The Aftermath…And Back To The Future

As the days passed since Sept. 11, many of us went back to work. Once we got back and began to deal with our business lives again practical questions came to mind. How does this effect the industry? How does this effect my business? How does this effect consumer confidence? All of these questions are legitimate and the answers won't be known for a while. The view that a ghastly tragedy like this, with its ripple effect on our economy, has never happened before is also legitimate. Yet over the past 30 years this country and the world have had to deal with other, different crises that affected business.

Take a look at CEA's consumer electronics factory dollar sales numbers during the years of four crises: 1970s oil embargo, the resignation of President Nixon, the Iranian Hostage crisis and Desert Storm.

CE factory shipments reached $5.9 billion during 1972. The oil embargo began in 1973 and was followed the next year with the resignation of President Nixon. CE sales during 1973 were $6.2 billion, with a steep cut to $5.5 billion during 1974. Sales were just about flat during 1975 before rebounding during 1976 to $6.9 billion.

The Iranian Hostage crisis began in late 1979 and annual sales were $10 billion. As the crisis dragged on into 1980 and there were gasoline shortages and rationing, sales during that year rose slightly to $11.8 billion. By 1981, sales began to pick up, rising to $14 billion.

During 1990, when the seeds of the Desert Storm war against Iraq were sown, CE sales were $43 billion. The year of the war, 1991, sales were almost flat at $42.7 billion. By 1992, CE factory sales rebounded to $47.4 billion.

Statistics are comforting, often giving the illusion of precise accuracy. But if you look behind these numbers, you will see that developments in the CE industry also affected business. During the early 1970s, a majority of U.S. households bought their first color TVs. The market was satiated. But there were few other technologies or new products to keep the momentum going. That, plus higher oil prices and overall inflation, hurt the industry and the economy as a whole.

The next one-two punch was the Iranian Hostage crisis and U.S. gasoline shortage. You would expect sales to have sunk, yet CE factory shipments rose by $1.8 billion during 1980 with a firm rebound by 1981. Why? That was the beginning of the VCR boom and the introduction of the first video game machines and software.

By the time of Desert Storm in '91, CE sales slipped by around $300 million, with the industry rebounding with a gain of $5 billion in sales during 1992. By that time in the CE business, VCRs, CD players, Nintendo and other game systems had become very popular staples in the marketplace, with home office products, personal computers quickly gaining a strong foothold.

What is the CE industry's condition now as we enter what may be a protracted period of crisis? The fundamentals of this industry, in terms of technology, are stronger than ever. The industry's selection of products is far more diversified than ever before, due in large part to the continued rollout of digital technology. Consumers may continue to turn to some of the industry's products to communicate and get information during this uncertain time, or they may turn to other categories for entertainment and some solace.

The industry does have good, innovative products to sell. Conditions for some retailers were not good prior to Sept. 11, so the current crisis will hurt those dealers more severely. While I hate making predictions, I will say that if historical patterns hold, when consumers begin to rebound from the effects of this crisis over the next few days, weeks and months, CE sales should rebound and get stronger, just as our country will. But be patient. It will take time.