Black Friday Phenomenon Causing Consumers to Wait to Make Electronics Purchases, CEA Says

SAN FRANCISCO -- Technology products are “in a pretty good position” heading into the holiday season, said Steve Koenig, CEA director-industry analysis, during the 2012 Holiday Sales and Forecast session at the CEA Industry Forum. According to CEA’s 19th Annual Purchase Patterns survey, 76 percent of holiday gift shoppers plan to buy a CE product, Koenig said, similar to last year’s findings. U.S. consumers plan to spend $252 each on technology this season, compared with $194 in pre-recession 2007, he said, a 30 percent bump. Year-to-year CE sales growth will be on par with last year, he said Tuesday. Overall, consumers plan to spend $1,634 this holiday season, up 11 percent over 2011, he said.

In its zeal to create an enthusiastic shopping spirit, the CE industry may have trained the consumer, as an unintended byproduct of Black Friday sales “to wait” to make holiday purchases, said Koenig. He called it a “serious problem for the industry.” While new product introductions by Apple, Nokia and others pulled sales forward into late September this year, “magnetism for Black Friday” deals is increasingly pushing sales back into Black Friday and late November, Koenig said.

Retailers summon Black Friday references throughout the year to evoke a “Pavlovian response from consumers,” Koenig said. But he questioned whether the industry is “now training the consumer to wait” in Q4 for Black Friday. Drawing sales to the end of November and early December causes sales to drop in October, he said. Forty percent of consumers surveyed by CEA said they'd start their holiday shopping in November, said Shawn DuBravac, senior director of research. Only 13 percent of consumers said they'd begin holiday shopping before Thanksgiving, he said.

Consumers looking for better deals than last year may be out of luck, Koenig and DuBravac said, indicating prices may have bottomed out in categories including notebook PCs and digital photo frames. Going back to 2009, notebook doorbuster prices were as low as $200, DuBravac said. That’s expected to be the starting price for notebooks this year, too, although the products will carry more features, he said. Digital photo frames opened at about $25 last year, he said, and starting prices are expected to begin at $24 this season. Digital cameras will return to starter prices of $20, he said. “You're not going to see significant shifts in those opening price points."

Consumers will be influenced by bargain prices heading into the holiday season, but the opening price point “doesn’t have the wow factor that it once did for consumers,” DuBravac said. Prices have gone about as low as they can go, he said. With digital photo frames at $24-$25, “consumers aren’t going to expect those to drop to zero,” he said. Survey results showed 81 percent of consumers expected prices to be as good or better than last year. Only 17 percent of respondents thought deals would be “much better” than last year, DuBravac said.

Since prices can’t fall much lower during the holiday season, the trend is toward more bang for the buck, Koenig said. TVs will benefit from that trend as average wholesale prices are expected to inch up this year for the first time in 10 years, DuBravac said. “Consumers are gravitating away from the lowest price device to a device that fits within their lifestyle.” He cited connected TVs, expected to represent 63 percent of TVs gifted this season, compared with 51 percent last year. Although 45 percent of shoppers said they planned to give 3D-capable TVs this season compared with 28 percent last year, DuBravac cautioned not to “take that as a bullish call on 3D” but instead as a “natural evolution of adoption.” As 3D is integrated into more sets, consumers either “actively buy it or buy it by default” because the set “already includes it,” he said. Large-screen models above 40 inches dominate the planned TV purchases at 72 percent versus 65 percent last year. “A lot of the growth will take place for TVs above 55 inches,” DuBravac said.

Tablets and smartphones will continue to be drivers this holiday season, the survey found. Smartphones and tablets led the intended gift list, with 29 and 27 percent of shoppers planning to gift mobile devices this season respectively. Notebook PCs and Blu-ray/DVD player weren’t far behind at 25 percent. Maturing MP3 players dropped 5 percent as a gift giving item to 22 percent, while 20 percent of those surveyed planned to give TVs, e-readers and external storage devices as gifts.

Digital camera sales are expected to continue to drop as a category, having peaked in the mid-2000s at about 37 percent of gift-giving plans and falling to about 26 percent this year, Koenig said. While digital camera sales overall have been impacted by a market saturation and increased capability of smartphone cameras, the DSLR and compact interchangeable lens categories are showing growth versus declining point-and-shoot models, he said.

Categories with the strongest growth rates forecast for Q4 are tablets at 112 percent to 32 million units, DSLR cameras up 13 percent to 776,000 units, sound bars up 54 percent to 680,000 units and headphones up 9.8 percent to 20.6 million units, DuBravac said. Categories expected to decline are led by camcorders at a 50 percent drop to 892,000 units, video game consoles down 10.4 percent to 13.8 million units, MP3 players down 10 percent to 12.8 million units and digital cameras down 7.6 percent to 12.1 million units, he said.

Most-requested gifts this season will be tablets at 16 percent of consumers surveyed. That’s followed by TVs at 10 percent; smartphones at 8 percent; notebook PCs at 7 percent; e-readers, videogame consoles and MP3 players at 4 percent; digital cameras and Blu-ray/DVD players at 3 percent; and desktop PCs at 2 percent.

Koenig downplayed the impact of showrooming on brick-and-mortar retail sales, saying consumers are just as likely to compare prices at other stores as on Amazon.com. There will be a “pronounced increase” of consumers using mobile devices while shopping, to the “consternation of retailers,” he said. Price-shopping on mobile phones will be “front and center,” Koenig said, following a significant jump last year. Forty-one percent of respondents plan to use a price-check app on their smartphone, Koenig said, making it “the new comparison shopping modality."

More than half of consumers take photos of a product with their devices while in stores, more than a third look for coupons, more than 50 percent research products on phones, and many call friends and family for advice, according to CEA’s M-Commerce study, DuBravac said. Notable apps that consumers will use to facilitate shopping this season include Apple’s new Passbook feature in iOS 6, which makes it easier for users to store and locate coupons, Amazon’s price-check app launched last year and Iona, which enables consumers to scan receipts and be alerted to price declines for price matching, DuBravac said. Consumers are using shopping apps in the store “and after they've made the purchase,” he said. The apps that empower consumers are “challenging” the retail channel,” Koenig said.

On where consumers plan to shop for CE products this season, Koenig said there’s a downward trend at warehouse clubs. He attributed that to product assortment that “changes from month to month, quarter to quarter.” Consumers looking for a specific item typically look elsewhere, he said. This year, 29 percent of shoppers are “very likely” to shop CE stores, 35 percent online, 29 percent in warehouse clubs and 63 percent at mass merchants, he said.

Retail strategies for the year combine new and old models, including the Toys R Us reservation system where consumers can reserve a product with a down payment. Toys R Us said it was stopping orders on the Wii and the company’s house tablet because of high demand early on, DuBravac noted. Walmart is experimenting with same-day delivery in select markets. Best Buy is experimenting with in-store pickup within 45 minutes. The latter will be “something to watch because of the potential of failure,” Koenig said. “Consumers are typically paying extra for this convenience,” he said, “and it could backfire on the channel.”