Despite Rough Outlook For 2009, Some Relief Expected

Despite Rough Outlook For 2009, Some Relief Expected

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A key analyst last week upgraded several retailers, including Best Buy, Target, and Costco, to "buy," based on the idea that economic recovery may be near.
 
Why were retailers with strong consumer electronic sales given a favorable look?  The economic community sees that CE retailers have a high potential to capture the family’s disposable income; even though there may be less “disposable income” available to capture. There is no doubt that consumer spending habits have been impacted by the current recession and employment fears but today’s family still needs to communicate and be entertained. The feeling is CE fills that need.
 
Many CE retailers have lived “on the edge” for years. Consumer Electronic products are an identifiable value for a retailer to promote. First, second and even third tier brands are a product that is highly promotable, especially when “price” is added to “value”. The result has been a highly competitive CE retail structure for the last fifty years.
 
That competitiveness may be forced to change in the near future as the economy shows signs of strengthening.  The demise of two major national retail chains and the weakness of several others have forced all retailers to evaluate their overhead expenses and their pricing positions. Sacrificing profitability to capture market share does not make sense – there is no window at the bank labeled “Units”. A less competitive CE marketplace leads to an improved profit picture for both retailers and manufacturers.
 
Recent articles in the CE trade press has indicated that retail pricing has stabilized – particularly in the flat panel product category. Consumers will still receive a tremendous value with pricing of a 32” HD widescreen plasma available at under $500 compared to a 32” 4:3 CRT-based screen at over $1,000 a decade ago.
 
There may be a potential problem. Sales of key product categories are running low on inventory as we approach the traditional new line introduction season and possible old-line liquidations. There is less than one week’s supply of PDP and jumbo 35” & larger LCD panels in the pipeline!
 
There may not be enough product available to maintain the current sales rate. Sales to dealers of plasma panes are 34% of the first ten weeks of 2008. Sales would have been higher but the rate has been limited by an inventory shortage with only a three-day supply available.
 
The 35” & Larger LCD product has been in a stronger inventory position and is 43% ahead of last year.  Unfortunately, inventory on hand has also declined to a low level with about four days on hand.
 
There are similar situations in other product categories.  Smart phones and electronic game consoles and software may be in short supply as we approach the Father’s Day promotional period.
 
For more information regarding forecast and sales data that is available from the Consumer Electronic Association visit CEA’s website www.CE.org or contact Tom Edwards at tedwards@ce.org.

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