Dealers Lament Tepid Holidays At Roundtable

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Las Vegas - Consumers took the old holiday favorite to heart this past month and stayed home for Christmas, according to leading retailers assembled for TWICE's annual retail roundtable, here.

The consensus among retailers was that price compression, the proliferation of low-priced off brands and a host of external factors, such as the looming specter of war in Iraq and the uncertain economy, constricted consumers' wallets and kept them away from stores.

'I was absolutely floored by the lack of traffic at malls,' said Tweeter's president & CEO Jeff Stone, who added that despite tepid consumers, the custom business remained strong.

'As far as Christmas went, the consumer won with low priced products and manufacturers won with high volumes,' said Tom Edwards, senior analyst, NPD Group. 'But those prices came out of retail margins.'

The commodization of many digital products, principally DVD players, and the growing number of Chinese manufacturers flooding the market with low-priced product dragged down margins, said Ray Brown, VP/general manager, Sears.

'It's a retailer's worst nightmare' to see shopping carts filled with commodity products, Brown said.

H.H. Gregg's CEO Jerry Throgmartin agreed. 'The introduction of hot new products hasn't caught up to the [commodity] cycle, and in that market, Walgreens and Wal-Mart will play a much larger role.'

Another trend highlighted by the panel was the sagging market for middle tier products.

'The very low and the very high did well, but there was a vacuum in the middle,' said Rick Souder, VP/general merchandise manager, Circuit City.

Bob Lawrence, executive director, AVB/BrandSource, said, 'We lost a lot of single unit DVD sales to supermarkets' and other low-price vendors.

Audio was particularly hard hit last year thanks in part to a dearth of excitement in the category, said Dave Workman, president/COO, Ultimate Electronics.

'We did awful in home audio, and I'm not sure why,' said Ken Weller, president/CEO, Good Guys.

Amazon.com VP Frank Sadowski noted that 'home audio as we know it is dead.' A combination of the change in consumer listening habits and the preponderance of home-theater-in-a-box systems has decreased consumer interest in high-end home audio.

'Our dot-com traffic tripled and we saw a much better [synergy] between our online business and in-store business,' said Mike Linton, executive VP, Best Buy.

As for the year ahead, predictions were hedged.

'I think 2003 will be a grind-it-out kind of year,' predicted Dave Edmondson, president/COO, RadioShack.

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