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Distributors: Flat Panel Price Drops To Fuel Holiday Demand

Recently, distributors have become a more integral part of CE retailing, particularly for smaller dealers, as many major manufacturers have followed the trend and handed off much of their distribution to third parties.

While their increasing relevance within the industry appears to have provided a boost for the distribution business in general, the growth experienced by most distributors as of late has not come without its challenges. The fourth quarter of 2005 left many dealers missing out on sales from that season’s — and probably this quarter’s — hottest product category: flat panel TV. According to distributors queried by TWICE, there are mixed feelings about whether the industry has learned its lesson and appropriately planned ahead, or if the supply chain is actually in an oversupply situation this holiday season.

Either way, flat panels are expected to be at the top of consumers’ shopping lists once again according to our panel of distribution execs, and many expect demand to be amplified by falling prices and an influx of extra consumer cash in the wake of recently falling gas prices — an issue of concern for many a distributor at earlier points this year.

On the following pages, our virtual panel shares its insight on how the distributor channel has been doing so far this year and what its expectations are through the end of the fourth quarter, as well as predictions on what will be the hot categories in the upcoming holiday season and whether or not execs are anticipating any problems in the supply chain.

TWICE:What’s your outlook for the holiday selling season in terms of consumer demand and consumer confidence?

Rob Eby, director of purchasing, D&H Distributing: Demand looks very good through the end of the year. Displays, regardless of the vendor and technology, are in very good supply. Consumer confidence is back up, especially since gas prices have begun to ease. In fact, analysts are predicting a 5 percent increase in holiday spending over last year. Robust new video games and two new platforms, the Nintendo Wii and the PlayStation 3, will help drive sales.

Henry Chiarelli, senior VP, marketing and merchandising, DBL Distributing: We expect strong gains during the holiday selling season across most categories; however, we expect exceptionally strong performance within our core category of accessories as well as home theater, photo/video, personal/portable and satellite radio. These segments will likely lead the way in our year-over-year growth performance.

Most of the growth in these segments will be fueled by improved consumer demand and the increased knowledge and confidence in the products they are purchasing. It is relevant to note that consumer purchase trends indicate a desire to offset rising costs of travel and entertainment with alternate home-based activities that are favorable to consumer electronics. This trend will ring true with DBL’s base of independent retailers and online retailers that look to us to provide the most relevant products at the best prices.

Rob Kalman, VP/ U.S. marketing, SED International: We are hearing a lot of excitement about this holiday season. Pending price drops, especially in HDTVs, are expected to be significant enough to generate strong sales. New products just out or coming before the holidays in some of the relatively newer categories, such as MP4 players and GPS, have meaningful enhancements, both functional and cosmetic. It is shaping up to be a strong gadget holiday.

Fred Towns, senior VP, New Age Electronics: We’re very optimistic for this year’s holiday season. This will be a very advantageous time for consumers, as manufacturers are offering incredible savings on many high-demand items. Additionally, more consumers are utilizing the Web, and choosing retailers with “brick and click” offerings. Those retailers continue to see double-digit growth, which we expect to continue through the holidays.

Warren Chaiken, president/COO, Almo: With gas prices receding, we are less concerned than we were a few weeks ago. Demand for high-end panels remains strong, but we are starting to see over-capacity in a market that has been in somewhat short supply for a long time. This should be good for the consumer, but will make the fourth quarter tough on anyone holding inventory as prices may fall sharply.

Kevin Kelly, VP sales and marketing, Stampede: This holiday season sales will be robust. Aggressive promotional pricing on plasma and LCD television product will fuel this record-setting sales season. It is officially a flat panel holiday season.”

TWICE:Which products will be most in demand this quarter?

Bill Stewart, president, Petra: Flat panel sales continue to be off the charts because of the decrease in price. Today, you can pay $500 for a 32-inch flat panel; whereas, a couple years ago, you’d pay $3000 for the same TV. Holiday sales should be phenomenal in this category. We’ll also see a demand for categories such as satellite radio, GPS receivers and all of the accessories that go with those products. iPod accessories and digital cameras will remain at the top of the list as well. And, of course, we are keeping a close eye on the outcome of the format battle between HD-DVD and Blu-ray technology.

Eby: Some predictions: LCD panels, plasma displays, new DVD technologies, networking, GPS systems, and video gaming. Also, Microsoft is launching the new Zune MP3 platform, set for November. Zune has the advantage of being based on connectivity within a Zune “community,” where one user can act as DJ, sharing selections from his or her library with other Zune owners. Microsoft is hailing this as a milestone launch for its Connected Entertainment division, and D&H is one of its biggest distribution partners.

Towns: The biggest trends we’re seeing this year are in plasma televisions, notebooks, and digital still cameras. These products will all be huge this holiday season, especially as manufacturers continue to offer such incredible price points.

Chiarelli: Anything related to CE accessories; home theater (especially flat screens, in-wall speakers and mounts); photo/video (particularly cameras with new features, higher mega-pixels and much lower ASP’s); and personal and portable (including iPod and iPod-related accessories, MP3 players, pocket video, and satellite radio) will lead the way as hot segments. This will also be a big year for GPS navigation devices. We expect attachment selling at the retail level to drive hot complimentary accessory products.

Kalman: HDTV, GPS, MP3 and MP4, smart phones, external storage products (both flash memory and external hard drives) and notebook computers.

Kelly: LCDs and plasmas will be the hottest products for Q4.

Chaiken: Plasma and large panel LCD will continue to be hot.