Electronics lead the way into holidays

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Electronics retailers are looking forward to this year's holiday season, in spite of a weak consumer-confidence profile and no must-have items on tap.

Early research points to the likelihood of healthy holiday sales, led by strong demand for consumer electronics, movies, music and games. While there is no new Gameboy or PlayStation product that will have customers lining up at stores, electronics marketers see several positive trends going into the season. With the reduction in the price of DVD players and flat-screen TVs and a price war among the video game makers, many consumers are expected to shop for electronics this holiday.

A survey by brand consulting firm BrandKeys found consumers plan to spend an average of $710 on holiday shopping, or about 9% more than last year. The one segment to show growth was electronics, which 45% of respondents plan to buy, or six percentage points higher than last year's number.

"When we talked to people about what they're looking for...there was a lot of electronics stuff," said Robert Passikoff, president of Brand Keys.

Indeed, the electronics retailers are girding for a heavy promotional season. In a recent conference call, Circuit City Stores Chairman-CEO W. Alan McCollough said the chain kept its advertising budget level this year, but has realigned its spending to focus more on "drive periods" such as the holidays. Circuit City spent $240 million last year, according to TNS Media Intelligence/CMR.

Rival Best Buy Co. started its promotion early, offering a free sneak-preview CD with purchases in October in order to stir up advance demand for movies, music and games.


"It's a perishable product. This is a way to say `Here it comes,"' said Michael Linton, Best Buy's chief marketing officer. The chain will also release its annual "magalog" on Nov. 16, a catalog featuring its electronics products with some editorial content. Seven million to 10 million copies will be distributed via direct mail and at Best Buy stores.

Demand for electronic products this holiday season will be fueled by a number of major pushes from manufacturers, particularly those backing flat-screen TVs, with PC players Dell and Gateway joining the traditional players such as Panasonic and Philips.

"This will be a flat-panel Christmas," thanks to lower prices and increased inventory, Mr. McCollough said.

Other moves are underway to back high definition TV. The Premier Retail Network, for one, is airing HD footage from the Tennis Channel in 2,000 Best Buy, Circuit City and Sears stores to allow shoppers to make side by side comparisons with analog TV.

In categories such as digital cameras, Hewlett-Packard alone is spending $300 million to back its consumer products. At the same time, video game console prices are falling, with Nintendo lowering the price point on Game Cube to $99 from $149, and video game software makers are pumping millions into a slew of new games.

"We would all love to have the must-have item, but there are a lot of nice trends," Mr. Linton said.

contributing: alice z. cuneo

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