Merchants Are Forecasting Christmas Chill From Consumers



CE and appliance merchants are forecasting a cold shoulder from consumers this holiday season.

Retail executives believe the industry’s current doldrums, which exceed even last summer’s unprecedented slowdown, could continue into the all-important holiday selling period, triggering drastic price promotions.

Compounding the problem, they say, is a dearth of new high-tech lures as shoppers gravitate to low-margin tablets and smartphones and remain largely indifferent to 3D and connected TV.

“My best guess is that where we are today will carry through to the fourth quarter, and right now we’re in a very tough market,” observed Bill Trawick, president and executive director of the NATM Buying Corp., whose members include the country’s largest big-box regional chains.

For some NATM dealers, business conditions are more challenging now than in the past three years. “They thought they had hit bottom, but it’s even tougher now,” he said, although there are also signs of resurgence in some markets where the recession started earlier.

Whether the industry can shake off its malaise before Christmas depends on many variables, including resolving the debt-ceiling issue, Trawick said. But even a brighter economic outlook won’t bring new technologies to the fore by the fourth quarter. As it stands, mobile devices including smartphones and tablets , and all things Apple, will continue to generate traffic and sales for the holidays, he predicted. TV, however, has been relegated once again to a replacement business, with a possible “bump” in 3D and smart models as prices continue to decline.

Like Trawick, D&H Distributing senior sales VP Jeff Davis said the fate of the fourth quarter rests with macroeconomic forces. “We’re optimistic, but also hoping for better economic conditions and improved employment to help the shopping season. If the housing market continues to improve, unemployment goes down, and innovative products continue to infuse the marketplace, then the consumer will come out to make purchases.”

Topping holiday shopping lists will be tablet computers, which “most sources agree will be the hottest category,” Davis said. D&H also has high expectations for thin and light notebooks, all-in-one desktops, LED monitors and storage, and anticipates “more demand for smart LED TV with built-in apps, social networking, and downloadable content and searching.”

In contrast, demand for 3DTV remains tepid, he said. “There is some momentum but it has yet to gain traction.”

Adding to TV’s woes is a shortage of 50-inch and larger panels, reported Bob Lawrence, CEO of the BrandSource buying group. “Big screens are moving when we can get a steady supply, but we’re having trouble getting inventory,” he said. Lawrence believes vendors are ratcheting back production and diverting available inventory to other, more profitable markets overseas.

Supply issues aside, consumer sentiment remains low and Lawrence doesn’t foresee any significant pickup until the housing and unemployment numbers improve. As a result, “Business right now is tougher than I’ve ever seen it in my career — and I’ve been in the industry since 1978,” he said. “But those members that are promoting are getting their fair share.”

Rick Bellows, president of the MEGA Group USA buying organization, agreed that promotions are critical for driving business, both now and during the holidays.

“Everybody has cut back on their forecasts,” he said, with MEGA’s own holiday projections in the range of flat to negative 2 percent, which still exceeds industry averages. “But those who stay aggressive and continue to market are getting whatever business is out there to get. When you put deals out there the consumer will step up.”

Dealers will get plenty of assistance from panicky manufacturers in crafting holiday promotions, although this year vendors will attempt to rein back the Black Friday period from three to four weeks to three to four days. “They don’t want to get caught in another monthlong window,” Bellows said.

But not all share in the downbeat outlook. Paul Ryder, CE VP at

, believes “customer interest and demand will continue to be strong through the balance of the year” (see TWICE, July 5), while Walmart home entertainment senior VP Gary Severson predicted that the second half, though competitive, “will get a little better.” [See TWICE, June 6.]

Staples’ retail president Demos Parneros is similarly up on CE in general, and tablets in particular. The No. 1 office-supply chain expects to have eight to 10 tablet and e-reader models in stores by Christmas, he told analysts last month, including devices from Hewlett-Packard and HTC that will join Staples’ current assortment of Kindles, Nooks and Motorola Xooms.

Customer reaction and adoption has been good, he noted. “It’s a really good business right now,” he said of e-books, while tablets “work well” and are generating “a lot of demand.”

Parneros said Staples will also “double down” on Monster’s Beats line of premium headphones following a successful 2010 holiday launch.

Also optimistic about Q4 is Jeannette Howe, executive director of Specialty Electronics Nationwide (SEN), the A/V, integration and custom installation division of the Nationwide Marketing Group. “Americans love Christmas and we’ve always had one, even in the recession,” she said.

While business remains inconsistent, Howe anticipates 3 percent growth for SEN members this holiday season on top of last year’s comparable gains, based on growing demand for larger screen TVs and a resurgence of audio separates. “If those trends continue it will be a pretty good year for us,” she said.

Howe believes that the current slowgrowth environment is the new norm for the industry, and that dealers who cut costs and run lean can continue to glean incremental sales. She is also enthusiastic about the introduction of smart appliances in 2012, which will boost sales for majap dealers and system integrators, and make the kitchen the new center of technology in the home.

Richard Glikes, executive director of Home Technology Specialists of America (HTSA), the custom installation, system integration and A/V specialty buying group, also believes that Santa will smile upon the industry come Christmas. “The holidays will be good and will start sooner,” he predicted. “Americans love to spend money, and there’s a lot of pent-up demand.”

Glikes said naysayers have short memories, and that all summers are very slow. “It doesn’t get started until football season, assuming we have one this year.” But regardless of whether NFL owners and players can reach an accord, consumer confidence levels and attitudes will improve and traffic will return following the summertime distractions of vacations and barbeques, he said.

HTSA members are additionally sheltered by an upscale clientele that “isn’t concerned by housing values or the price of fuel,” he said. “They tend to pamper themselves more in hard times … we can use more of them.”

Glikes agreed that “there’s not a lot of new, exciting stuff” to drive the holiday season, but believes select categories will be hot, including tablets for whole-home control; distributed sound and look-alike Sonos products; and the full spectrum of audio, including headphones, loudspeakers and even turntables, whose growth he described as “astounding.

“There’s a new fever around music, and audio is very promising,” he said.

Short of that, manufacturers will also “push harder” on Black Friday by working on container deals that will deliver 42-inch TVs for $399. “Fuzzy TV at a cheap price will be there, and it will drive traffic,” Glikes said.


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