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Consumer Electronics Industry Expecting Big Drop in Christmas Sales

Nov 17, 2008 12:00 PM, By Rebecca Day

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It’s clear that the Grinch is poised to steal this year’s holiday retail sales. Industry watchers are just waiting to see how bad it will be. Citing “unprecedented negative sentiment” among consumers, Consumer Electronics Association (CEA) officials last week tried to generate an upbeat mood toward the upcoming holiday sales season at a New York press preview for the International Consumer Electronics Show. According to Tim Herbert, senior director of market research for CEA, the industry is experiencing “very serious times” not seen in the 15 years since the organization began doing consumer surveys.

CEA tracked consumers three times between September and November, finding an all-time low in sentiment among three groups of 1,000 adult respondents. The findings were echoed by a survey of CEA executives who said consumer sentiment was at its lowest point ever. The “good” news: views of the overall economy were more negative generally than those of the consumer electronics industry specifically.

Looking toward holiday sales, CEA predicts a 14 percent drop in Q4 spending for consumer electronics, along with drops in travel, food, and apparel. Last year, consumers spent an average $1,671 on consumer electronics. This year the average expenditure is expected to drop to $1,437. Consumers cited loss of bonuses, fear of layoffs, the cost of living, and the general economy as reasons for the expected spending decline.

Along with clothes, money, and the priceless peace and happiness, consumers’ wish lists for 2008 included PCs, TVs, mobile phones, MP3 players, videogame players, DVD players, digital cameras and camcorders, GPS navigators, and DVRs. CEA’s comments came a day after Circuit City filed bankruptcy and a day before Best Buy lowered its projections for 2008. Best Buy’s statement said that lower-than-expected revenue and uncertainty regarding future consumer spending has limited the company’s ability to project revenue for the holiday shopping season and the balance of the fiscal year.

“Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we’ve ever seen,” said Brad Anderson, vice chairman and chief executive officer of Best Buy. “Best Buy simply can’t adjust fast enough to maintain our earnings momentum for this year. We’re beginning to adjust our cost structure to restore earnings momentum and still gain market share.”

Best Buy’s total comparable-store sales declined by approximately 7.6 percent for fiscal October, following a comparable-store sales decline for fiscal September.

Industry watchers are wary of Black Friday when consumers head to the stores to begin the official start of the holiday shopping season. “We’ll be following Black Friday more closely than ever as an indicator of holiday sales and consumers’ emotional intent,” said Herbert of CEA. He added that 28 percent of consumers surveyed said they plan to shop during Thanksgiving weekend, according to the CEA survey.

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