Industry Voices
The Managed Home Conundrum
Posted by Stephen Baker on July 2, 2008
Judging by the drumbeat of depressing economic news, one would think that every retail category and every product was in the throes of a recession.
However, as has happened in other downturns (and in the upturns as well) consumer technology continues to beat the averages. While there isn’t capacity for an 8 percent or 10 percent year-over-year revenue growth as we saw a couple of years ago, The NPD Group June retail-tracking service showed a 3 percent dollar increase over June 2007, the second consecutive month of positive news, after May’s jump of over 7 percent. And this is after five straight months of flat or negative results, stretching back to December.
What happened? Clearly the rebates helped, but consumers could have spent their rebates on lots of stuff – clothes, food, their mortgages maybe – but instead a lot of them decided to buy some new electronics. Great for us as an industry as it helps validate the notion that electronics are not always a discretionary spend, but are more of a necessity. It’s a much better place to be in the pecking order of consumer priorities. And while we wring our hands about “only” 3 percent growth, let’s remember that lots of industries don’t see that in their best days, never mind in the doldrums of the worst economy we have seen since the electronics business grew up in the mid-90s.
The two biggest categories in electronics had phenomenal performance in May and in June, with both PCs and TVs delivering solid revenue growth. Both desktops and notebook PCs saw double-digit revenue increases in June for the first time in quite awhile. In TVs, unit growth of 34 percent in LCD TVs was balanced by the same level of increase in dollars. And it bares mentioning that both these categories demand that consumers spend upwards of $800 to $1000 on average on these purchases, certainly not an impulse decision level of pricing.
But I don’t want to leave us feeling all sweetness and light (those who know me can’t be surprised by that) because electronics is looking at some serious structural product concerns. As the rebates wind down, the question will be once again whether we can grow through this recession or be dragged down by it.