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CE Holiday Sales Soft, Dealers Point To TVs


Santa’s bag was decidedly mixed
for consumer electronics retailers this past holiday

Despite a better than 3 percent increase in total retail
sales and rabid demand for smartphones, tablets
and e-readers, tracking surveys and dealer accounts
pointed to soft performance for the CE sector overall.

According to The NPD Group, CE sales within the
brick-and-mortar channel fell 4 percent to $15 billion
during the holiday season, while
MasterCard Advisors’ broader SpendingPulse report
showed a tepid 1.2 percent increase in electronics.

CE “was one of the lagging performers” compared
to other consumer product sectors, MasterCard
said, attributable to steep declines in TV pricing.

But holiday results varied widely, from the single-digit
comp-store declines posted by Best Buy, hhgregg
and national discount chains, to
the solid seasonal business reported by some regional
dealers, including Abt Electronics and Nebraska Furniture Mart. “It was the most mixed
year I’ve seen for the industry,” observed
Abt president Mike Abt.

Most dealers said the root cause of
soft CE sales was lower prices and
slackened demand for TV, which remains
the cornerstone of CE retailing.
As Mike Decker, merchandising senior
VP for the Nationwide Marketing Group
noted, average selling prices (ASPs) for
TVs fell 24 percent last year over 2009,
and slipped 7 percent during the holiday
season alone.

As a result, $499 became the new
“sweet spot” for 40-inch to 42-inch
LCD, while mass merchants and e-tailers
helped lead 32-inch TVs below $400. “It
was hard to compete with the lead opening
price points out there,” Decker said.

Holiday traffic would have needed to
rise 15 percent to 20 percent year over
year to outpace the ASP declines, said
ProSource’s Dave Workman, executive
director/COO of the Progressive Retailers
Organization (PRO Group). “The
nature of the CE business is the everincreasing
burden of additional traffic,”
he said, particularly for a mature category
like TV, where demand, even for
innovations like 3D and IP connectivity,
was disappointing. Adding to that, aggressive
pricing by Walmart and Target
“sucked a lot of units out of the market.”

PRO dealers compensated in car A/V
— led by category leaders like Car Toys,
Crutchfield and Sixth Avenue Electronics
— and in audio, which was up 9 percent
for the buying group last year on strength
in sound bars, HDMI 1.4 A/V receivers,
iPod docks and wireless multi-room
sound systems, as exemplified by Sonos.

As a result, “it was a reasonably good
holiday season for retailers,” Workman
said, “but spotty.”

At Nationwide, dealers kicked off the
holiday season with aggressive Black
Friday promotions that generated strong
traffic and unit sales but flat to slightly lower
dollar volume. Members offset margin
erosion by stepping up customers to 52-
inch and larger displays, and by attaching
extended warranties, HDMI cables, Bluray
Disc players and HTiBs to sales.

“Very few customers walked,” Decker
said, and Christmastime ads and directmail
campaigns helped prod holiday business
to slightly above last year’s levels.

Like Abt, Nebraska Furniture Mart exceeded
industry averages, particularly in
TV, where holiday sales were up by the
double digits. “We anticipated that cameras
and computers would be robust, but we
were very, very pleased — and a little surprised
— by TV,” said Mark Shaw, divisional
merchandise manager for electronics.

Nebraska saw strength in entry-level
1080p plasma, LCD and LED as well as
step-up 3D models, the latter boosted
by bundles and other pass-through offers
from manufacturers, as well as aggressive
marketing. “3D really spiked,”
Shaw said, although his biggest hit of
the holidays was Blu-ray, as player prices
fell to the $99-$149 range from last
year’s $199-$299 price points.

As for Abt Electronics, respectable
sales of better TVs were complemented
by audio, gaming and all things Apple,
including iPods, iPhones and iPads. Indeed,
tablets have become “a new industry”
unto themselves, Mike Abt said,
as covers and other accessories, and
programming for whole-home control
applications, have taken off.

Looking ahead to the New Year, Nationwide’s
Decker hopes that more modest
TV price erosion, in the 2 percent to
5 percent range, will help buoy members’
bottom lines, while Sony Electronics
executive VP and chief marketing officer
Mike Fasulo is cautiously optimistic
that growing consumer confidence will
lead to improved industry sales in 2011.

“We’re not out of the woods,” he said,
“but the industry was stronger last year
than in 2009, and I believe this year will
be stronger than 2010.”