Stakes ‘Never Higher’

CEA Urges Brick-and-Mortar Retailers to Go for ‘Promotion Over Price’ This Holiday Season

October 23, 2013 by Rebecca Day|Top News

LOS ANGELES -- “The stakes have never been higher for brick-and-mortar retailers,” said Steve Koenig, CEA director-industry analysis, at the 2013 Holiday Sales and Forecast session during the CEA Industry Forum. The goal for retailers this year is “to raise store comps,” Koenig said, saying the progressively lower prices in holiday doorbuster deals aren’t “sustainable.” The industry has to “demonstrate to Wall Street that they're getting people into the store, and they're getting them to open their wallet,” Koenig said.

CEA is pushing its retail members to go for “promotion over price.” In the past, Koenig said, retailers have taken the “easier play” of offering lower and lower prices through doorbusters and other means. “Promotions have to change,” he said: One way to raise store comps and achieve higher tickets is to “build out the basket” through attachments, “bundles, bundles, bundles” and by selling “ecosystems” of products. Store within a store sections will promote the latter, he said.

In marketing around Black Friday and the holidays, the higher penetration of consumers with smartphones and tablets will drive more promotion by those devices, said Shawn DuBravac, CEA senior director-research. He envisioned more multiple doorbuster strategies to keep consumers coming into stores at different hours on Thanksgiving to “create events during the longer open period.” Once the “Pandora’s Box” has been opened, “it’s tough to close,” DuBravac said because year-over-year comps suffer without the same number of shopping hours. “It’s hard to imagine that we're ever going to enter an environment where retailers are going to suddenly close down on those hours,” he said. Retailers will continue to “test the limits of how early can they go to add an extra hour or two of that shopping time to benefit year-over-year comps without alienating the consumer.” As a result, he predicted more staggered, multiple and flash deals online and through apps. Black Friday deals will be offered by some retailers “longer into the day” on Black Friday, he said, and retailers will go to more unannounced deals through apps.

According to CEA research, consumers plan to spend about 12 percent less overall this holiday season, DuBravac said, although 4 percent more respondents, 89 percent, planned to do holiday gift shopping this year. CEA projects tech spending will grow 2.6 percent for November and December, below the 4 percent growth last year and “well below the 10- and 20-year trends,” he said. Seventy-four percent of those surveyed planned to buy tech gifts, compared with 76 percent last year, he said. CEA’s national sample recorded buying intent among 1,019 adult consumers.

Last year at the Industry Forum, CEA predicted holiday season growth of 3.5 percent and it was 2.2 percent, he said. DuBravac cited lingering uneasiness following the government shutdown, unemployment rates and competition from other household purchases due to pent-up demand for other durable goods such as washers and dryers and cars.

An increasing challenge among consumers is technology satiation, said DuBravac. In its survey of shopping plans, CEA asks consumers who plan to spend less in a holiday season about the factors behind those plans. In the past few years, economic uncertainties have driven a scaleback in spending plans but in 2013 there was a “pretty big jump” in the percentage of consumers saying they're spending less “because they have everything that they need,” DuBravac said. He said some of those consumers may be not be aware of the emerging technology products available to them. That’s an opportunity for the industry to educate consumers “who may think they have everything they need but aren’t aware of the full set of possibilities."

Among categories, tablets are expected to lead holiday gift lists again this year. About 40 percent of the annual tablet volume will sell in Q4 “and arguably in the last eight weeks,” DuBravac said. Respondents showed a roughly equal number hoping to receive and expecting to give tablets as presents this year. Tablets had 10 percent consumer ownership at the end of 2010 and that penetration rate stands at 40 percent today, DuBravac said, saying he can “easily imagine” that number climbing to “well over 50 percent” by the end of the holiday season.

According to the CEA survey, 14 percent of adults will ask for a tablet this year, followed by 12 percent requesting a notebook PC. TVs follow at 11 percent, followed by smartphones and videogame consoles at 7 percent, while e-readers have fallen to 3 percent wish list presence. Two percent of respondents said they would ask for a Blu-ray player, MP3 player or digital camera, and 1 percent were asking for a desktop PC, according to data. Blu-ray players have “still relatively low ownership” compared with DVD players in their product cycle and CEA expects to see interest grow in that category, DuBravac said.

