Soft Holiday Has Dealers Thinking Small

By Greg Scoblete -- TWICE, 1/7/2008 6:16:00 PM

LAS VEGAS — While past holiday seasons have focused on big TVs, retailers are increasingly pinning their hopes on the small and portable to drive future growth.

That was the consensus of dealers, distributors and buying group executives attending TWICE's annual Retail Roundtable at CES, moderated by senior editor Alan Wolf.

Even though LCD TV was the leading CE seller during the holiday season, declines in the average selling price of LCD TV “put a damper on revenues,” said Ross Rubin, industry analysis director, The NPD Group. Excluding video games and cellphones, CE category revenue was down 2 percent in the last six weeks of the year vs. the last six weeks of 2006, Rubin added.

“The ‘p’ in 1080p doesn’t stand for profit,” remarked Steve Caldero, senior VP, Ken Crane’s.

TV is by no means dead, dealers hastened to add. The digital transition will force late adopters to upgrade, giving retailers an opportunity “to educate the mass market,” said Fred Towns, senior VP, New Age Electronics. The transition will also keep second- and third-tier TV brands alive as replacements for smaller TVs in bedrooms and kitchens, predicted D&H Distributing marketing VP Dan Schwab.

The challenge is finding a reliable second- or third-tier TV partner to meet the entry -level price points, said Edward Maloney, president, Cowboy Maloney’s Electric City.

“You would think that some consolidation [in TV] is inevitable,” said Dave Workman, Pro Group executive director. “But we’re a long way away from HD saturation.”

It’s difficult to determine the growth trajectory in flat panel because dealers don’t yet know the replacement cycle, added Noah Herschman, audio/video director, Amazon.com.

If big TVs are under pressure, small, portable entertainment devices are flourishing, driven by consumer-generated content and a mobile lifestyle, dealers said.

The rise of portable devices has placed an emphasis not just on functionality but on style and design, said Irynne MacKay, entertainment and mobile products senior VP/general merchandise manager, Circuit City. “Consumers see these devices as an expression of themselves when they take them out of their pocket or purse.”

It’s not just small products, but assortments have shrunk as well as consumers use the Web and customer reviews to edit their own assortments. Consequently, retail space will shrink, predicted Douglas Moore, hardlines senior VP, Sears. “The retail model that supports lots of SKUs is under pressure and the transformation is going to be painful.” No matter how successful portable devices become, they won’t deliver the profits of TVs, Moore added. “It’s a smaller business.”

Ultimately, successful dealers need to be chameleons, capable of changing with the times, said Jeannette Howe, executive director, Nationwide Marketing Group/Specialty Electronics.