TWICE Retail Roundtable Redux: Outlook Mixed On CE's 2nd Half

NEW YORK — Days after the New Year dawned, a panel of industry executives gathered around a conference table at International CES to share their take on the state of the consumer electronics business.

Much has transpired during the ensuing six months, and TWICE invited our panelists back for an updated outlook on the back half of the year. Their forecasts follow.

TWICE: What is your outlook for the holiday selling season?

Steve Caldero, senior VP/COO, Ken Crane's: Consumers will continue to be very cautious with their purchases. Even now people are spending more time looking before they buy — they shop multiple stores, investigate on the Internet and look for reassurance that they are making the correct purchase. According to J.D. Power and Associates, over 30 percent of those in the market for a new flat-screen TV spend four to six weeks looking before they make a purchase.

Dave Workman, executive director, Progressive Retailers Organization (PRO) Group: I think the upcoming holiday season will surprise everyone. We have run counter-cycle to other industries in the past as evidenced by the industry's growth following 9/11, and I believe we will begin to see some cocooning effect baked into consumer's discretionary purchases throughout the fall. New-vehicle sales are down, and people are choosing to not travel as frequently. This in combination with the hot categories our industry is offering should leave us with a reasonable holiday period.

Jeannette Howe, executive director, Specialty Electronics Nationwide (SEN)/Nationwide Marketing Group: Fortunately, gas prices are beginning to drop some, and once the presidential election is over, I think consumer confidence will begin to revive. As the holidays approach, we should also see resurgence in flat-panel sales. Americans love their TVs. There are more TVs than people in the United States. The average U.S. household has 2.5 people and boasts 2.75 TVs.

But I constantly remind dealers that consumers are no longer kicking tires. If someone walks in your doors, they are a serious prospect; don't take their presence lightly. We will see fewer customers this year, so the goal should be to get a larger share of them. We are actively encouraging dealers to get Imaging Science Foundation certified so they can calibrate flat panels; to get more involved in home automation, gaming environments and networking; and to capitalize on the slower times to broaden their roster of services. Gaming environments in particular can be a fabulous profit opportunity and can help dealers reach a younger demographic.

This has been a challenging year for dealers that relied on new housing starts, but the dealers who have expanded their offerings have done well. The light bulb as we know it will be gone in the next 10 years. Lighting systems are gaining in popularity as are all initiatives that promote energy efficiency. There are lots of opportunities out there for the creative business person.

Edward Maloney, president, Cowboy Maloney's Electric City: I've only been in the business for 40 years; I'd need to be in it a lot longer to know what's going to happen.

But I can tell you the way the business is going — it's just rough, the way costs have gone up. If there's an erosion in margin like we had two Christmases ago, I don't know how some dealers are going to pay their bills. Everything is going up, everything is more expensive, and everybody is re-examining everything they're doing in an effort to control costs and boost ROI [return on investment].

Our business has remained fairly good, and, like others, we're looking at developing alternative revenue streams. Mississippi hasn't had anywhere near the number of home foreclosures that other markets have experienced.

Stephen Baker, industry analysis VP, The NPD Group (standing in for Ross Rubin): The outlook heading into the second half of 2008 is very unstable. The first four months of 2008 (as well as December 2007) reflected a serious retrenchment in consumer spending on consumer technology. However, May and June, likely as a result of the tax rebates, rebounded very nicely.

The key question that remains unanswered for now is whether that was temporary or permanent. While we hope for a permanent rebound, the evidence says this is temporary. Consumers remain uncertain about their economic outlook and continue to be under pressure in their spending, and while we have some exciting products for the holiday, it seems unlikely that they can propel sufficient demand in Q4 to make it an unqualified success.