Consumers took the old holiday favorite to heart this past month and stayed home for Christmas, according to leading retailers assembled for TWICE's annual retail roundtable at CES.
In a postmortem of the holiday selling season moderated by TWICE senior editor Alan Wolf, dealers pointed to price compression and the proliferation of low-priced off-brands from China as the biggest threats to their bottom lines.
Meanwhile, external woes such as the looming specter of war in Iraq and the uncertain economy constricted consumers' wallets, squeezing the top line as well.
"I was absolutely floored by the lack of traffic at malls," said Tweeter's president and CEO Jeff Stone.
"As far as Christmas went, the consumer won with low priced products and manufacturers won with high volumes," said Tom Edwards, senior analyst, NPD Group. "But those prices came out of retail margins."
"It's a retailer's worst nightmare" to see shopping carts filled with commodity products, Ray Brown, VP/general manager, Sears, said.
H.H. Gregg's CEO Jerry Throgmartin agreed. "The introduction of hot new products hasn't caught up to the [commodity] cycle, and in that market, Walgreens and Wal-Mart will play a much larger role."
At the other end of the pricing spectrum, Good Guys' renewed focus on high-end, better margin goods has led it to what will likely be its first profitable year in recent memory. "I know our name came up when people speculated who from last year's roundtable wouldn't be around this year," said Ken Weller, president/CEO, Good Guys. "Well, I'm happy to report we're still here."
Another trend highlighted by the panel was the sagging market for middle tier products. "The very low and the very high did well but there was a vacuum in the middle," said Rick Souder, VP and general merchandise manager, Circuit City.
Bob Lawrence, executive director, AVB/BrandSource, also saw an increase in package sales to the detriment of single unit sales. "We lost a lot of single unit DVD sales to supermarkets" and other low-price vendors, Lawrence said.
Audio was particularly hard hit last year thanks in part to a dearth of excitement in the category, said Dave Workman, president/COO, Ultimate Electronics.
Amazon.com VP Frank Sadowski noted that "home audio as we know it is dead." A combination in the change of consumer listening habits and the preponderance of home-theater-in-a-box systems have decreased consumer interest in high-end home audio.
E-commerce looked to be a winner in 2002 for both pure play e-tailers like Amazon and click-and-mortar dealers like Best Buy. "Our dot-com traffic tripled and we saw a much better [synergy] between our online business and in-store business," said Mike Linton, executive VP, Best Buy.
As for the year ahead, forecasts were hedged. "I think 2003 will be a grind-it-out kind of year," predicted Dave Edmondson, president/COO, RadioShack.
Complete roundtable coverage will appear in the Feb. 24 issue of TWICE.