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Consumer electronics gift sales will grow 8 percent during the fourth quarter from the same period last year, but deep discounts and special retail events will be needed to get consumers into stores and shopping online.
That is the word from the Consumer Electronics Association (CEA), which issued its 16th Annual CE Holiday Sales Forecast last week at the CEA Industry Forum at the Arizona Grand Resort.
Shawn DuBravac, chief economist/research director, and Steve Koenig, industry analysis director, presented CEA's report, which detailed the effects of the recession on the economy, the U.S. consumer and the CE industry.
Given the economy, it is surprising that four out of five adults (80 percent) plan on buying CE products this holiday, the highest results in the 16 years of the survey.
Overall gift spending this holiday season will increase 4 percent over last year despite a drop in overall holiday spending. Spending on CE will also increase over over last year despite a drop in overall holiday spending. Spending on CE will also increase over last year. Consumers plan to spend an average of $222 on consumer electronics this holiday, a gain of 8 percent over last year. Half of consumers (48 percent) also plan to buy a CE product for themselves this holiday, the CEA study shows.
“Pent-up demand for technology products is evident in consumers' gift wish lists and holiday CE purchase plans,” Koenig said. “Some 20 percent of consumers say they plan to spend more on gifts compared to last year, with electronics leading the way.”
“Consumers remain wary but there are signs of optimism in our holiday forecast,” said DuBravac. “As the holiday approaches, consumer appetite for technology highlights the resiliency of the tech sector.”
Consumer electronics comprise four of the top 10 items on adults' holiday gift wish list, with computers and video games ranking No. 2 and No. 3, respectively, behind clothes. Televisions and digital cameras also made the list. Several emerging technologies, such as Blu-ray players, e-readers and netbooks, are among the most wanted and hottest gifts this season. These products are in the adults' top 10 CE wish list for the first time, joining such mainstays as notebooks, portable MP3 players and flat-panel TVs. Netbooks are another hot category, especially among teens, ranking in the top 10 CE gift wish list of that age group for the first time. Portable MP3 players, video game consoles and digital cameras are among the most popular gifts consumers are planning on giving their friends and family this year, CEA said.
“Some of the hottest gifts this holiday will be CE products new to the market,” said Koenig. “Retailers who dedicate shelf space to new technologies, like e-readers, will likely be rewarded with stronger foot traffic.”
But the survey also showed that consumers have cut back on major purchases during the year, and CE was affected, along with major appliances, furniture and cars (until the “cash for clunkers” program kicked in).
Industry insiders who were interviewed said fewer consumers have visited stores, and 60 percent believe it is the “new norm” or a long-term change that consumers will be hesitant to buy for some time.
Typical gift giving and holiday shopping will be down in several non-CE categories, such as home decorations, greeting cards, travel and others, which makes the possible gain in CE gift giving all that more surprising.
CEA said all types of retail promotions — event-driven sales, specials and the like — are driving consumers to CE stores and online and should continue to do so in the fourth quarter, meaning that margins will suffer as a consequence.
And the survey showed that one-third of CE insiders interviewed were pessimistic about Black Friday and the weekend after Black Friday, predicting sales will struggle vs. last year.
But the industry seems to have gotten consumers to plan holiday spending before Black Friday, the survey indicated.
The top motivator to buy is still price (91 percent), but ease of purchase (85 percent), past experience (85 percent) and ease of returns (84 percent) mean that “consumers are not experimenting” when it comes to where they will shop for the holidays, DuBravac and Koenig said.
The study showed that 67 percent will shop at mass merchants, 60 percent at electronics stores and 41 percent online.
Accessories will play a major role in CE gift giving this year, in video games, which are high-margin items, as well as memory cards, which are the No. 1 overall planned CE purchase for the season, at 29 percent.
“Consumers will be looking for deals, and retailers will be willing to make deals to drive traffic,” DuBravac said. Sixty-nine percent of consumers surveyed said they are looking for good deals, 45 percent will shop at discounters and 42 percent will buy a less expensive product.
Retailers are also worried about low traffic, price declines, fewer new “must-have” products, not enough inventory (or too much) and even an outbreak of the H1N1 virus, which could curb sales.
The study was conducted in September 2009. It was designed and formulated by CEA Market Research. The complete study is available free to CEA member companies at http://spmembers.ce.org. Non-members may purchase the report for $199 at http://mycea.ce.org.