The 7 Worst New Product Flops of 2011

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By Charles B. Stockdale, 24/7 Wall St.

A number of incredible new products were launched this year. Apple (AAPL) introduced the iPhone 4S -- a phone with voice command and the much ballyhooed Siri personal assistant software. Boeing's (BA) 787 Dreamliner -- a fuel efficient jet built using carbon composite -- finally had its first commercial flight.

But of course, not all products and services launched this year flew quite so high -- indeed, some crashed and burned spectacularly. 24/7 Wall St. looked at the major product launches of 2011 to identify the biggest duds of the bunch.

New products generally fail either because they're inferior versions of already successful offerings, or because it turns out there was little demand for them in the marketplace. Research In Motion's (RIMM) PlayBook was a fine example of the former. In a market dominated by the iPad at the high end and the Kindle Fire at the low end, there was just no room for a poorly designed tablet. RIM publicly blamed its weak sales on competitive shifts in the market, referring to the release of Kindle Fire.

Many companies also often fail to understand consumer sentiment and, as a result, do not accurately estimate demand for the product. When Netflix (NFLX) announced it would spin off its DVD-by-mail service in the form of a new service called Qwikster, customers were outraged. Nobody wanted to use the new site, and they definitely didn't want to pay extra money for it. Even though Qwikster perished before it was even launched, the blunder cost Netflix many customers.


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The 7 Worst Product Flops of 2011
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The 7 Worst New Product Flops of 2011

Company: Disney

Following the release of Avatar in 2009, Hollywood decided it had a new cash cow in the form of 3-D films, and it began milking it for all it was worth. That all changed with the release of director Simon Wells’ Mars Needs Moms -- a flop of epic proportions. Disney (DIS), of course, was expecting another hit, and spent $175 million on the film. In its opening weekend, it brought in just $6.9 million. According to movie data website The Numbers, after the final worldwide tickets sales numbers were in, Mars Needs Moms lost an estimated $130 million, making it the biggest money loser of all time.

Journalist Brooks Barnes wrote in The New York Times, “In the movie business, sometimes a flop is just a flop. Then there are misses so disastrous that they send signals to broad swaths of Hollywood.” Mars Needs Moms signaled that the market has become saturated and that digitally animated family films are not the sure thing they once were.

Company: Fiat

The new model Fiat 500 is a three door vehicle that's under 12 feet long. The car was expected to be a big seller in the U.S., rivaling BMW’s Mini. Even before the car’s launch, however, detractors were predicting failure.

Alan Mulally, CEO of Ford (F), stated in Panorama magazine, “I do not see large market in the U.S.A. for a smaller car than the Fiesta. Those that tried failed.”

He was right. According to online magazine DailyTech, “Fiat expected to sell 50,000 500s during 2011 in North America. Through the first seven months of 2011, Fiat sold fewer than 12,000.” Sales were so poor that Chrysler Group, which manages the Fiat brand in the United States, ousted U.S. chief Laura Soave this past November.

Company: Research In Motion

The PlayBook was one of the most anticipated consumer electronic products of 2011 and “one of RIM’s most important roll-outs,” as The Wall Street Journal put it. It was the company’s first attempt at competing with Apple (AAPL) in the tablet space, leveraging the success of the BlackBerry. Many hoped it would be the businessman’s answer to the iPad.

Unfortunately, the BlackBerry App World had few well-regarded apps -- a critical problem for a device hoping to compete with the iPad and Apple’s massively stocked App Store. Following a poor debut, RIM (RIMM) lowered its sales target for the second quarter of 2011 to one-third of what it had been originally, according to research firm DigiTimes. In a statement, RIM blamed the weak  sales on “several factors, including recent shifts in the competitive dynamics of the tablet market,” by which it was referring to the arrival of the popular (and inexpensive) Kindle Fire.

The company attempted to get its product off the ground with aggressive promotions, which caused it to lose $485 million in discounts on the tablet in the third quarter.

Companies: AT&T/HTC

In June, AT&T (T) announced the HTC Status. The Status was the first, and likely the last, smartphone with a dedicated Facebook share button. At the time of its launch, AT&T hoped it would be incredibly popular among users of the social networking leader.

“We can’t wait to put the HTC Status in the hands of our young customers who will waste no time tapping into Facebook to update their friends,” said Jeff Bradley, senior VP of devices for AT&T Mobility and Consumer Markets. But sales were significantly lower than the company had expected, and rumors that the phone would be discontinued spread quickly. Given the ease with which users can access Facebook on other smartphones, the case for buying a Status was fairly weak.

Despite its low sales, AT&T has defended the  product, stating, “The HTC Status is a great product and our plans for it to be part of our portfolio haven’t changed.”

Company: General Motors

GM (GM) was originally so excited about the Volt that the company announced in January it was speeding up its roll-out by six months. But by November, the excitement had fizzled out. Larry Nitz, GM’s executive director for vehicle electrification, told Reuters, “It’s naive to think that the world is going to switch tomorrow to EVs [electric vehicles].”

Indeed, sales for the vehicle have been consistently low. Only 125 models were sold in July 2011. This was after GM spokeswoman Michelle Bunker was quoted as saying that the Volt was “virtually sold out” due to its popularity -- a statement later shown to be inaccurate.

Adding insult to injury, Chevy Volts are being investigated for fires involving the cars’ lithium-ion batteries. GM has offered free loaner cars to concerned Volt owners.

Company: Netflix

In September, Netflix (NFLX) announced that it would be separating its online streaming service and its DVD-by-mail service. Streaming was going to continue under the Netflix brand, while DVD-by-mail was going to operate under a new website called Qwikster.

The change -- and the accompanying increase in prices -- outraged customers, leading the company to kill off Qwikster before it was even launched. CEO Reed Hastings announced this decision in a blog post on the company’s website in which he began, “I messed up. I owe everyone an explanation.” The post was flooded with more than 27,000 angry comments. The ordeal cost the company approximately 800,000 customers.

Company: Abercrombie & Fitch

While no stranger to controversy, Abercrombie & Fitch (ANF) seemed to have crossed a line this time. In March, the retailer unveiled its spring line for Abercrombie Kids, a division targeting children ages 8 to 14. Included was the “Ashley” Push-Up Triangle, a bikini top with padding. The launch prompted a violent response from parent groups. Several child development experts also criticized the top because it sexualized young girls.

At first, Abercrombie tried to address the concerns by reclassifying the top as padded and saying it was not intended for very young girls. It stated on Facebook: “We’ve re-categorized the Ashley swimsuit as padded. We agree with those who say it is best ‘suited’ for girls age 12 and older.” But while the bottoms are still available, the bikini top is no longer featured on the company’s website.

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