For Retailers, Electronics Shine This Holiday Season

Walmart Takes Lead in Dropping Prices, and Consumers Respond to Sales, Promotions

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YORK, Pa. (AdAge.com) -- Consumer electronics are tried-and-true annual holiday-sales drivers. But this holiday, thanks to a long year of price drops and the influence of the one super-retailer's aggressive marketing plans, consumer electronics have become the main draw of the season.

Ongoing price drops have brought consumer electronics such as flat-panel TVs from the stratosphere to the average consumer's air space.
Ongoing price drops have brought consumer electronics such as flat-panel TVs from the stratosphere to the average consumer's air space. Credit: AP
Walmart, the country's largest retailer, has focused on aggressive consumer-electronics marketing and promotions all season, signaling its intent as early as Labor Day with a $298 back-to-school laptop promotion.

Deliberate strategy
"Walmart has very deliberately throughout the holiday smartly devised promotions that generate excitement every week," said Mike Duff, blogger for CBS Interactive's BNET. Over the weekend, the department store was set to roll out iPod nanos for $145 with a $50 iTunes gift card, and just recently ended a $199 Nintendo Wii with $50 Walmart card offer. The limited product and promotional period offers not only draw shoppers to the stores, but also tie them into a more extensive relationship with the retailer via the gift cards, Mr. Duff pointed out.

And like many retail sales trends, where Walmart goes, others must follow. Target, for instance, advertised in a recent circular $30 store gift cards with every Nintendo Wii purchase, and Best Buy recently offered a free "Wario Land: Shake It!" game with a Wii purchase, and had previously offered a $20 store gift card.

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Walmart's reason for turning the spotlight on electronics, Mr. Duff said, is twofold. Consumer electronics are a good holiday draw, but Walmart is also looking to showcase its improved electronics department. And because the retailer had been doing electronics promotions anyway, it's a good kill-two-birds-with-one-stone kind of strategy, he said.

Of course, the ongoing price drops that have brought consumer electronics such as flat-panel TVs from the stratosphere to the average consumer's air space are just as important.

"Five years ago, I did a study that said when flat panels get to be $499 or less, you'll see a new explosion of sales. And that's where we are now. What we're seeing is much like in the '80s when the VCR hit the $249 moving price point," said C. Britt Beemer, CEO and founder of America's Research Group, who recently raised his electronics sales prediction for the first time in 19 years.

Avoiding leftovers
Retailers are also motivated this year to do aggressive marketing to avoid a repeat of last year's leftover stockpiles.

Laura Conrad, president of PriceGrabber.com, said in an e-mail interview, "Competitive deals and attractive promotions around Black Friday, Cyber Monday and through December are enticing consumers to loosen their purse strings and ensuring retailers that they will not be left with overstocked items after the holiday season."

So it should come as no surprise that beginning with Black Friday, consumer electronic sales have been robust.

NPD's Black Friday shopping study found that electronics led the way with almost half (49%) of shoppers buying them. Apparel was second at 43%, and movies were third at 27%.

"Electronics continue to be the early bright spot with consumers, for gifting as well as self purchasing. Add in the thrill of hunting for bargains, and we have a winning combination," said NPD analyst Marshal Cohen in a press release.

The National Retail Federation similarly found that 37% of Black Friday weekend shoppers bought consumer electronics, the third most popular category of items purchased, although they don't include video games in with electronics. (The "books, CDs, DVDs, videos and video games" category accounted for 40% of sales and was second, behind clothing and accessories at 51%.)

Tied with toys
And consumer-electonics sales seem to be continuing strong past Black Friday as well. An ARG survey last week found that consumer electronics were tied with toys for the first time in 25 years, as the most purchased Christmas gift item. Thirty percent of consumers said electronics were the gift item they were buying most often this year, vs. 30.8% who said toys. Last year, only 23.7% said electronics, while 33.8 % said toys.

NPD analyst Steve Baker said flash camcorders, wireless networking devices and digital cameras are unexpectedly strong second-tier performers in this holiday, along with the already strong flat-panel and notebook computer categories.

"What's different this holiday is we're seeing a broadening in categories with more positive unit volume sales," he said. "Whether that's because people are returning to the market because of lower pricing, or they have to replace something, or they're just out shopping."

The Consumer Electronics Association predicts a 6% increase in sales volume for electronics this holiday, vs. a 6% decrease last year.

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