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Prospects for Holiday CE Sales: ‘Most Dire Situation We’ve Seen’
CEA economists expect Q4 CE expenditures to grow only 3.5% this year versus last year -- poor for CE historically, but better than other consumer categories.
This is the "most dire situation we've seen," CEA economist Sean DuBravac said during the annual holiday forecast presented by the Consumer Electronics Association.
Total holiday expenditures – across all product categories – is expected to drop 14% from last year. "In the past, [consumers] planned to spend the same amount or more," DuBravac says.
Confidence among "Tech Insiders" is "the lowest point since we've been running this [poll] in four years," said co-presenter Tim Herbert.
The two CEA economists presented their annual holiday forecast during the CEA Industry Forum in Las Vegas.
The good news? The consumer electronics category appears to be doing better than other sectors.
Overall, CE expenditures should grow 3.5% this holiday season compared to 2007.
The growth largely will be driven by GPS and in-car video (30% growth from 2007) and mobile phones (11%).
Audio/video expenditures (including portable MP3 players and camcorders) are expected to grow almost 4% over this holiday season versus last. About half of that volume is expected to be in the flat panel category.
In what may be the understatement of the year, DuBravac notes, "Expect to see pressure on the average selling price."
While gift expenditures are expected to be down about 15% across the board, allocations to the CE category are up slightly. Last year, consumers spent 22% ($194) of their gift budget on CE products. This year, they plan to allocate 28% ($210) to CE.
The losers? In the next six months, consumers plan to eliminate sporting goods (31%) from their budget, followed by home décor (28%), vacations (26%), and CDs, DVDs and downloads (24%).
Only 20% of consumers surveyed expect to drop CE from their budgets. And an even smaller number – 11% -- plan to cut off their cable or satellite subscription.
"CE is lower on this list," says DuBravac. "I think this bodes well for the consumer electronics category."
Most adults want PCs or TVs for the holidays, but they're not going to get them, CEA believes.
Gift givers are much more likely to spring for video game systems, digital cameras and portable media players. Primarily because they simply cost less, Herbert explains.
TVs did break the top 10 list (at #7) of gifts that people expect to give this year. Last year, TV didn't make the cut at all.
Three product categories joined the top 10 gift list this year for the first time: tabletop/clock radios, boom boxes and external storage.
Pointing to the rise in popularity of MP3 players, Herbert says, "Once they own it, they want to take the music wherever they go. Most people use [portable music players] in the home more than out of the home."
For that reason, CEA believes that docking stations, boom boxes and other low-cost devices for playing digital content will be hot gift items this holiday season.
"As they look for areas to cut back," says DuBravac, "these new additions have very compelling price points as gifts."
More surprises? Some 8% of people plan to give the gift of home automation – more than home theater speakers, web cameras, DVRs and multimedia networking devices.
While Americans don't expect to give away too many TVs this holiday, the displays that they do intend to give, by and large, are high-def (85%). They are more apt to buy LCDs (63%) than plasmas (45%)
The No. 1 reason for giving a TV, according to CEA, is to replace a recipient's older TV. DuBravac believes that this motive might be a little self-serving, as children upgrade their parents' displays, giving the younger generation a more suitable way to entertain themselves during visits.
No. 3 on the list of reasons for giving a TV is to prepare the recipient for the digital transition.
By a fairly large margin, consumers say they'll base TV purchases on the quality of the video (89%). The No. 2 factor is sales and discounts (76%), followed by the store's return policy (63%).
Only 62% of buyers will consider the manufacturer's brand. Given that picture quality seems to be so important, does that mean consumers don't equate brand name with quality?
Some 53% of buyers expect to save money by selecting store brands.
"We're seeing things in financial markets that we've never seen before," DuBravac reminds us. "For the industry all is not lost. Certainly we're holding up better than other industries."
While online sales will continue its upward trend, more consumers this year (75%) will visit CE retailers than they did last year (69%).
That is due in no small part, however, to the fact that more retailers are carrying CE products.
It is unclear whether or not traditional A/V stores will see more traffic.
Perhaps the most dismal news in our business is that the No. 1 gift on the holiday wish list is peace/happiness, rising from the No. 2 slot in the previous two years.
Resellers would do well to remind consumers that multiple A/V systems in the home can in fact promote both peace and happiness.
