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Consumers' macroeconomic concerns took some of the wind out of Super Bowl TV sales, prompting vendors and retailers to resort to steep promotions to drive volume.
"Those that are promoting are doing well — those that aren't are struggling the most," said Jim Ristow, executive VP of Home Entertainment Source (HES), of his buying group's nearly 500 specialty A/V dealers.
Ristow described a "perfect storm" of macroeconomic factors — including the housing bubble, the sub-prime mortgage crisis, stock market volatility and even the presidential election — that will shake consumer confidence well past the Super Bowl and impact discretionary spending for much of the year.
Indeed, consumer spending was flat in December, a recent U.S. Department of Commerce report showed, with record-high oil and food prices diverting holiday-related sales. The report underscored the largely disappointing revenue figures posted by leading consumer electronics and other retail chains for the month.
The trend, it appeared, continued through January. "In consumer electronics, we believe that Super Bowl is proving disappointing and that weakness is across the board," observed Bank of America retail analyst David Strasser. "TV sales as always are the focus this time of year, but it is not holding up to past years." Strasser said in a research note that softness in Florida and California, which were hardest hit by the housing downturn, has spread to other parts of the country, and predicted negative January comps for CE specialty leaders Best Buy and Circuit City.
To help spur TV sales, dealers as well as vendors assumed an aggressive promotional stance. "We're seeing some unexpected promotional activity from the vendor community, over and above their scheduled Super Bowl promotions," Ristow said. "That's a telltale sign that business is challenging."
Mike Gatti, executive director of the Retail Advertising and Marketing Association (RAMA), a division of the National Retail Federation, said retail promotions were expected to have a big influence on buying behavior. "Smart shoppers hold off on major purchases like televisions and entertainment centers until retailers are offering special discounts and promotions," he noted. "After a lackluster holiday season, retailers will be courting consumers with their very best deals on electronics, furniture and even food in anticipation of the Super Bowl."
That was certainly the case at Wal-Mart, which cut prices 10 percent to 30 percent on a wide range of products including CE, and offered 18-month no-interest terms on purchases of $250 or more that were made with a Wal-Mart private-label credit card.
"We all know economic times are tough," said John Fleming, Wal-Mart's chief merchandising officer. "Shoppers are depending on us to deliver the best price so they can stick to their plans, no matter what the economy throws at us."
TV specials included:
a flat-panel TV stand for $98.88 or motion wall mount for $99.86;
Vizio's 32-inch LCD TV for $597, 50-inch 720p plasma for $1,197 and 46-inch 1080p LCD for $1,346;
an RCA or Polaroid 32-inch LCD TV/DVD combo for $683; and
a $100 gift card with purchases of Philips 42-inch 1080p LCD TV, which retailed for $1,296.
Among other retailers, Circuit City revived its Super Bowl TV delivery guarantee, promising that sets sized 32 inches and larger could be purchased as late as 4 p.m. on the Wednesday before the game and still be delivered and set up in time for kickoff, or the customer would receive a $50 gift card. The chain also continued its 60-day HDTV price guarantee, which refunds 110 percent of the difference within 30 days, or 100 percent within 60 days, if a customer sees the same in-stock set advertised at a lower price by a local competitor.
At Sears Holdings, Kmart offered a 37-inch Olevia LCD TV for $617, and corporate sibling Sears pitched 36 months of interest-free payments or a $300 gift card on purchases of a Samsung 46-inch or larger HDTV with a Samsung audio system or Blu-ray Disc player.
Most Samsung dealers also leveraged the vendor's "Official HDTV of Super Bowl XLII" status by offering a $100 NFLShop.com gift certificate with purchases of the vendor's HDTVs in sizes 40 inches and larger.
While the promotions stimulated sales, the volume came at a cost. Bill Trawick, president and executive director of the NATM Buying Corp., reported that flat-panel unit sales remained "very, very strong" for the buying group's 12 regional CE chains. Margins, however, were a different story.
"We're struggling on margins," Trawick acknowledged. "The nationals, as well as some of our guys, have gotten very promotional to stimulate business, and we've seen a decline in margins."
Not surprisingly, retailers with store locations along the Northeast corridor enjoyed the biggest bump in sales, as consumers clamored to see the area's New York Giants go up against the New England Patriots on a big, high-definition display. "Thank God we've got a team in there," said John LaRegina, senior TV and video buyer for P.C. Richard & Son, the New York metro area chain. "The extra business created by the game has been significant. For any fan sitting on the HDTV fence, the decision was made. There's been a spike since the New York-Green Bay [conference championship] game, and business will be very strong right up to Sunday at noon."
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.