Heavy Discounting, Slim Margins Expected

By TWICE Staff -- TWICE, 10/18/2010

TWICE: What type of fourth quarter do you think the industry will have this year?

Warren Chaiken, Almo: Consumer confidence is at an all-time low, so it will take some heavy discounting to get consumers to open their wallets. At the end of the quarter I think we’ll see that top-of-the-line sales will be comparable to or ahead of last year. The diligent retailers that concentrated on filling the basket vs. one-off promotions will experience comfortable margin gains.

Doretta Raffio, ADI: It may be an overused phrase, but “cautiously optimistic” sums up our expectations. We are all hoping for a sales uplift in areas outside of flat panels and tablets, but expect sales in these product areas to lead the way. 3D technology is still in the early adapter phase. There are a lot of questions being asked of installers -- very similar to where the HD industry was a few years ago. Homeowners recognize that to experience 3D, you need the content as well as the accessories.

Doug Robison, DSI Systems: Sales volume should be robust, but margins will be tight.

Fred Towns, New Age Electronics: From the conversations we have had with our retailers, they expect more than likely single-digit growth mainly due to the deep discounting they will have to offer in order to get consumers to come to their stores to buy. They will have to sacrifice margins in order to drive business, but can balance that out by adding bundle options and increasing attach rates for other high-margin items.

Mark Gustavson, WYNIT: As a rule, most manufacturers have “right-sized” their capacities and retailers have paid significant attention to initial stocking orders leading up to the holidays.

We therefore look forward to a strong finish to 2010, with one major variable to consider -- what will impact the U.S. consumer’s willingness to spend? The outcome of the midterm elections, coupled with one’s personal economic reality, will inevitably make some consumers more comfortable, and others less.

The success of the season will be driven by how products and prices align with discretionary spending power.

Rob Eby, D&H Distributing: I think vendors are hoping for the best this season, and they’re taking action to make that the case as we emerge from the recession. We all have to measure up against Window 7 sales from last year, so the industry is annualizing bigger sales growth because of it.

In light of this, manufacturers are trying to hit the right price points in order to generate the numbers they want this year. They’re doing things like adding incentives such as free 3D glasses with a new 3D-capable DVD player to get consumers buying. Manufacturers and retailers want to make sure that fourth quarter is successful, and are willing to offer their best deals in order to make that happen.

Bill Stewart, Petra Industries: We’re cautiously optimistic about the fourth quarter. We expect to see things stabilize further and even predict growth in some categories like A/V mounts, cables, gaming, headphones and Apple accessories, particularly iPhone 4 and iPad cases, as those will still be hot gift items for the holidays. Blu-ray should also do well with movies getting bundled with players, particularly around Black Friday. Our merchandising team continues to do a great job negotiating deals and bringing in inventory for fourth quarter that will support numerous promotions we will extend to our dealers.