December 11th, 2008
admin
November retail sales figures are coming in for the discount chains, and according to a report by TWICE, the news is a bit grim. WalMart posted a 6.5 percent gain over last year, with consumer electronics, clothing, and home goods doing well.
So much for the good news. Costco was down 3 percent, and sales were down 6.1 percent at Target. The report also cites data from MasterCard for the first two weeks of November, in which consumer electronics and major appliances were down 22.1 percent over last year, following a 19.9 percent drop in October.
Now, these statistics are based on total dollars, which changes the picture a little. With prices for some electronics falling 10 to 20 percent this year, the same level of unit sales will produce a smaller total revenue. We’ve also seen evidence of buyers scaling down their expectations, and choosing to purchase smaller TV sets than in prior years.
But I think that the fact that WalMart posted the gains is a telling detail. People are looking to stretch their dollars as far as possible, and that means leaving the specialty stores behind. WalMart provides one-stop-shopping for deeply-discounted products in just about all categories, including top brand flat panel HDTVs. Everyone has been tightening their belts – including the retailers — which means that the bargains are going to stick around for a while.
December 11th, 2008
admin
Already liquidating under a Chapter 11 bankruptcy plan, Tweeter threw in the towel and abruptly closed all of its 70 stores nationwide on Tuesday. More than 600 employees lost their jobs, and the company has petitioned a Delaware court to convert the Chapter 11 to Chapter 7 bankruptcy protection. Many customers have paid some or all of the price of equipment that they have not yet received, and they may never get their purchase or their money back, as they now have become creditors, far down the list of those with claims against the defunct company.
These can be perilous times for consumers, and this is not a good time to pay in advance for equipment. It’s better to wait and pay on delivery — even if it means that you spend a little more – rather than take the risk of a downturn in your retailer’s financial condition. Sadly, we can be certain that Tweeter will not be the last consumer electronics casualty of this weak market.
December 11th, 2008
admin
It has been widely reported that Fox announced plans to broadcast the college football BCS championship game in 3D at select movie theaters in Boston, New York, and Los Angeles. The plans were announced this week by Fox Sports CEO David Hill at the 3-D Entertainment Summit.
Perhaps more important were the comments made by Hill along with the announcement. He complained about how the networks had to bear the cost of converting to HD, for which they did not receive “a penny more” from the advertisers or television manufacturers. He said that he does not intend to let the rest of the industry take a free ride on the adoption of 3D, and that they’ll have to share in the costs if it is going to happen.
Forgive me, but it seems to me that Hill just doesn’t get it. I wasn’t involved then, but did the TV manufacturers help pay the networks to add support for color, or for stereo sound? I expect not. If Hill hasn’t noticed, many of the TV manufacturers are selling their products at or below cost. Just where does he think that the money will come from for them to chip in on the adoption of 3D technology. And both Panasonic and Samsung have been selling 3D-capable rear projection sets for years; sales have hardly set any records at this point, so I don’t see a pot of gold sitting there to share with Fox.
And what if the advertisers aren’t paying a penny more for HD content? Whose fault is that? It’s not the advertisers, that’s for sure. They pay what they have to in order to reach their target market. If HD is doing a better job than standard definition programming at delivering the desired audience, it will be worth more to the advertisers. I expect that the problem is that the video entertainment market is getting much more diluted, so there are fewer advertiser dollars available per show on average. Is this hard on the networks and content producers? Sure. But unless the new technology is going to help those other groups make more money, don’t expect them to help pay for it.
Networks are struggling to maintain their audiences, and they will have to do more to attract and retain viewers. 3D broadcasts may be part of that mix. But the cold truth is that if 3D is what it takes to remain competitive, the networks may have to figure out a different business model that will help them pay for it.
One of the assumptions about a slow-down in consumer electronics sales is that the prime brands will be okay, and it’s the smaller companies that get hammered. Well, as a measure of just how bad the situation is, Sony announced today that it intends to trim about $1.1 billion in annual costs. One way to get these savings is to cut about 8,000 jobs — about 5% of its workforce – as well as an unspecified number of seasonal and temporary workers. The company will also close about 10% of its 57 manufacturing sites, shifting production to locations with lower costs or relying on manufacturing partners.
It was just a few short years ago that Sony went through massive layoffs and cost-cutting programs. At the time, it was more a result of the company’s failure to maintain a competitive position in several markets that it used to dominate. This time, it doesn’t appear that Sony has done anything seriously wrong, as its products compete well in many areas. It’s just that with retailers postponing — or even cancelling – orders, cash flow is going to be a major problem all along the supply chain and not even the biggest of the big will be immune from its effects. It appears that Sony is addressing the issue early, and maybe the cuts will be enough to help it through the first half of the next year, which is traditionally a slow time for consumer electronic sales anyway.
The bottom line, however, is that if Sony is facing a cash crunch and closing production plants, the inventory pile-up must be significant across the whole industry. I continue to expect to see great bargains as everyone along the supply chain tries to find ways to squeeze cash out of the product that they have already created.
When I was in a Costco last week, I looked for some smaller LCD HDTVs with built-in DVD players, but couldn’t find any. I asked one of the store staff, and he told me that they used to carry such models but don’t anymore. (I did notice that Best Buy and Circuit City both had some combo-models for sale.)
Now comes news from Sharp that the company plans to build in DVD players into some larger screens offered for sale in the United States. And these are not small sets; the new models are 42″ and 32″ according to a report in TWICE. What sets these apart from other combo models is that the DVD players will be high-def Blu-ray.
It’s an intriguing move on Sharp’s part. American consumers still view Blu-ray as too expensive and not enough better than standard DVD to be worth three or four times the cost. So maybe this is a strategy to try to get more Blu-ray players installed by bundling them with the TV. The fact that the sets are 32″ and 42″ are not surprising. Adding a standard DVD player only adds a small cost to the total for the set, so it makes sense to add one to an inexpensive set that only costs a few hundred dollars. A Blu-ray drive could double the cost of a small set, however, so the only way to make it a reasonable step up is to add it to a more expensive larger display. The TWICE article says that no pricing was announced, but that the 42″ model is expected to cost “less than $2,000“. That would have been an attractive price point for a 42″ LCD HDTV a couple of years ago, but not today. If Sharp hopes to sell many of these combo sets, they’ll have to be closer to $1,000.
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