Looking For A Comeback
By Steve Smith -- TWICE, 6/25/2001
As what economists liked to call "the longest continuous economic expansion in the history of the U.S." petered out around the holidays last year, 2001 dawned and the consumer electronics industry made its annual pilgrimage to International CES in Las Vegas. While retailers reported at the show that the fourth quarter was good, but not as strong as expected, CES drew record crowds eager to find out more about the many new technologies and products that will be available now and in the future.
Usually a good holiday season and an exciting, upbeat CES indicates that the industry will enjoy a strong year. As we close the book on the first half of 2001, for the industry to make that truism a reality this year retail sales will have to make a comeback in the second half.
The upbeat attitude of CES changed quickly in the weeks that followed the show. After enjoying major sales gains for the past few years, by February and March some industry executives were rationalizing the situation, saying things like, "Flat sales aren't too bad when you are comparing it to a record year."
Of course there are plenty of reasons for the general economic malaise: higher electricity costs, especially in California; dramatically higher prices for heating fuel and gasoline; collapsing stock market prices; the demise of many dot.coms; job layoffs; and the resultant job anxiety of many consumers who didn't get laid off.
All of this has put a pall on consumer purchases in general and several industry categories in particular. Personal computer sales are down, with manufacturers offering deep discounts to move inventory. Wireless sales have been hurt as demand dropped dramatically. And according to CEA shipment figures, analog video sales, except for camcorder and DVD sales, are also down. The upside of the video market is that as more consumers move to digital TVs, analog TV sales were expected to recede.
Strangely enough many retailers, especially small and regional dealers, haven't panicked during the first half and are hopeful that things will rebound. Of course they benefited from Montgomery Ward's demise and the absence of Circuit City in the major appliance business. But attendees of the Best Brands Plus buying group meeting earlier this month (see p. 1), echoed sentiments you'd probably hear from members of NATM, AVB, Pro Group, et al.
Many feel that three factors will create sales growth during the second half: more expected rate cuts by the Federal Reserve; the recently-approved Federal tax cut and rebate expected to be mailed during the summer; and the notion that the economy has finally bottomed out and is on the rebound.
If the opinions of these retailers are right, the economy is on the comeback trail as we enter the second half. (Technically, economists say we are not in a recession.) There will be plenty of bargains in CE stores or departments for consumers as many retailers and manufacturers will continue to cut prices to entice consumers to spend.
One hopes that during the next six months there will be enough profitable sales volume recorded that the industry can breathe a sign of relief and celebrate a comeback as we again prepare to trek to Vegas and CES.
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