Philips looks to click with online retail

Dubai: It may no longer be making TVs on its own any-more, but one of the world's most enduring brands — Philips — is not one to vacate the consumer space altogether. Instead, it now plans to further connect with the region's consumers through the online mode.

"We are definitely not moving out of retail; it's still a critical segment and we are actually investing to be in the categories of choice within consumer lifestyle," Roy Jakobs, who recently took over as president and CEO at Philips Middle East and Africa, said.

"It will be done around the domains of personal health and well-being."

But where does an online strategy fit in and wouldn't it cut into the physical retail presence?

"Philips is not pushing for direct online channels but through regional partners," Jakobs said.

"It's still very early days for online retail in the Middle East unlike in Turkey where growth in the consumer category has been at more than 50 per cent.

"In fact, the Middle East online sales growth rate is somewhat slower than the rest of the world. But what we see is that there's strong single digit growth in some consumer categories and even double-digit on others. That's what needs to be capitalised on and we need to secure a position for ourselves through the partners."

None of this should come as a surprise for a brand — a dominant player in the B2B space through its healthcare and lighting divisions — that has constantly reinvented itself over its 122 years of operations.

It is in this context that last year's transfer of the TV division into a joint venture with TPV Technology should be viewed.

The Philips branded TVs can claim to a heritage in the Middle East and managed to hold its own against the Japanese domination of the 1970s and 1980s.

It was in recent years that it slipped down in the pecking order.

Low-growth segments

As to whether the change had a material impact on the regional performance, Jakobs said: "Its contribution was not insignificant, but all the other categories were picking up in growth. And we were getting more out of the high-growth categories, which is why stepping out of low-growth ones did not leave a considerable impact."

"In the categories we are in now, we actually have strong positions. The contribution of lighting and healthcare to the total would be bigger, but B2C is still an important part. The global split in revenues between consumer lifestyle, lighting and healthcare also applies very much to this region. We play to a certain quality level and within that we are quite competitive."

On the physical retailing side, the brand intends to spread itself wherever an opportunity presents. But mono-brand outlets are something that it will not be interested in.

"Multi-brand retailing is one of the fastest growing categories and we believe our consumers prefer to be in such an environment," Jakobs said.

"Where they go, we need to be right there and that's why multi-brand stores work fine for us."

Global sales mixed results

In the first quarter of this year, Philips reported global sales of €5.6 billion (Dh25.8 billion). While healthcare-related sales were up 9 per cent from the year before, those at its consumer lifestyle division were down a marginal 1 per cent, principally as a result of a drop in ‘lifestyle entertainment' products.

Lighting sales increased 2 per cent year-on-year, with LED-based sales up 22 per cent compared to the first quarter of 2011. Lighting achieved high single-digit sales growth in all growth markets for the brand, according to a statement. Results were impacted by operational issues at Consumer Luminaires and Lumileds, as well as a one-time loss on the sale of assets.