The economy is hurting but CE sales will remain relatively healthy compared to other industries, with a 3.5 Percent increase expected during the fourth quarter, roughly half of last year’s growth.
“It will be bad across the board, except for CE products,” Shawn DuBravac, a Consumer Electronics Association economist, said during a presentation of the 15th annual CE Holiday Purchase Pattern Study at the CEA Industry Forum here in Las Vegas.
The National Retail Federation recently estimated that Q4 sales throughout the general retail industry grow only 1.9 percent, one of the lowest increases recorded since the NRF survey began in 2002. CE retail sales will fare slightly better, with such segments as A/V growing at 3.9 percent, accessories at 4.6 percent and video games at 5.6 percent.
The holiday forecast was conducted with 1,000 U.S. adults and fielded from Sept. 25 to Sept. 28. The margin of error is plus or minus 3.2 percentage points.
In the survey, CEA found that consumers’ total spending around this holiday season is expected to drop 14 percent to $1,437 from $1,671.
Spending on gifts is expected to drop 15 percent to $750 from $804 last year. But the amount of gift expenditure allotted to CE products is expected to rise to 28 percent or $210 from 22 percent or $194 last year.
“It’s certainly a historic time and we’re seeing things in the financial markets we have never seen before,” DuBravac said. “But for our industry, all is not lost. We’re certainly holding up better than some other industries.”
The findings, co-presented with Tim Herbert, CEA’s senior director of research, touched upon many different CE segments and trends that can help retailers choose which products and demographics to focus on through the next year.
While some of the numbers, given the state of the economy, seem somewhat positive, about 20 percent of consumers surveyed said they plan to eliminate spending on CE products. That’s compared to 31 percent who don’t plan to buy any sporting goods, 28 percent who are cutting out furniture purchases and 26 percent who plan to cut out vacations. Only six percent plan to stop buying clothing and shoes, while 11 percent will eliminate cable or satellite TV subscriptions and eating out in restaurants.
Overall discretionary spending, which has fluctuated over the years in sync with the highs and lows of the economy, has settled at about two percent of consumers’ durable good spending this year, down from a high of about 17 percent in 1983. But the amount spent on technology as a percentage of consumer durable goods spending has steadily increased since 1980 to about 17 percent this year.
About 79 percent of respondents said they plan to give a CE-related gift this year, up from 75 percent last year. About 48 percent said they actually gave a CE gift last year, while 44 percent said they received one.
The 3.5 percent growth in Q4 CE spending comes from the following areas:
A/V, including portable MP3 players and camcorders, represent 27.9 percent of total CE spending with a Q4 increase of 3.9 percent. Computers represent 15.6 percent with negative growth of one percent. Home communications represent 19.5 percent with a decrease of 5.3 percent. Mobile phones represent 15.5 percent with 11 percent growth.
Accessories and blank media come in at 9.6 percent with 4.6 percent growth. Video games represent 4.7 percent with 5.6 percent growth.
The killer category seems to be GPS, including in-car video, with 30 percent growth and representing three percent of total CE spending.
Digital cameras, fueled by SLRs and digital frame sales, represent 4.3 percent with 6.9 percent growth.
As far as what people plan to give as gifts this year, televisions, tabletop and clock radios, portable CDs and MP3 boom boxes, and external storage devices hit the list for the fist time. The boom boxes represent a trend that more people are now listening to the MP3 players at home than on the road, while the external storage devices show a need for securing, managing and sharing all of the digital photo and music files consumers have amassed over the years.
Video game systems (27 percent plan to buy one as a gift), digital cameras (about 21 percent), digital media players (about 21 percent), DVD players, laptops (17 percent) and portable game devices topped the list, in that order. All of those numbers are down several percentage points from last year.
In terms of demographics, 75 percent of consumers plan to visit a CE retailer during the holidays. About 79 percent of those are men, 71 percent women, 88 percent between the ages of 18 and 24, 85 percent between 35 and 44, 76 percent between 45 and 54 and 56 percent more than 56.
About 54 percent of the respondents said they plan to do some holiday shopping online, up from 51 percent last year and 45 percent in 2006.
About 57 percent plan to buy a CE gift through an online retailer. Men represent 66 percent of that number, while women represent 49 percent.
Retailers should keep in mind that in tough economies consumers usually use more coupons, spend more time looking for bargains, spend less on non-essential items, shop at discount retailers, buy with cash instead of credit, buy store brands instead of name brands, review Sunday newspaper circulars, buy a less expensive version of a product, and shop more on auction and re-sale sites.