Dealers Dreaming Of A Digital Christmas - Twice

Dealers Dreaming Of A Digital Christmas

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With memories of the thermometer-busting July Fourth weekend still fresh, TWICE is turning its attention to another, albeit frostier, seasonal holiday: Christmas.

Aside from welcomed notions of winter wonderlands, we raise the subject because the holiday selling season is also very much on the minds of consumer electronics retailers.

Indeed, dealers are already laying the groundwork for the make-it-or-break-it fourth quarter by planning their assortment strategies and making educated guesses about consumer demand, product availability, and even Federal Reserve interest rate hikes.

So after factoring in all the variables, what do their crystal balls reveal? According to the nation's largest and less-than-largest CE merchants, Santa will be very busy come December 24, and his sleigh will be overflowing with all manner of digital goodies.

"We expect it to be a digital holiday season," said Best Buy spokesperson Laurie Bauer, who echoed the belief of most merchants that consumers will be clamoring for digital cameras, camcorders, TVs, DVDs, audio CD-Rs and cellphones as Christmas approaches.

Also high on shoppers' wish lists, retailers believe, will be DBS systems, notably those from DirecTv, as well as home theater components, mobile audio and video products and even interactive toys -- a category of particular importance to RadioShack and CompUSA.

Though dealers were reluctant to make financial forecasts for the calendar-year fourth quarter, they conceded that the anticipated level of digital gift giving bodes well for retail coffers. So assuming Santa's helpers work overtime to avoid the DVD shortages of last year, and barring a stock market meltdown, mass Y2K hysteria, an asteroid impact or other unforeseen calamity, retailers are confident that Christmas 1999 will close out the century with a bang.

What follows are the respective comments of retailers contacted by TWICE:

Best Buy: "We expect it to be a digital holiday season, with DVD players, digital camcorders, digital cameras, digital cellphones and digital TVs topping many wish lists for the holidays," predicted Laurie Bauer, a spokeswoman for the largest CE retailer in the land.

What makes digital products so special? Aside from their superior performance characteristics, their attractive pricing will also lure consumers. "The decreasing price of DVD players, digital cameras and televisions will make those products attractive to holiday shoppers," Bauer said. Also adding to the exodus of DVDs from store shelves will be the increased number of movie titles that will be available.

CompUSA: While the nation's number three CE retailer is also bullish on digital, the electronics chain is placing a big bet on interactive toys. As part of the company's strategic overhaul, which emphasizes a revamped product mix, the category is expected to be "very big this Christmas" for both kids and CompUSA, said spokeswoman Suzanne Shelton.

"It's an emerging category aimed at younger children," she explained. "Focus groups found that early adopters shop our stores, and we'd prefer that they buy their kids these products -- manufactured by Mattel and others -- from us, rather than a Toys `R' Us."

Meanwhile, back at the digital camp, that class of products "will continue to surge" come Christmas, Shelton predicted, led by digital cameras, digital camcorders and digital editing equipment that allows for editing output. Digital assistants will also remain popular items for the holidays.

Douglas TV, The Big Screen Store: Given the name of this five-unit independent based in the metropolitan Chicago area, it should come as no surprise that CEO Greg Kritz has high hopes for brisk holiday sales of digital and high-definition TVs.

"Sales of digital TVs versus analog models have gone up every month as a percentage of total sales," he reported. Fanning the digital TV fires are live-signal HDTV presentations in each Douglas store, as well as the start of digital broadcasts in Chicago last month. That event resulted in an immediate sales blip, Kritz said, adding that while models with aspect ratios of 6:9 are selling, the 4:3 units still constitute the bulk of his sales.

Also helping to build category momentum for the holidays is the expected rollout this fall of second-generation set-top boxes by Mitsubishi and Toshiba, which are HD-ready, DirecTv compatible and, at $649 to $849, less than half the current price. "A customer thinking about getting a satellite system might upgrade to these new set-top boxes in order to have both capabilities," he said.

Beyond television, Kritz also has great expectations for DVD players this Christmas, as well as for portable DVDs, which he describes as a "good gift item." His only caveat: availability. "We did extremely well with DVD last year and availability is getting better, but it's still not enough. We still have some back-order situations on some models."

