'02 Sales? Watch The Independents…

During the last recession we endured, in the early 1990s, as always my colleagues and I were scurrying around to put the economic downturn in perspective and try to find out how it would affect consumer electronics sales for the holiday season and the year.

A well-known CE manufacturing executive shared with me the following: "Consumers may cut back on vacations, getting the new car they really wanted and settling for one that is less expensive. And they may cut back on going to the movies or going out to eat. But when it comes to treating themselves and replacing that trip, that movie or whatever, consumers will turn to consumer electronics. The industry will be fine." Did you notice he didn't say the industry was "recession-proof"? But he was correct: overall, the industry performed well versus the rest of the economy.

Fast forward to March 2001. I received a call from a stock analyst who asked the same question I asked of that executive a decade ago. I mentioned that digital products would continue to have strong appeal this year, that the independent retailers I talked with since CES were optimistic about the second half and I shared with him the decade-old observation of the CE business and recession.

"You really believe that self-serving drivel," was the analyst's response. I sheepishly told him that after attending three buying group meetings since CES, both independent retailers and a few of the manufacturers I spoke with were optimistic. In fact one or two echoed the sentiment my manufacturing friend said a decade ago.

While everything changed after Sept. 11, and the rebound the CE industry predicted for the second half was not as buoyant as expected, holiday sales of CE products led the way at retail. Seventy-nine dollar DVD players aside, generally margins of higher-end digital products did not get wrecked to make volume numbers. (By the way, kudos goes to CEA's eBrain consumer research operation, which predicted as much this past fall.)

So what about this year? According to CEA its factory sales report projects that 2002 will end up with $95.725 billion, higher than the estimated 2001 sales $93.173 billion (final numbers aren't in yet), but slightly higher than 2000's $95.217 billion. And remember those are factory sales numbers, not retail sell-through numbers. Retail sales for 2001 could wind up higher than expected, when all the reports are in.

Speaking of retail sales reports, latest from publicly held CE chains, showed that their performance was mixed (TWICE, Jan. 21, 2002, p. 1). Some had higher sales for the final quarter of the year and/or December, and others had slightly lower sales or lower comps than the previous year. Kmart filed for Chapter 11 last week, but that had little to do with consumer electronics. But the big guys aren't the whole ballgame when it comes to industry performance.

The first buying group meetings, which will be held during the next several weeks, will serve as early indications to how this year may turn out. MARTA Cooperative of America holds its meeting in Orlando this week, with Nationwide TV & Appliance meeting in mid-February, and NATM holding its annual meeting in Florida in early March. Last year the collective opinion of attendees of those meetings can be described by that accursed phrase "cautiously optimistic."

As it turned out they had every right to be. Sales may have been flat at retail for many, or may have fallen slightly for others, but on the whole it could have been a lot worse. Watch what the independents have to say and how they order. Experience shows that they may give us an early indication as to how the year might turn out.