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Merchants Dreaming Of A White-Goods Christmas

11/17/2013 07:00:00 PM Eastern

NEW YORK – CE and appliance merchants are forecasting a solid if not stellar holiday season as consumers get past governmental concerns and resume some measure of good cheer.

According to retailers, buying group executives and a major distributor, deep discounts on TVs and tablets will help get shoppers in the holiday mood, although tight supplies from cautious TV vendors could prove troublesome come Super Bowl.

But it’s white goods dealers that stand to benefit the most this quarter as the resurgence in majaps, and its greater role in Black Friday promotions, compensates for continued declines in TV and other legacy CE categories like GPS, laptops and digital imaging, they noted.

“We feel pretty good about Q4,” said Bill Trawick, president and executive director of the NATM Buying Corp., the $7 billion buying group for big-box regional and multiregional chains. “The appliance business is extremely strong and will hold up through the holidays.

“The big question,” he said, “is shortages. If we have a pretty good season, we may see some shortages in the first quarter” as manufacturers tighten production, launch aggressive pricing programs, and even cut back on some members’ forecasts in a bid to restore profitability and clear the pipeline in advance of an earlier 2014 model year.

In CE, Trawick said NATM dealers will focus on large, fully featured TVs, and that those who dropped their 50- inch and smaller opening-price-point models are seeing improved comp sales in dollar and/or unit volume.

“TV has hit the bottom and is improving, but still has a long way to go,” he said. Members will benefit somewhat this season from Ultra High-Definition TV, which remains a niche category, and will enjoy greater volume opportunities in January when Vizio will avail its line to all NATM dealers.

As for Black Friday, Trawick anticipates that promotional pricing will be no more aggressive than last year, now that vendors are beginning to put profitability ahead of market share. Similarly, NATM dealers will refrain from competing on key promotional models that are widely available in the marketplace that offer volume but little margin. “It’s not in our best interest to pursue them,” he said. “We will promote around them, rather than with them.”

Dennis May, president/CEO of h.h.gregg, also sees little change in the season’s promotional timbre thanks to “relative stability in pricing,” he told analysts on an earnings call late last month.

Promotions, including those from h.h.gregg, are starting “very early” this year due to an early Hanukkah and fewer shopping days between Thanksgiving and Christmas. Otherwise, he said, promotional pricing will be “pretty straight forward and not different from past years.”

May agreed that “major appliances have become a very important business for the holiday season,” and will be further buoyed at h.h.gregg by a new seasonal marketing campaign that will help drive positive comps.

“It’s really interesting to see how much of our business we expect to be appliances this holiday,” he said. “I mean, appliances for our fiscal third quarter will be larger than video. It’s interesting how the business has shifted and evolved, not only at h.h.gregg but for the industry. Nearly 40 percent of our business will be the appliance category, even in the holiday quarter.”

In contrast, the 228-store chain is projecting a mid to high single-digit decline in TV holiday comps industrywide, and has responded by expanding its assortment of 60-inch and larger tier-one and Ultra HD models, increasing its sales training, and reducing its reliance on CE.

Still, May expects tablets to be the company’s “No. 1 gift for the holiday season,” fueled by new product innovations from Apple, Amazon and Samsung. The plan, he said, is to “really emphasize and drive that category … we believe that’ll be a great traffic driver for the holiday season.”

Like h.h.gregg, No. 3 appliance chain The Home Depot is well positioned for the holidays, and wasted no time in launching its pre-Black Friday promotions.

“Black Friday has become a huge appliance event,” merchandising VP Bob Baird told TWICE. “This event will represent just under 20 percent of our business for the year. We are looking for a big year-over-year increase.”

Warren Chaiken, president/COO of national majap and CE distributor Almo, also expects “very strong” business for Black Friday or, more accurately, Black November, and is aiding non-participating dealers on Thanksgiving weekend with an exclusive program that builds upon American Express’s Small Business Saturday promotion.

Chaiken said consumer concerns over the federal budget stalemate and Obamacare’s website woes took some wind out of October sales, but he sees enthusiasm and demand returning in November as “dealers who are in the game are bringing in the product they need.”

Dave Workman, president/CEO of the ProSource buying group, serving custom installers, system integrators and A/V specialty dealers, also believes that the governmental concerns that impacted retail behavior in October have somewhat ebbed. Nevertheless, “We’re still dealing with a shaky consumer,” he said, and only the super-premium segment of the market is performing well.

TV, which had been the lynchpin of CE retail, will continue to be a drag on the industry this season, as consumers remain unwilling to pay a premium for step-up features, and large panels will sell for “ridiculously low prices” on Black Friday, he said. But this year could be the bottom for TV, and falling average selling prices for Ultra HD models could help the industry claw its way back up in 2014.

This quarter, tablets will also see “a lot of very aggressive pricing,” he said, although the real holiday wild card will be gaming, and how popular the two new Xbox and PlayStation platforms will prove.

Hot categories where ProSource competes include premium soundbars, headphones and Bluetooth speakers, while members also continue to do extremely well in multi-room audio and installation, Workman said.

For Video & Audio Center in Los Angeles, the key to success – and one of the best third quarters in its 31- year history – was a focus on new technologies like Ultra HD and OLED TV displays.

“Those that are embracing the new technology have seen tremendous success and will see more this holiday season,” observed corporate director Tom Campbell.

He added that consumer demand for technology will be “the highest we’ve ever seen” this quarter, fueled also by tablets and smartphones. The trick, he added, is to generate demand by stoking consumer interest and desire.