“It’s the Economy, Stupid” … Again - Twice

“It’s the Economy, Stupid” … Again

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Here it is. My first post for TWICE and I don’t think I can get by without first addressing the state of the global economy. I seem to recall the above headline (or something close to it) being used in a well-publicized presidential debate many years ago. Given the current economic climate with this year’s election coming up, the campaign line seems even more relevant today.

That said, like millions of Americans, I wonder what it will take to pull us out of the current funk. I believe eventually the $700 billion government rescue/bailout plan will help. So will interest rate cuts by the Federal Reserve and the government’s support of the commercial paper market — all designed to provide liquidity, open up lines of credit and boost confidence. Plus, there are some new proposals on the table by both presidential candidates that may bring some relief to people struggling to pay their mortgages or looking at the possibility of home foreclosures.

My question is: How is the consumer going to respond in this environment? In recent years, consumer spending has been the fuel behind the nation’s economic vitality, as well as the economic development of countries around the world that are directly impacted by U.S. spending and investment — be they mature markets like Japan, Korea and western Europe, or emerging countries like China, India and Russia.

And relative to Sony, especially here in the U.S., my questions are: Will American consumers spend their hard-earned money during the busiest season of the year leading up to the holidays on our consumer electronics products?  Is the nation’s transition to digital television in February 2009 going to keep consumers buying HDTV sets and related products like Blu-ray players?  Will consumers be in a gift-giving and gift-buying mood as the holidays approach?  Will consumers opt for entertainment options provided by our great products, while perhaps forgoing that next new automobile purchase or an elaborate vacation?

We’ll soon see. I know our corporation globally just announced a downward forecast revision. Nevertheless, for much of the year, consumers have continued to shop and continue to buy CE products at a pace outdistancing the economy as a whole and other segments like housing and automobiles. In the past month or two, however, there have been signs of tentativeness. Retailers are now in a place where they have to start making some bets on consumer expectations as they place their holiday orders. And manufacturers like Sony have to be responsive and show the value that consumers will receive by sticking with the industry’s No. 1 brand.

Although the U.S. unemployment rate has increased somewhat, overall employment in the U.S. remains relatively high. Call me an optimist, but even with the volatile stock market and shrinking retirement funds, I believe people still want to entertain themselves and their families with cool new products — perhaps now more than ever. You may have noticed the Consumer Electronics Association’s recent forecast for 3.5 percent industry growth in the fourth quarter, so they certainly haven’t thrown in the towel either.

And one thing you can be sure of with consumer electronics is that the value of CE products keeps going up even when prices in general are often coming down. This axiom is true for flat-panel LCD televisions,  Blu-ray Disc players, notebook computers, digital cameras, camcorders, video game consoles and more. What other industry can say that?

I also believe that a consumer rewarding him- or herself (or getting a gift) with a new product from Sony (and, yes, some of our competitors) is a pervasive motivation that will continue even in these challenging times. Now, how about a little more confidence out there on the front lines?

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