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Consumer Electronics Numbers Worse Than Predicted

Jan 5, 2009 7:00 PM, By Rebecca Day


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CEA-CNET Consumer Sentiment Indexes

In December, the CEA-CNET Index of Consumer Expectations fell two points from November. The index remains nearly six points below last December’s level, demonstrating the effects of the poor economic climate. To read the report and see this chart in more detail, click here.

With the International Consumer Electronics Show opening this week in Las Vegas, the electronics industry finds itself reeling from a punishing holiday sales season.

The numbers are in and they were worse than even the most pessimistic forecasts. Retail numbers released by MasterCard's SpendingPulse division show a 4 percent drop in holiday sales from last year, with electronics joining appliances, jewelry, and women's clothing among the holiday purchases faring the worst. Electronics sustained a 27 percent hit, with large-ticket items more than $1,000 suffering the most setbacks, according to the report. Even Internet sales took a dive, with e-retailers feeling the pain of their first negative returns following years of 15-20 percent holiday season sales gains.

Consumer confidence levels are tracking accordingly. According to the monthly CEA-CNET Index of Consumer Technology Expectations, consumer confidence in the electronics sector dropped in December—and by a larger margin than that for the economy as a whole. The Index of Consumer Technology Expectations dropped 7 points from November to 78.3, representing a 13 percent drop from the same period last year. The overall Index of Consumer Expectations fell 2.1 points from November and 6 points from last December.

The confidence report is distressing for the CE industry, which had held an edge over other industries heading into the fourth quarter, according to CEA. The trade organization had reported last fall that consumers remained optimistic about electronics purchases despite a gloomy economy. CEA research at the time indicated consumers' views of the overall economy were more negative than those of the CE industry.

Looking to 2009, CEA is banking on consumers to overcome their spending malaise in the first quarter. The Super Bowl has traditionally provided a Q1 uptick for retailers with consumers upgrading big-screen TVs before the big game. This year offers the additional lure of the digital TV transition in mid-February, and opportunities remain. Industry estimates project that as many as 7 percent of consumers aren't ready for the digital transition.

In addition, the evergreen cocooning theme has resurfaced this year, and it may have more legs than in years past. According to CEA: "More and more Americans are staying home these days trying to save precious dollars in this crumbling economy and they are looking for ways to stay entertained while they're doing it." A recent survey indicates more than half of U.S. adults said they plan to spend more time at home watching television in the coming months rather than going out to restaurants or the movies.

Amid the negative numbers, unit sales of 35in. and larger TVs were up 5.1 percent over last year through the end of November, CEA reported. Large-panel LCD and plasma TVs surged 12 and 10 percent, respectively, but the uptick came at a cost. Retailer cost-cutting drove the sales, reported through November, with wholesale selling prices slashed by 36 percent for plasma and 18 percent for LCD TVs.



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