Do we really need it? Can we get by with a smaller model? Do we really need this year’s latest and greatest update to cell phones and digital cameras? As the economy continues to totter, those are the questions electronic retailers most fear this holiday season.
What retailers do know this year is not to expect long lines for hot electronics or any crazed demand amid teeming crowds at the malls and strip centers. Some analysts are even predicting the slowest holiday shopping season in 30 years.
“All indications are that consumers will shop cautiously this holiday. Likely to take a hit are the higher price points,” analyst Roger Kay wrote in an October post to his blog. “Shoppers will come in and browse, but they’ll probably leave with smaller packages. Products like expensive flat-panel TVs, fancy notebooks, gaming desktops and high-end phones will likely remain on the shelves in unprecedented numbers. Best positioned will be items under $200.”
Kay added, “This season will be like no other in recent times. In the forecasting biz, we call it a ‘market discontinuity.’ That is, a break from the past.”
Lending credence to Kay’s dismal forecast, SpendingPulse, a macro-economic report tracking retail and service sales, released data Nov. 23 showing November retail electronics and appliance sales hitting a year-to-year decline of 22.1 percent.
“While this is obviously a notable negative year-to-year comparison, it is fairly comparable to the 19.9 percent decline in October, so at least we can report that the declines are not worsening,” Michael McNamara, vice president of research and analysis for MasterCard Advisors, said in a statement.
But, according to NPD electronics analyst Stephen Baker, it could be worse.
“Doing well is going to be a relative thing this year,” said Baker. “That said, electronics have almost always outperformed the overall market.”
So, if not exactly hot, what’s at least warm in the stores? Certainly, flat screen digital televisions as America nears the Feb. 17 deadline for the digital television transition. As recently as this summer flat screens were expected to be jumping off the shelves this holiday season, but the September meltdown in the financial markets has slowed down the optimistic forecasts.
“It’s a tough thing for the electronics business to realize,” Baker said. “It’s hard to adjust business models.”
In addition to whatever uptick flat screens bring to the market, Baker predicts “pretty good” sales for computer notebooks and SLR digital cameras. He also thinks smart phones like Apple’s iPhone, RIMM’s BlackBerry Storm and T-Mobile’s G1 to do “pretty well” but not “as good as we hoped.”
Even then, though, there are tradeoffs.
“When smart phone sales go up, other phone sales go down,” Baker said.
Still, there are least some bright points this holiday season, at least as seen through the ever optimistic eyes of the CEA (Consumer Electronics Association). According to the CEA, new computers are third on adults’ holiday gift wish lists, finishing just behind peace and happiness. Televisions, video game systems and cell phones also made the top 10.
“Certainly with the recession in the early 1990’s and the burst of the dot-com bubble, consumers spent less of their discretionary income on consumer electronics,” CEA economist Shawn DuBravac said in an October forecast. “However, there has been a change in sentiment as consumers now view consumer electronics as a necessity rather than a luxury. Although this year’s projected fourth quarter growth is down from last year, discretionary spending on consumer electronics is at an all-time high.”