Excitement Should Create Profits
By Steve Smith -- TWICE, 1/17/2005
It is rare when yours truly is ever correct when making a prediction, so permit me to blow my own horn. In this space in our Jan. 6 issue I predicted the following about the 2005 International CES: “This will probably be the largest CES in history, easily surpassing last year's record attendance of over 130,000.”
Well the Consumer Electronics Association (CEA) released an initial CES attendance figure of 142,585 early last week. While the number is subject to an independent audit, it will certainly top last year's attendance when all is said and done. The aisles were packed, even during Saturday afternoon when the show usually slows down due to football fans watching playoff games.
Attendees braved the coldest and wettest Las Vegas weather in recent memory to see all of the new products and new technologies. As CEA president/CEO Gary Shapiro noted, “The 2005 International CES succeeded by every measure ... [and] reflects [the] digital revolution.”
The digital revolution's products continue to excite consumers all over the world. Shapiro, CEA events and conferences VP Karen Chupka, and the staff of CEA should be congratulated for being able to produce a record-breaking show, and being able to do it with few glitches while enabling those who had to conduct business to do it relatively painlessly.
CES usually sets a tone for excitement, interest and demand in the industry's products and services. But will the new year bring some degree of profitability?
During a holiday selling season where the hottest products sold at retail were CE, profits and even sales lagged behind excitement. For instance, two of the industry's leading chains did not have a rousing December. Best Buy's same-store sales were up a couple of percent for December, while Circuit City's were down. And Ultimate Electronics, one of the signature chains in this business, has filed for Chapter 11. (See stories, p. 1 and p. 8.)
And it is not just the retailers who are under pressure. More leading manufacturers than you can name have, in the past 12 to 18 months, changed management, changed their distribution structure and changed the way they are approaching the market. Manufacturers are now faced with introducing innovative products or technologies, but having a smaller time frame than ever to sell it profitably.
The expansion of digital technology globally has created more competitors for established brands, straining their slim profits and, consequently, impacting the profitability of retailers and distributors.
The DVD player available on Black Friday for $17 to generate store traffic is only a symptom of what is going on. More typical is established brands selling down vs. selling up. For example, Apple has taken its wildly successful iPod down-market with the iPod shuffle, a stripped-down version of the original that, based its memory alone, is less expensive than competing SKUs from other brands.
No predictions, just two observations: The industry has fewer margins for error than ever before, and it has to translate consumer excitement into profits now, before it is too late.
