Matching last year’s record fourth-quarter sales performance will be no mean feat, but retailers are confident that they’ll do just that during the first holiday selling season of the 21st century.
Despite a somewhat tamer economy, merchants said that a wider and more affordable slew of digital devices led by wireless products, camcorders and mobile video will likely send shoppers flocking to CE counters in droves. Also driving holiday sales to near record levels will be the expected advent of the $99 DVD player, while price points in the low $2,000 range for HD-ready TVs are certain to make this a big-screen Christmas, retailers predict.
But business won’t all be gravy this holiday season. Despite their added ammunition, dealers say they will have to work harder and smarter to make their fourth-quarter numbers, while possible Grinches could include chip-related product shortages and tight supplies of HDTVs.
To counter those inevitable bumps on the yule log, merchants are taking special pains to get their forecasts in to manufacturers early and accurately, and are hedging their HDTV bets by sourcing from multiple suppliers. Besides, as Best Buy points out, consumer electronics is the third most popular gift category according to the International Mass Retailers Association (IMRA), and this Christmas, more than others, there’ll be plenty of items to choose from.
“The list of new products for inclusion in our holiday ads this year is far more extensive than past years, with most falling under the title of digital,” said Jeff Maynard, Best Buy’s VP of marketing services. “When you look at the list of what we have to entice customers [see story, below], including things that just never existed for us before, plus the new markets we’re entering like New York, Seattle and Portland, you’ve got to think it’s going to be a great season.”
Ultimate Electronics president Dave Workman is also predicting “a pretty strong Christmas,” albeit for those who are “strong in digital and can differentiate from the discounters. It’s going to be one of those years where if you play your game, [sales are] there to be had.”
On the product front, the story is a “total continuation of what’s been driving the business over the last 12 to 18 months,” Workman said, with HD-ready TV topping the list. “We were up 400 percent in the first quarter in HD, and it’ll be our No. 1 growth area for the fall and fourth quarter.”
Although Sony’s announced HD delay “puts a little cold water on it,” Ultimate will fill the void with units from Hitachi and Mitsubishi, he said.
Workman added that there are also tremendous opportunities in HD satellite boxes (“if manufacturers can get their act together”) and noted that digital camcorders “continue to perform exceptionally well.” He also cited the “old tried-and-true” DVD player, whose plummeting prices can be shored up with high-end progressive-scan units and recordable models, assuming they’re available by the fourth quarter.
At Crutchfield, senior VP of merchandising Dan Hodgson said the catalog and online merchant has been aiming at 15 percent growth this year, and that consumer confidence aside, that’s a “reasonable expectation” for fourth-quarter gains.
“The CE business is well positioned,” he argued. “Consumers are adopting new technologies, and digital TVs are spurring sales of Dolby digital receivers and speakers. There’s such a tidal wave influencing the home side, I don’t see anything slowing that down barring a total economic collapse — and I don’t see that happening.”
On the automotive side of the business, MP3 is clearly the shining star, Hodgson observed. “The incredible level of interest in MP3 is amazing. Almost overnight, without the participation of the CE industry, the market has established it as a standard, and demand has been remarkable.”
Unfortunately, the phenomenon has caught manufacturers off guard, and opportunities are being lost due to lack of product, he said. “Manufacturers need to respond. They haven’t figured out what this thing is and how to take advantage of it.”
For Good Guys, “all things digital” will top its customers’ wish lists, said merchandising VP Cathy Stauffer. “There’s a huge appetite for anything new and affordable, and for things that are smaller and sleeker.” Among her top picks for the fourth quarter are wireless phones, MP3 and MiniDisc players, Palm-type PDAs and other Internet devices, and of course, HDTV, whether available with recordable disc drives and Web access, or not.
“You’re going to see more products that do multiple things, or make things easy or convenient for people,” Stauffer said. “Home theater in a box with DVD, for example, is a great solution.”
Another “hot category” for Good Guys is mobile, she said, where the chain has made a “concerted effort” to bolster its stable of brands, particularly in video and navigation.
Tweeter Home Entertainment Group is also “very bullish” on the fourth quarter, with anticipated comp-store sales up in the high single digits, said merchandising and purchasing VP Bernie Sapienza. Leading the charge for the growing national chain are “a plethora of DVD products and an HD-compatible entry point down in the low $2,000 range,” he said. “DVD and big-screen TV — that alone will do it. The rest is drag-along business.”
Like its peers, Tweeter is also high on mobile electronics. “The business is great,” Sapienza said. “We anticipated the arrival of video boxes for cars long before anyone else, and that’s paying off with significant gains in our 12-volt business. It’s no longer car stereo, it’s multimedia.”
His only gripe: shortages, whether in MP3 options or supplies of camcorders. “We saw camcorders dry up pretty good over Father’s Day,” Sapienza said. “Sony said supplies should be better by Christmas, and we don’t anticipate it to be as bad, because chip makers will have had a year to ramp up.”
And although Tweeter has experienced spot shortages in HDTVs from Sony and Toshiba, the retailer “hasn’t felt the same kind of pain” on the category’s specialty side, owing to its close relationship with Mitsubishi. “We were supporters from day one, and were well-positioned to be the benefactors of their technological advances,” he said.
Buying groups are also predicting a robust Christmas. At AVB, executive director Bob Lawrence said “anything DVD-related” will find favor with consumers, and that as opposed to fourth-quarter 1999, “there should be enough product to go around.”
Not surprisingly, Lawrence said that HDTV should also be a strong performer, provided the economy continues to hold up. “If that’s the case, people will be more inclined to say `Let’s get the family an HDTV set for Christmas,’ ” he said. Similarly, major appliances that “speed up cooking times or dress up the kitchen” will also be popular, again assuming the economy remains on track.
“The first quarter was good, April and May were tough, and June’s coming back,” Lawrence said. “If things continue as they are, this Christmas will be as good as last.”
At a MARTA meeting in Scottsdale, Ariz., last month, retailers said they expected consumer interest in projection TVs, HD-ready and HDTVs to continue into the second half. But many members voiced concern over shortages in these products, which are making it hard for them to fulfill customer demand.
Tom O’Shaughnessy, district sales manager at Zenith, said the decreased price points on such items are making them more attractive to a larger group of consumers. “The bottom line is everyone will have high-definition televisions in the future — we’re just starting out,” he said.