unable to replenish your inventory when their products sell well? You will start to demand cash flow statements from your suppliers. Favored suppliers may get better terms like faster payment or less agonizing returns policies. You may even offer select suppliers bridge or inventory financing loans.

In the post-credit era, those with cash are kings.

Maybe you're Skype. You have hardware partners who make phones with Skype embedded or pre-loaded, webcams and headphones that bundle Skype. Firms like Vosky that build telecom gateways. What can you do in this environment to support those suppliers?

Low hanging fruit:

• Suspend your five-percent-of-retail logo license fee, cut it dramatically, or rebate it through a cooperative advertising program. I talked to name brand headset and webcam vendors who dropped out of the Skype co-brand program because five percent of retail income (10-20% of wholesale) doesn't pay.
• Help manufacturers of high-end gear craft value offerings that still exploit Skype's high quality audio and video.
• Bring gear partners together for joint marketing to retailers. Skype's Wal-Mart model is one approach.
• Share in-depth market research and consumer behavior insights so designers can make products Skype users will buy.
• Remodel your online store and create a process for ongoing innovation in driving the right Skype users at the right time to the right products. Perhaps even making the store more social. And don't forget the department for Skype at Work buyers.

CES 2009 is over. Taxi rides and shoe shines are half of CES 2008. Liquidity trumps innovation in 2009 as sectors consolidate and power changes hands in consumer electronics.

Technorati tags: skype, ces, ces09, wal-mart, walmart, channels, distribution, alliances