Electronics dealers nationwide say they are counting on continued strong sales of big-screen and projection TVs in 1996, thanks to the upcoming Super Bowl in January and the Summer Olympic Games in Atlanta, which begin in July. Still unknown among retailers, however, is how computers will fare next year after slower-than-expected sales during the first two weeks of the Christmas season and a consumer credit crunch.
After a year of eroding margins and a particularly slow second quarter for computer turns, retailers told TWICE they are still unsure about whether computer sales will pick up in 1996. By the second weekend in December, major chains nationwide, including Comp-USA and Circuit City, were already offering increasingly slashed prices, and rebates of $200 on some PCs and laptop models — while Apple cut prices by 8% to 25% on its PCs, including two new Power Macintosh models, in an attempt to jump start flagging sales.
“I think the biggest question mark in 1996 will be computers,” said Chuck Cebuhar, divisional VP for home office and home electronics at Sears. Some retailers worry that the computer market may finally be reaching saturation, with fewer potential first-time buyers expected in stores next year. A survey released this month by Link Resources in New York found that to ensure continued sales growth, PC suppliers must turn to consumers buying a second or third computer. And it can be a lot harder selling to an existing computer owner, as Microsoft found out when it tried to persuade consumers to upgrade to Windows 95. A San Francisco-based firm, Odyssey Research, estimates that only 6% of consumers with home computers have purchased Windows 95 so far, and only 10% will do so in the next six months. “Computer sales have slowed down from the feverish pace they had over the past 18 months,” said Steve Child, merchandising VP for electronics and appliances at the five-store R.C. Willey chain in Utah. “The market is just so competitive everywhere.”
Child, like many retailers interviewed for this forecast, predicts a flat 1996, largely because there is no new development in audio, video or computers that will bring people into stores — except for Digital Video Disc (DVD) technology, which isn’t expected to make an impact on retail sales until Christmas of 1996. “We’re in an industry that is spoiled by microwave ovens and VCRs and computers and big-screens,” he said. “I think the technology is maturing to the point where there is no big product coming to boost interest and get people into stores.” Child does expect big-screen TVs, projection TVs, and RCA’s Digital Satellite System (DSS) to continue to be big sellers through 1996. However, most retailers cited the Super Bowl and the Summer Olympic Games, which run from July 19 to August 4, as excellent draws for big-screen sales. “Our big-screen business is just outstanding,” said Milton Rosenberg, president of the eight-store Bernie’s TV And Appliance chain, which has six stores in Connecticut and two in Massachusetts. “We’re optimistic about big-screens in ’96.”
Ivan Steinberg, president of Steinberg’s, the 16-store Cincinnati chain, agreed, and said that January is always a strong month for big-screen sales. “There’s no doubt in my mind, with Super Bowl Sunday coming, that big-screen TVs will continue to be big in ’96,” he added. Some retailers predicted that 1996 will be marked by more careful inventory selection to maximize turns. “In an erratic economy, I think you’re going to see dealers getting very careful about model selection,” said Roger Heuberger, executive director of the Progressive Retailers Organization (PRO Group). “They will be looking for product that offers protective distribution and shelter.”
Jay Lebowitz, president of buying group Intercounty Appliances, said that “competition is going to get keener in ’96, and dealers are going to get more selective about what they buy.” Other retailers said they are concerned that the credit woes that kept many Americans away from shopping in 1995 will continue through next year, a key problem for the countless dealers who use 0% financing and full-year delayed payment schedules to entice consumers into stores. “This business has been done with credit promotions all over the country,” said Elly Valas, executive director of NARDA. “There are some real questions about what’s going to happen in 1996 and 1997.”
Noah Herschman, marketing director for Tweeter, etc., the 19-store chain in Massachusetts, said there is definitely concern about how much money American shoppers will be willing to shell out next year. “We hope ’96 will be a good year, but the economy is kind of funny,” Herschman said. “My prediction is that credit card debt may finally catch up with people next year. When all of a sudden no one wants to use their credit card, that could be a big problem.”
But Cebuhar of Sears said the electronics industry may still fare well next year, even if people decide to stay home more and “cocoon” to avoid running up their credit card bills. “Electronics has always been somewhat insulated from credit woes,” he said. “If people decide to pull in their horns, that doesn’t mean they won’t buy electronics. If they cut back, they typically stay home, and then they want a better TV.” Saul Gold, executive director of NATM, said he is also optimistic about 1996, despite a very competitive retail climate this year. “In election years, the economy always tends to pick up,” Gold said. “So, we’re hoping for the best.”