Total holiday expenditures – across all product categories – is expected to drop 14% from last year. "In the past, [consumers] planned to spend the same amount or more," DuBravac says.
Confidence among "Tech Insiders" is "the lowest point since we've been running this [poll] in four years," said co-presenter Tim Herbert.
The two CEA economists presented their annual holiday forecast during the CEA Industry Forum in Las Vegas.
The good news? The consumer electronics category appears to be doing better than other sectors.
Overall, CE expenditures should grow 3.5% this holiday season compared to 2007.
The growth largely will be driven by GPS and in-car video (30% growth from 2007) and mobile phones (11%).
Audio/video expenditures (including portable MP3 players and camcorders) are expected to grow almost 4% over this holiday season versus last. About half of that volume is expected to be in the flat panel category.
In what may be the understatement of the year, DuBravac notes, "Expect to see pressure on the average selling price."
CE Tops Gift Lists
While gift expenditures are expected to be down about 15% across the board, allocations to the CE category are up slightly. Last year, consumers spent 22% ($194) of their gift budget on CE products. This year, they plan to allocate 28% ($210) to CE.
The losers? In the next six months, consumers plan to eliminate sporting goods (31%) from their budget, followed by home décor (28%), vacations (26%), and CDs, DVDs and downloads (24%).
Only 20% of consumers surveyed expect to drop CE from their budgets. And an even smaller number – 11% -- plan to cut off their cable or satellite subscription.
"CE is lower on this list," says DuBravac. "I think this bodes well for the consumer electronics category."
Some Surprise CE Categories
Most adults want PCs or TVs for the holidays, but they're not going to get them, CEA believes.
Gift givers are much more likely to spring for video game systems, digital cameras and portable media players. Primarily because they simply cost less, Herbert explains.
TVs did break the top 10 list (at #7) of gifts that people expect to give this year. Last year, TV didn't make the cut at all.
Three product categories joined the top 10 gift list this year for the first time: tabletop/clock radios, boom boxes and external storage.
Pointing to the rise in popularity of MP3 players, Herbert says, "Once they own it, they want to take the music wherever they go. Most people use [portable music players] in the home more than out of the home."
For that reason, CEA believes that docking stations, boom boxes and other low-cost devices for playing digital content will be hot gift items this holiday season.
"As they look for areas to cut back," says DuBravac, "these new additions have very compelling price points as gifts."
More surprises? Some 8% of people plan to give the gift of home automation – more than home theater speakers, web cameras, DVRs and multimedia networking devices.
TV Trends
While Americans don't expect to give away too many TVs this holiday, the displays that they do intend to give, by and large, are high-def (85%). They are more apt to buy LCDs (63%) than plasmas (45%)
The No. 1 reason for giving a TV, according to CEA, is to replace a recipient's older TV. DuBravac believes that this motive might be a little self-serving, as children upgrade their parents' displays, giving the younger generation a more suitable way to entertain themselves during visits.
No. 3 on the list of reasons for giving a TV is to prepare the recipient for the digital transition.
By a fairly large margin, consumers say they'll base TV purchases on the quality of the video (89%). The No. 2 factor is sales and discounts (76%), followed by the store's return policy (63%).
Only 62% of buyers will consider the manufacturer's brand. Given that picture quality seems to be so important, does that mean consumers don't equate brand name with quality?
Some 53% of buyers expect to save money by selecting store brands.
Hanging in There
"We're seeing things in financial markets that we've never seen before," DuBravac reminds us. "For the industry all is not lost. Certainly we're holding up better than other industries."
While online sales will continue its upward trend, more consumers this year (75%) will visit CE retailers than they did last year (69%).
That is due in no small part, however, to the fact that more retailers are carrying CE products.
It is unclear whether or not traditional A/V stores will see more traffic.
Perhaps the most dismal news in our business is that the No. 1 gift on the holiday wish list is peace/happiness, rising from the No. 2 slot in the previous two years.
Resellers would do well to remind consumers that multiple A/V systems in the home can in fact promote both peace and happiness.
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About the Author
Julie Jacobson, Editor-at-large, CE Pro
Julie Jacobson is co-founder of EH Publishing and currently spends most of her time writing for CE Pro, mostly in the areas of home automation, networked A/V and the business of home systems integration. She majored in Economics at the University of Michigan, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. Julie is a washed-up Ultimate Frisbee player with the scars to prove it. Follow her on Twitter @juliejacobson.
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