Just as some now do when considering the course of world events and their own lives, the business year 2001 can be divided into two parts: before 9/11 and after 9/11.
First the before:
2001 began with high hopes. Seemingly immune to the post-tech-boom malaise that wounded the economy and hurt retailers over Christmas, CE dealers reported decent, if not stellar, sales during the just-ended holiday season. Building on that head of steam, the Consumer Electronics Association (CEA) projected full-year factory sales of $95.6 billion as International CES 2001 kicked off with a triumvirate of iconic industry keynoters — CEA president/CEO Gary Shapiro, former CEA chairman and newly elected congressman Darrell Issa, and Microsoft chairman Bill Gates — who offered an upbeat view of the CE market. Gates used the forum to unveil Xbox, which he described as a broadband gaming device,” and to present a connected home primer called “The Emerging Digital Lifestyle” that painted a bright future for connectivity.
The Xbox model displayed on the show floor was only a low-powered prototype, and the trade would have to wait until the Electronics Entertainment Expo (E3) in May to test drive the new gaming platform. Sharing the spotlight was Nintendo, which also unveiled its next-generation contender for the PlayStation throne, GameCube.
Elsewhere on the product front, XM regrettably chose Sept. 12 to launch its new satellite radio service, and Microsoft rolled out Windows XP later that fall. Minolta began to mine the untapped premium digital camera market with a fully-featured, 5.2 megapixel model.
Other industry innovations in 2001 included:
- the first generation of Bluetooth headsets, shipped first by Ericsson at retails of $149-$199;
- a line of two-piece, USB- and 1394-compatible external hard drives from Iomega in 5GB, 10GB and 20GB capacities for respective prices of $129, $149 and $199, that presaged the widespread use of cheap, portable memory; and
- incorporating the same hard disk drive technology, an eye-catching portable music player from Apple called iPod. The trade was initially impressed by the unit’s clean, white design, but thought its high $399 price point for 5GB of storage, and dependence on Apple’s operating system and online music store, would limit its popularity to Apple’s hard-core devotees.
Apple would launch another front that year in the guise of its first two Apple retail stores. Within the year, 23 more locations would blossom, establishing one of the most successful vendor-operated CE retail chains.
Meanwhile, plasma TV continued to percolate. In March, the technology’s chief proponents announced dramatic price cuts that edged the flat-panel displays closer to the outer limits of middle-class affordability, with Fujitsu dropping its top-of-the-line 42W from $14,000 to $10,000 at retail, while Sony’s top shelf 42W-inch HD model fell $3,000 to a $14,000 price point.
Helping to build momentum for plasma and HDTV was the decision by the ABC and CBS television networks to broadcast vast chunks of their fall programming in 720p and 1,080i.
But despite these dazzling sales tools, the CE industry finally began to succumb to the post-Internet boom environment. The first signs of trouble came in February, when the flagging economy and plummeting consumer confidence began to take a toll on brown- and white-goods dealers, who reported sharply slower sales growth. By spring, Heilig-Meyers and NATM dealer American Appliance shut their doors for good. It was all in sharp contrast to 2000, when the country’s Top 100 CE retailers posted a 13.4 percent increase in cumulative sales according to TWICE’s annual retail registry.
Sales remained soft through the summer, and then our world changed forever on September 11.
Northeasterners will forever remember that crisp, bright morning which belied the horrors to come. The staff of TWICE watched events spiral out of control from our office windows, just a couple of subway stops north of Ground Zero. First we thought it was a fire; then we heard reports of an accidental plane collision. And I was certain that the second airliner, which from our vantage appeared black in silhouette, was a military rescue plane.
Unfortunately it was not.
The industry, like all civilized governments, institutions and individuals, was shocked and grief-stricken. Immediately impacted were many New York and Washington area stores and shopping malls nationwide, which were closed that day and next. At Ground Zero, RadioShack and Sam Goody outlets in the World Trade Center were destroyed, and J&R Music World, located a block away, sustained damage from the towers’ collapse.
XM delayed its launch until October, and conferences, conventions and hearings were cancelled. Microsoft donated $5 million to the rescue effort, Cisco gave $6 million, and contributions poured in from Best Buy, HP, Maytag, Sprint, Sears, Sony , Wal-Mart and other industry sources.
Following a period of national mourning and flat sales, business finally began to rebound by November.
For some the wounds of September 11 would never heal, but the CE industry was clearly on the mend.