by: Chris Bonney
Editor - CEDN
Early indications are that this holiday season may not be all joy for consumer electronics manufacturers and retailers. U.S. households are expected to spend only an average of $390 on Christmas gifts this year, compared from last year’s $418, according to a new report by the Conference Board Consumer Research Center.
“Consumers are approaching the holiday season very cautiously,” noted Lynn Franco, the Conference Board center’s director. “Job losses and uncertainty about the future are making for a very frugal shopper.”
IBISWorld, another national market research firm, is seeing the same trend. Although they predict that holiday sales will grow 0.19 percent this year to $128.1 billion, they see almost all the growth coming in expenditures for food and drinks, while gift spending will decline.
This all accords with economic projections from the Federal Reserve System’s Board of Governors, which is projecting that the recovery from this year’s recession will be long and slow, with high unemployment rates continuing through 2010 and into 2010. Some of the Federal Reserve analysts are suggesting that it’ll take five or six years for the U.S. economy to return to a normal path with sustainable rates of output growth and unemployment as well as an appropriate inflation rate.
This is all very bad news for consumer electronics manufacturers and retailers, who are reeling from a nearly 10 percent year-over-year drop in sales, according to U.S. Census Bureau statistics. The brutal numbers are forcing pre-Black Friday discounting by major retailers including Best Buy, Sears, Wal-Mart and others. The announced discounts are, so far, less dramatic than the deep discounts offered last year, but those may not be enough to generate the sales that electronics makers are hoping for.
According to IBISWorld, retailers who try to avoid discounting key goods for too long may face disaster. “People do not have the disposable income and will look elsewhere for their gifts,” the organization’s report says.
All of this suggests that we’ll be seeing fierce competition among manufacturers at the 2010 Consumer Electronics Show, the venue in which manufacturers unveil their new products for the 2010 sales year. With unemployment rates projected to remain over 10 percent through at least the entire first half of 2010 and the housing crisis continuing, Americans’ disposable income cannot be expected to increase enough to inspire them into a feeding frenzy of electronics purchases.
That frenzy is going to come as CE manufacturers attempt to out-compete each other to put their products on as many retail shelves as possible. Retailers will be just as eager to find the products and the pricing they need to help them compete for a share of that smaller disposable income pie.
Manufacturers and retailers alike who fail to succeed in drawing consumers’ attention to their own electronic offerings are likely to find that those consumers have spent their limited resources bread and butter instead. And then they’ll be joining the lines at the unemployment office.
Comments