NEW YORK —
Santa’s bag was decidedly mixed for consumer electronics retailers this past holiday season.
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.”