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Gadgets Still King Of Holiday Shopping

Posted on: Sunday, 2 November 2008, 09:55 CST

The Google phone is just one of the many new gadgets shoppers will be nabbing up, even if it takes a few sacrifices.

Spending plans for electronics are at their lowest level since the industry's Consumer Electronics Association began its annual shopper survey 15 years ago.

Still in the midst of tightened U.S. household budgets, consumers have a soft spot for electronics.  They will give up items like sporting goods and trips to pay for gadgets, said Tim Herbert, senior director of market research for the CEA.

"These are no longer just luxury items or products that are fun to own. They really are used in a variety of ways to enhance communications, increase productivity, or for education," Herbert said. "Also, from a gift-giving standpoint, there is still a tremendous 'wow' factor with electronics."

According to the CEA, consumers plan to cut overall holiday spending by about 14 percent this year, but their budget allocation for electronics has increased.

The hot-ticket items like the "Google Phone" distributed by T-Mobile USA, Apple Inc's iPod and iPhone, and even the sleek 2-pound Dell mini-computer are expected to wreak the benefits of the momentum.

Some other items that are expected to be sold in big quantities are SandDisk's 16 gigabyte memory card, DVD box sets, external hard drives, and webcams.

Traditional electronic retailers like Best Buy Co and Circuit City Stores will be pressed to offer bigger deals on these items to consumers to stand out against the discounts at Wal-Mart Stores Inc.

"The product cycle is commoditizing, so as price points become cheaper you get into the sweet spot of the Wal-Mart customer," said JP Morgan analyst Christopher Horvers.

"Circuit City right now is in a capital-constrained situation and really fighting for their life," Horvers said. "You're likely to see them be more aggressive this year to try to drive traffic."

So far, there has yet to be seen a "must-have" gadget this year.  Previous years, devices like Sony Corp's PlayStation 3, Nintendo's Wii, or Sirius satellite radios were shortly launched before the season to woo shoppers .

Global Director of digital media for Frost & Sullivan, Mukul Krishna, is betting that advanced high-definition TVs, video game software and smartphones will be consumers top picks in electronics.

He agrees that consumers who have scaled back their lifestyle will be looking for aggressive discounts and coupons by major electronic leaders.

Any shopping may be bittersweet after the global financial crisis of the U.S. economy.

NPD Group found 26 percent of its survey participants planned to spend less this year, versus 18 percent last year.

According to another industry study, consumer electronics are expected to rise 3.5 percent in the fourth quarter, down from 7 percent a year ago.

Despite the shrinking value of their retirement accounts, shoppers still may snap up deals for devices they have been eyeing all year.

"You will see more bargain hunting and lower pricing, and more advertising for Black Friday. However ... pricing probably won't be what drives people into the stores," said analyst Stephen Baker of research firm NPD.

"If people still feel the way that they do now, (stores are) going to have to keep reminding them that these things have never been more affordable," he added.

Next year's switch to digital broadcasting signals is expected to help boost sales of better TVs.

As of February 17, 2009, television broadcasters must begin airing only in digital, making "rabbit-ear" antennas outdated and useless.

Brands such as Vizio sold at Wal-Mart Stores may have an advantage because of their lower prices, as customers will be looking for values. 

"Consumers might be going for some of the cheaper alternatives out there," Frost & Sullivan's Krishna said.

Regardless of the gloomy outlook, CEA's Herbert said emotions may drive shoppers to the store as the holidays draw closer.

"Historically, for a lot of Americans, shopping is therapy. People want to give gifts to their loved ones," he said. "If these products can enhance family time or serve as a substitute for that trip to Disney World for a vacation ... consumers view that as a way to keep their spirits up."

"I don't think anyone wants to outright cancel Christmas," Herbert added.

Source: redOrbit Staff & Wire Reports

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