Armed with sufficient supplies of flat-panel and microdisplay TVs, and plenty of HD content to drive them, leading CE retailers are confident of glad tidings in the fourth quarter.
CompUSA’s CEO Larry Mondry, for one, is taking solace in the resiliency that consumers have demonstrated during the first half of the year, and sees no reason why spending should abate during the latter half.
One challenge retailers will face, however, is the cost and availability of advertising media, he predicted, due to the inordinate amount of spending surrounding the presidential election and Summer Olympics. “It means that there will potentially be less quality media to go around at reasonable prices, and retailers will have to re-examine their advertising practices. It could have a big impact on all of us.”
Topping Mondry’s wish list, though, is a show of rational pricing by CE retailers. “Although I’ve never seen it happen in my 30 years in retail, I’d like to think that retailers could be rational. It’s bound to happen someday. Then we can all be successful, which would be much healthier for the industry.”
Dave Workman, president/CEO of Ultimate Electronics, believes that the presidential election bodes well for conspicuous CE consumption. “Consumer sentiment stays pretty high in a presidential election year because the incumbent reinforces good news, which makes people feel better about opening their wallets,” he said.
Also in CE retailers’ favor are the Summer Olympics, falls sports and the greater availability of HD programming. “Demand for HDTV is going to be very strong,” Workman predicted, although he also anticipates “some pretty frisky pricing for flat-panel displays as capacity finally exceeds demand.” Ultimate hopes to offset the price declines through product mix and the use of “more natural step points,” as well as the “wild card” that is the integrated HD tuner, which can add hundreds of dollars to the price of a TV.
Philo Pappas, senior VP/merchandising for Tweeter Home Entertainment Group, says his chain is “cautiously optimistic” about the fourth quarter. “Business has really started to improve over the last thirty days, and we think it will continue as we head into the fall.” Like his peers, Pappas cited the Summer Olympics and the start of the football season “as an opportunity to really sell the latest high-definition video.”
Pappas acknowledged that external factors like high fuel costs and the transition in Iraq could make consumers somewhat cautious, “but Christmas always comes. If you offer the right products and stay with the hottest trends, you’ll be OK.”
Warren Mann, executive director of the 100-plus dealer MARTA Cooperative of America, is more guarded in his outlook. “The whole year has been up and down, as if the consumer has been following the vagaries of current events,” he observed, suggesting that the seesaw sales pattern will continue. “The biggest hurdle is getting people to go out and buy something.”
The view is somewhat different for D&H Distributing, where CE sales are growing at better than 50 percent over last year, helping to push the business over the billion dollar mark. Dan Schwab, VP/marketing, attributes the growth in part to the digital convergence category, and “hot” products like large-screen LCD TVs (26-inches and up) and VCR/DVD recorder combos.
“I think that this will be the most positive second half of business that we have seen in years,” Schwab said.
By contrast, Frank Sadowski, VP of consumer electronics for Amazon.com, foresees a “real mixed bag” for the industry, which he says has entered an “unsettled, transitional phase,” thanks to a plethora of new brands and new pricing lows.
“Dramatic growth in several categories is offset by dramatic declines in others, so I don’t see any big, dynamic growth overall,” he said.