Will the changes in consumer spending affect sales of Consumer Electronics?

…or will product shortages be a result of unanticipated demand?

There is no question that the United States’ and the World’s economy has changed. Consumers are reacting to new pressures they did not feel during the ‘boom times’ of the previous decades. Corporate America, too,  is adjusting its buying habits as businesses recalibrate operations to weather the economic storm.

In the CE industry, retailers and manufacturers are being forced to change to the new consumer purchase patterns. The ‘Field of Dreams‘ mentality prevalent in the recent past no longer works. “If you build it … they will come” is no longer a smart strategy. In addition, inventory control is now more important than ever to maintain profitability at both the retailer and  manufacturer level. 

CE industry observers and stakeholders alike are asking:

Will changes in consumer and business spending affect sales of CE products?
What are the best-selling technologies and product features in this economy?
Will product shortages result from unanticipated demand?
How do company sales compare with the industry?
Are sales of new technologies (e.g. Blu-Ray players) stifled by the economic downturn?

One area where the consumer does not seem to be conserving is home entertainment.  They may be going to fewer concerts and movies but they are spending on family and personal entertainment.  Television is a ‘must’ for the family’s needs.

The Consumer Electronics Association’s 2012 Industry Forecast indicates that 16.7 million 35” and larger flat televisions will be sold in 2009. This is an increase of more then 16%, on top of a 33% increase in 2008.  The forecast includes input from more then 80 manufacturers, retailers and other industry-focused participants and is produced in July of each year and updated in the following January.  CEA’s forecasts are considered the benchmark for CE sales and are widely used in formulating business plans for retailers, manufacturers and component manufacturers throughout the CE industry.

WILL THE 2012 INDUSTRY FORECAST BE ON THE MARK IN THE NEAR FUTURE?

January sales results are in and it looks like the U.S. consumer is still purchasing televisions for their families.  Unit sales to dealers of 35” and larger displays in January were 62% ahead of January 2008, well of the 16% gain forecasted for the total year. 

WILL THERE BE ENOUGH PIPELINE INVENTORY TO SUPPORT DEMAND?

Wholesale inventory on hand at the end of January may not be enough to support demand in the first and second quarter of 2009.  The current inventory of 35” and larger LCD display is only enough to support 1.5 weeks of sales to dealers if sales stay at the same level as they were in trough the first 16 weeks of 2008.  The supply of plasma panels is even bleaker at 1.1 weeks on hand.  If the January 2009 sales increase continues, the LCD inventory represents less then one weeks supply and plasma has only a three day supply.

Manufacturers and retailers have to take a conservative position with the unknown economy and the loss of two national retailers.  Neither wants to be in a position of stocking quantities of ‘old models’ from last year’s line that are usually sold at close-out discounts. New-line models will not be available until late spring or until the summer months. The numbers indicate that shortages will be probable.

Shortages may actually be a benefit as retailers vie for the customers of the two national retailers who have left openings in many markets.  Price competition in an already highly competitive category may not be as necessary.  The analog-to-digital delay to June may allow extra time for consumer demand to be filled.

The Forecasts can also be ordered at the CEA Store.  CEA Members can download the U.S. Consumer Electronics Sales & Forecasts 2004-2009 at the CEA Web Site.

Please contact me if you have any questions regarding these data or for any other sales to dealers reports available from the Consumer Electronics Association.

Best regards

Tom Edwards

Consumer Electronics Association

Email – tedwards@ce.org