The Good Guys: Although the West Coast specialty chain is in transition mode as founder Ronald Unkefer retakes the chairman's office, marketing VP Brad Bramy is confident that digital devices, particularly DVD and HDTV, as well as higher-end receivers and home theater products, will lead the holiday sales pack.

"Digital products are an exciting new category and they're generating a lot of interest," he said. DVD in particular is the retailer's fastest-growing category, Bramy reported, and The Good Guys remains cautiously optimistic that player shortages won't put a crimp in Santa's style for a second consecutive year. "There was an incredible demand last Christmas, and we assume that manufacturers don't want a repeat of what happened then."

The Pacific powerhouse is also pinning its Yuletide plans on HDTV, "which has been picking up since it was introduced last year," Bramy continued. "We are selling a pretty good amount of it, and the new fall programming, more of which is broadcast in high-definition, will generate more interest from the public."

"DirecTv is also introducing more high-definition programming," he added, "and those two factors will spike greater interest in HDTV."

RadioShack: The fourth-biggest purveyor of consumer electronics predicts that computers, DVD, satellite systems and wireless phones will be weighing down Santa's sleigh when Christmas rolls around.

"We're very bullish about the balance of the year," said senior VP Richard Borinstein. In computers, growing interest in the Internet, combined with the recent rash of rebates will "accelerate the pace of sales" and offset declining prices, he said.

As for audio/video, the demise of Divx will further propel DVD players, Borinstein said, while sales of DBS systems "will absolutely continue to grow at the same record pace as the first half."

Also setting a record pace "every month with just unbelievable numbers" is the wireless category, which he describes as a great Christmas gift. "We don't see it slowing down," he said, owing to the number of households seeking multiple wireless phones, the availability of lower cost plans, and the safety and convenience factors.

RadioShack will also do a booming Yuletide business in what Borinstein describes as "niche areas," including affordable specialty gifts such as wireless speakers, headsets for cordless phones, indoor/outdoor barometers, digital cooking thermometers and tire gauges, talking picture frames, and the popular Golf Scope, a miniature telescope that measures distance.

Also high on the retailer's holiday agenda is electronic toys, including handheld games, science kits, children's laptops, casino games and a "neat twist in radio control toys" -- as yet unveiled -- "that will capture the hearts and minds of America," he said.

The stores will also be stocking more batteries, flashlights and solar-powered or hand-cranked portable radios for those with Y2K concerns.

Of little concern to Borinstein are product shortages, even those within the satellite sector that have dogged the 7,000-unit retailer. Although he believes satellite shortages will be "behind us for the fall," thanks to a new RCA production line, he describes shortages as "a good thing. I hope I run short. That would mean a very merry Christmas."

Tweeter Home Entertainment Group: The rapidly expanding CE chain, which extended its reach coast-to-coast following last month's purchase of Dow Stereo/Video in San Diego, foresees big numbers across the board for Christmas, said spokeswoman Anne Marie Boucher.

Among the categories leading the charge for Tweeter and its Bryn Mawr, Hi-Fi Buys, Home Entertainment and Dow subsidiaries will be mobile electronics. "CD players are hot again, although people are moving toward double-DIN because the larger faceplate can accommodate more CDs and you don't need a changer in the back," she said.

Also expected to be "huge" for the retailer is mobile video, including DVD players, LCD monitors, "and the speakers that go with that." The category currently represents about 5% of Tweeter's total mobile business, Boucher said, "and we would like to see that double to 10% during the fourth quarter."

In audio fare, Dolby Digital Surround Sound receivers will be big holiday items, she predicted, owing to an extended assortment as pricing drops on entry-level models and top-tier units maintain their original price points. But they'll have to share space beneath the Christmas tree with portable compact disk recorders and speakers, sales of which were rejuvenated by surround sound demand.

Within the video realm, Boucher cited the usual suspects: "Obviously digital TV, DVD players, digital camcorders and DirecTv."

Ultimate Electronics: "There's going to be a real strong trend for anything with the word `digital' in it," observed president David Workman. "The consumer has really grasped the concept of digital and its product evolution in cameras, camcorders, televisions and other categories. It's hot with the consumer."

Specifically, Ultimate anticipates glad tidings for DVD players and big-screen TVs. "DVD is just going to be off the charts this Christmas. It will be incredible. Big-screen TV is also doing very well, and we will continue to see good momentum for that category through the holidays."

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