Second Half Could Show A Downside

By Jeff Malester On Jul 12 2004 - 6:00am

Not all second-half accessories selling forecasts are unquestionably positive. Instead, executive expectations can be softened by the possibility of negative events beyond industry control. At the same time, these execs offer numerous ideas designed to contain a slide.

For one example, when tempering his optimism with words of caution while looking at the consumer electronics business during the next six months, broad lines accessories manufacturer Gemini Industries' president/CEO Mike O'Neal said, "Overall, we predict that business will become more difficult over the next quarter.

"Although rising fuel prices will result in upward pressure on products costs, retailers will want to lower costs in at attempt to drive more volume, while maintaining gross margins. The net effect of this will be an increased efficiency of the supply chain, compensating for both sets of pressures."

More specifically, zeroing in on the accessories marketplace, O'Neal said, "In the fourth quarter, the critical issue among retailers to maintain or increase profits will be gaining attachment sales. With so much downward pricing pressure on the core products, savvy retailers are aggressively searching for methods to drive more complementary accessory sales. Our response to this development must be more effective promotion of accessories with the sale of core products.

"As more people invest in better quality digital televisions, and surround audio, we will see this drive high performance cables and higher quality interconnect sales," continued O'Neal.

"Another example of a product offering better performance is noise-canceling headphones. We believe that sales of these headphones will increase significantly in the fourth quarter as more and more consumers experience the benefits," said the head of Clifton, N.J.-based Gemini.

Another executive hedging his bets when forecasting the CE business climate in the next six months is Eric Tong, VP/marketing and product management at Compton, Calif.-based Belkin.

"The CE accessories market will be relatively flat for the summer months, with strong growth projected for the holiday season. Growth in digital imaging, digital TVs and digital content demand will continue, and consumers will be looking to make investments toward a more meaningful 'digital lifestyle.'"

"Additionally, the various digital technologies are becoming more intuitive, and the early majority consumers are willing to invest in these types of products and services," continued Tong. "Average selling prices are trending downward, so retailers will need to take advantage of attaching accessories and providing their customers with a holistic solution."

In specific product, "broadband continues to grow as DSL and cable providers are getting more aggressive with their pricing plans. Growth of broadband is being fueled by digital music and video-on-demand content — a technology that is quickly becoming a reality. Users will be looking for additional ways to optimize their broadband pipe, which will fuel voice over IP (VoIP) demand for the second half of 2004," said Tong.

"Belkin's callEverywhere broadband phone service will enable users to make phone calls over broadband with any land-line phone. Three residential and two business service plans will give consumers a tiered offering, enabling them to see significant savings over their typical phone bills," he said.