Harman Sees 50/50 Split in Online, Physical Store Sales in 5 Years

Harman had a 118% year-on-year jump in e-commerce sales during the pandemic, Robert Jan van Dormael, vice president-consumer marketing, told a Futuresource audio conference last week. Traditional retail played an “instrumental role,” he said, including with “shop-in-shops.” Excluding pure play e-tailers like Amazon, Harmon had 32% higher online sales growth with traditional retailers.

In five years, van Dormael expects e-commerce to be half of Harman's sales volume, with percentages varying by category and price point. More than half of headphone purchases are online in emerging markets, he said, and most lifestyle products under $175 are sold online. He expects those trends to play out in the U.K., Europe and North America.

Smartphones are “the remote control” of Generation Z consumers’ lives, noted Van Dormael, saying for that demographic it’s “mobile-only” vs. mobile-first. The manufacturer is catering to those consumers by adding augmented reality in the online shopping experience. It had a three times uptick in customer interactions, time on site and add to cart activity as a result, he said.

A big challenge for the audio industry is to convey a sensory experience -- and the better audio quality message -- in an e-commerce environment. Van Dormael said there will always be opportunities to experience a product in a marketplace that's half physical, half online. Harman has experience centers in New York and Munich. Store and experience center closures during the COVID-19 pandemic showed the importance of product reviews by consumers and by experts, he said. As e-commerce becomes a bigger part of the sales mix, Harman is looking to new services such as try-and-buy, he said. That strategy is especially important with higher priced gear.

Online is a natural progression since more than 80% of consumers go online to research, compare and read reviews on products before buying, said van Dormael. “Consumers are relying more and more on reviews,” to understand the product and see how others experience it, he said. User-generated content is “critical” to conveying how other consumers experience a product in the e-commerce world. Augmented and virtual reality will make those e-commerce shopping experiences more engaging, he said: “The influence of online channels on purchase behavior will grow as it becomes more seamless an engaging.”

The Harman executive also sees manufacturer direct-to-consumer sales accelerating “massively.” DTC models give vendors consumer insights and an opportunity to improve services, product development and develop brand engagement. Harman is expanding DTC commerce through social and commercial marketplaces. Social channels such as TikTok, Instagram and Snapchat are becoming more like stores with payment providers behind them, he said.

The social media platforms allow brands to develop a direct relationship with their end users, said van Dormael. “Even without a sophisticated e-commerce platform, it’s relatively easy to start a direct-to-consumer social media challenge and marketplaces that can offer a tremendous reach.” The best way to build a brand and customer relationships is to “be in control,” he said. DTC comprises about 8% of Harman’s revenue.