TWICE Retail Roundtable Redux: Panelists Pick The Holiday Hits

By Alan Wolf -- TWICE, 8/18/2008

NEW YORK — Days after the new year dawned, a panel of industry executives gathered around a conference table at International CES to share their take on the state of the consumer electronics business.

Much has transpired during the ensuing seven months, and TWICE invited our panelists back for an updated outlook on the back half of the year. Their picks for hit holiday products and pipeline forecasts follow.

TWICE: Which categories or products do you expect to be the biggest hits of Holiday 2008?

Dave Workman, executive director, Progressive Retailers Organization (PRO Group): Flat-panel TV, Blu-ray Disc players, gaming, PND [portable navigation devices], digital converter boxes, HD camcorders, digital SLR, and laptop computers — although the No. 1 have-to-have product will be the iPhone.

I think portions of the audio market will do okay, but it will be in selected areas.

Steve Caldero, senior VP/chief operating officer, Ken Crane's: High-end products continue to be in heavy demand. We are anxiously awaiting the Mitsubishi Laser TV as well as their 3-D demo. Also, Samsung's new LED LCDs will be out shortly, as well as Sony's new XBR products.

Edward Maloney, president, Cowboy Maloney's Electric City: The flat-panel business is still going to be hot, particularly in 32 inches and higher as 50-inch LCD becomes more affordable.

Jeannette Howe, executive director, Specialty Electronics Nationwide (SEN)/Nationwide Marketing Group: Our buying group dealer members are primarily in the home theater business, so although the new cellphones may be hot, that category does not have a tremendous impact on our sales.

That said, we are still seeing growth in all of the categories that touch iPods and iPhones.

Stephen Baker, industry analysis VP, The NPD Group (standing in for Ross Rubin): The usual suspects will be hot. We're looking for a strong holiday from big-screen TV, specifically 40-inch and larger flat panels; notebook PCs; Apple PCs and the iPhone; digital-SLR cameras and their accessories; mobile navigation; and digital picture frames.

Of course video games will continue to be hot as well.

TWICE: Do you anticipate shortages — or gluts — in any categories?

Workman: The areas I am most concerned about potential shortages would be digital converter boxes, Blu-ray, small-screen LCD and. while not a core category for our members, Nintendo Wii.

Caldero: Pioneer Elite 60-inch plasma's are very hard to come by.

Maloney: We're not able to get everything we want right now, especially smaller LCD screen sizes.

Howe: It does appear that larger flat panels, 50 inches and up, will be in short supply.

Inventory is the hot potato; dealers don't want to stock it until it is sold. Our Warehouse Direct fulfillment/distribution partners are all experiencing more than double-digit growth. It is a great advantage for dealer members to buy products, particularly video, at the right price and still get the goods within 48 hours. This gives the dealers better control over their cash flow and they are at less risk of owning a TV that drops in price 24 hours later.

Baker: Inventory mistakes seem more possible this year than others since demand visibility is so poor, and the cost of logistics on goods has changed dramatically over the past year, leaving everyone guessing as to volumes and reluctant to pay the cost to fix mistakes.

More electronics will come on the water as opposed to on a plane, and it seems likely that retailers and OEMs will not expend extra effort to make up shortfalls if the cost of shipping makes the available profit too meager. Whether this encourages retailers and OEMs to stock up or run lean is anyone's guess, but I would suspect that errors will be made on the side of having too few as opposed to too many.

Dealers Playing Catch-Up To Converter-Box Demand

TWICE: How would you describe consumer demand for digital-to-analog TV converter boxes?

Rob Eby, purchasing VP, D&H Distributing (standing in for co-president Dan Schwab): Converter-box demand is large. Everyone seems to think they need one because of the universal confusion that exists.

TWICE: Have you had any issues with the coupon-redemption program?

Eby: We see no current issues with coupon redemption. Of course, consumers are only just starting to send in for the redemption coupons now, so we need to take that into account.

Jeannette Howe, SEN: The primary issue we have had with the converter-box program was insufficient inventory. No one knew what the demand would be for coupon-eligible converter boxes, and although we forecasted generously, we have been in a back-ordered situation for most of the summer.

We are only supporting converter boxes with the analog pass-through feature from reputable manufacturers, and those boxes have been in the greatest demand. We should be flush with inventory as of this month.

Interestingly, about 40 percent of the boxes sold have been bought without benefit of the coupons. We have had instances where consumers got coupons and then sat on them too long. The current economic climate has prompted many consumers to just buy the box.

Dave Workman, PRO Group: Likewise, the only issue I have heard about is the shortage of boxes. I also think everyone has been caught by surprise at the consumer demand for digital converter boxes. Most of the midsized and smaller retailers are still reporting some shortages, although this appears to be getting better.

Steve Caldero, Ken Crane's: We have been overwhelmed with the demand for converter boxes. Originally we were looking to sell 50 to 100 boxes, and to date we have gone through over 400. People are using the $40 coupons before they expire whether they plan on using the box or not.

As the only independent retailer in Southern California listed to accept the coupons, we have seen many customer who have never shopped at Ken Crane's before.

Edward Maloney, Cowboy Maloney's Electric City: We're selling all we can get. We'll get a shipment in and they'll all be gone within two or three days. People who don't even need them are buying them. We're selling them for $55 but they could easily sell for $70.

TWICE: Are customers using the coupons?

Maloney: Yes, although a lot of them don't realize that there's an expiration date.

TWICE: Will the boxes divert flat-panel sales during the holidays?

Howe: I suspect that during the holiday season many of these coupon-eligible converter box sales will convert to flat-screen sales. We also have lots of opportunities in the first half of next year when consumers learn that the boxes are confusing to hook up and cumbersome to use with their old analog TVs.

Stephen Baker, The NPD Group: I can't see [converter boxes] being a big deal this holiday. It's certainly not the type of product you want to advertise to draw traffic, and they are so cheap that there won't be much price cutting. Moreover, the additional spend that converter box customers will generate seems destined to be very small.

TWICE: Do you think consumers are adequately prepared for the digital broadcast transition in February?

Workman: Probably not a 100 percent. It is tough to get everyone affected completely aware of the transition despite the efforts of the industry. There will likely be some consumers making a lot of noise once the signal is turned off. This is a political hot potato and hopefully we won't have Congress grandstanding on the issue to try and cover their rear.

Caldero: Many consumers are not happy with the conversion. They view the whole process as a burden.

Eby: Consumers are definitely not prepared for the transition, but they are getting there. There hasn't been enough proper education in the channel as of yet to detail the specifics of the transition.