NEW YORK – Holiday 2012 was a mixed bag for CE retailers, who battled storms, fiscal concerns and a national tragedy on top of their own industry challenges.
Despite a rosy report from the Consumer Electronics Association (CEA), which found consumer expectations about technology spending at an all-time high in December, weakness in TV put a damper on dealer sales.
“The TV category was tough and hurt most people,” observed Bill Trawick, president and executive director of the NATM Buying Corp. On the plus side, margins mostly held on 50-inch and larger displays thanks to greater pricing discipline by manufacturers and retailers, and the season was short on bundles and other profit-draining promotions of past holiday periods, he noted.
What’s more, major appliances continued to outperform for NATM’s big-box dealers, continuing a winning streak from Black Friday, while members who carry furniture, bedding and tablets said strong sales in those categories, and to a lesser extent digital imaging, helped offset softness in TV.
For Warren Chaiken, president/COO of national CE and appliance distributor Almo Corp., holiday sales held steady following an initial Thanksgiving surge. “Black Friday and Cyber Monday were stronger for us than they’ve ever been,” he said, “but then we waited for that second holiday rush that never came.”
Despite the altered shopping patterns, holiday business was up for the distributor, particularly online, and Chaiken said he was very pleased with the company’s operational execution.
Tom Campbell, corporate director of West Coast specialty chain Video and Audio Center, acknowledged that the holiday period was challenging for all retailers, but said his company charted a successful course by eschewing low-end loss leaders and aggressively pricing mid- to higher-end merchandise, like Sony’s 20.2MP Cyber-shot digital camera, which retailed for $580.
“Manufacturers are starting to realize that it’s not how low you can go, that there’s a market out there for mid-priced to higher-end products,” Campbell said, adding that the strategy could be a panacea for the CE industry.
Video and Audio Center also enjoyed a very strong post-holiday business, fueled by an end-of-the-year inventory sale that began Dec. 26 with 8:00 a.m. store openings and was heralded in double-truck newspaper ads.
Like NATM’s dealers, the chain also benefitted by diversifying its assortment, in this instance with new digital technologies like Google TV. “Consumer acceptance of new technologies is like never before,” observed co-owner Joseph Akhtarzad. “It’s become a digital universe and no longer just A/V.”
CEA’s research confirmed the appeal of tech devices over the holiday period. “Technology products are the most wanted gifts this holiday season, and we’ve seen a tremendous amount of activity,” said Shawn DuBravac, CEA’s chief economist and senior director of research. “Consumers are increasingly dedicating a significant portion of their overall gift budgets to electronics, which has crowded out other categories for holiday gift spending.”
Still, CE gained a larger share of a shrinking overall basket according to most holiday assessments. MasterCard Advisors, the financial firm’s professional services arm, said in-store and online sales of CE, apparel, jewelry and luxury goods across all payment forms edged up just 0.7 percent year over year for the eight weeks ended Dec. 24, compared to 2 percent growth in 2011.
MasterCard’s SpendingPulse report jibed with late December tallies from ShopperTrak, which showed week-over-week declines of 2.5 percent in sales and 3.3 percent in foot traffic for the last full week before Christmas, and from the International Council of Shopping Centers (ICSC) and Goldman Sachs, which showed a scant week-over-week increase of 0.7 percent for the same period.
Analysts say holiday spending was blunted by a combination of factors, including Hurricane Sandy, the school shootings in Connecticut, concerns over the fiscal cliff, an overzealous Black Friday, a dearth of hit products, and an early winter storm that that swept much of the nation just days before Christmas.
“Consumers have been bombarded with distractions this holiday with Hurricane Sandy, the election, the tragedy in Newtown, and now during crunch time we enter the red zone with the fiscal cliff,” observed Marshall Cohen, the NPD Group’s chief industry expert.
Indeed, Walmart CEO Mike Duke, speaking before the Council on Foreign Relations in mid-December, said internal polls revealed that “15 percent of our customers are telling us this discussion about [the] fiscal cliff will affect what they spend on Christmas.”
To analyst Michael McNamara, global solutions leader for MasterCard SpendingPulse, the early impact of Sandy took much of the wind out of the holiday season. “You really did have two kinds of results, depending on the region -- one had a relatively negative season, while the other was more in line with the lower end of expectations,” he said. “But given that the Mid-Atlantic and Northeast regions account for about 24 percent of total U.S. retail, if those regions go negative, they definitely have an impact on the overall numbers.”
Even online sales were dampened, rising jut 8.4 percent to $48 billion for the eight weeks ended Dec. 24, MasterCard Advisors said. Market research firm ComScore pegged e-commerce sales growth at nearly twice that clip for the period of Nov. 1-Dec. 21, boosted by a 53-percent sales spike during the last five days of the period, although its estimated sales total was lower by $9.3 billion.
NPD’s Cohen added that retailers would have to provide a fiscal stimulus of their own to clear out post-Christmas inventory. “Look for retailers to offer up bigger discounts than we saw last year as the consumer fizzled out in the waning hours of holiday,” he said.
Indeed, on the morning of Dec. 26 retailers were already flooding the airwaves and cyberspace with steep post-holiday promotions, such as h.h.gregg’s four-day, 30-percent off sale, doorbuster deals by Video and Audio Center, and Staples’ in-store offer of 15-percent off everything shoppers can fit in a bag. Others, like Target, opened as early as 7 a.m. the day after Christmas to accommodate returns and encourage gift card recipients to cash in their presents.
Looking ahead to the balance of 2013, at least one national distributor, D&H Distributing, is hoping to repeat the double-digit growth it enjoyed last year in select mobility and home entertainment categories. Trends like Smart TV and streaming media are motivating consumers to upgrade or convert their existing equipment to accommodate content from online services like Netflix, Pandora, Vudu, and Hulu Plus, the company said, while Windows 8 will usher in a host of new Ultrabooks, all-in-one PCs and tablets this quarter. “We’re enthusiastic about the [new] year,” co-president Dan Schwab said.