Products that could drive store traffic include convertible PCs, still largely an unknown concept to consumers, and Ultra HD TV, Koenig said. CEA projects roughly 25,800 Ultra HD TVs will sell during Q4. “It’s not about volume,” Koenig said. “It’s an opportunity to raise awareness and educate customers,” he said. Customers shopping for CE gifts will “invariably wander” into the TV section where they will “potentially get a demo” and learn more about the fledgling technology, he said. CEA forecasts 450,000 units will ship next year.

Among mainstream TV technologies, purchase intent for LED-lit TVs declined slightly from 76 in 2012 to 72 percent this year and fell from 72 percent to 65 percent this year, while intent to buy a plasma TV nudged upward to 48 percent from 45 percent, according to data. Consumer interest in larger screen sizes continues, with 80 percent of those planning to buy a TV looking to 40 inches and larger sets compared with 72 percent last year. There was a slight decrease in the number of consumers interested in buying a connected TV -- down from 63 percent last year to 61 percent this year -- and buying interest in 3D fell from 45 percent to 35 percent.

Home game consoles will be “strong players” during the holiday season, with 19 percent of consumers planning to give a PS4 or Xbox One as a gift this year, Koenig said. He envisioned a lot of bundling opportunities around the new consoles with accessories and content. The gaming category will be “as much about the products themselves” as about the bundling and attachment story, he said. The portable gaming market is waning, with 9 percent of those surveyed planning to gift a portable gaming product this year, compared with 15 percent last year.

In audio purchase intent, multi-room audio products and soundbars are expected to see growth this holiday with 21 percent of consumers planning to buy multi-room audio gifts, a “pretty big jump,” DuBravac said, from 15 percent last year. Soundbars and headphones are also showing growth in buying interest from consumers, he said, with 10 percent of consumers planning to gift a soundbar versus 7 percent last year. Some 28 percent plan to give headphones, he said. About one in five respondents planned to give an MP3 player for the holiday season, he said.

Interest in GPS units and digital cameras continues to slide due to redundant functionality on the smartphone, which Koenig called “our de facto digital camera these days.” Imaging is still a “sensible play” for retailers, he said, noting that action cameras are an “up-and-coming” category, while interest is waning in DSLRs, according to data.

This year, the overall technology holiday spend will decrease on average from $258 to $248, according to CEA forecasts, with 33 cents of every gift dollar being spent on technology. Koenig called the $10 falloff “insignificant,” citing that the rising importance of technology in terms of gift spending that has risen 24 percent from 2007 until 2013.

CEA Industry Forum Notebook

Panelists at the Ultra High-Definition Evolution session sidestepped our question on the projected starting price for 4K TVs this time next year, although one acknowledged lower prices are key to the acceleration of Ultra HD in the broad market. Henry Derovanessian, DirecTV senior vice president-consumer premise engineering, said DirecTV is “closely monitoring” 4K developments but “broad appeal” depends on affordability and availability of rich 4K content that will draw consumers to the format. He noted DirecTV’s role as a launch provider of content during the HD rollout and said the satellite provider will be an Ultra HD player “at the right time.” DirecTV subscribers associate the service with sports content, Derovanessian said, saying 60p frame rate is a requirement for sports because of the high-speed action. The important thing, he said, is to make sure when the service launches, that it meets customer’s expectations. An advantage DirecTV will have when it does offer Ultra HD programming is a “fat” pipeline with “no data caps,” Derovanessian said. At the same time, HEVC (high-efficiency video coding) is a “requirement” for DirecTV, which will deliver a 4K stream in a compressed format and let TVs do the decoding, he said. DirecTV can accomplish that by leveraging an interface standard provided by the RVU Alliance that’s currently in use by Samsung and other TVs today and it gives the provider a leg up on other companies because it “reduces time to market,” he said. “We don’t have to go out and replace new boxes” because it can send content right to compatible TVs. Dan Schinasi, senior marketing manager at Samsung, said two competitors have “leapfrogged us” by incorporating HEVC decoders in their Ultra HD sets, while Samsung will use the Evolution Kit as an outboard decoding solution until standards for HDMI 2.0 and copy protection are finalized. Samsung’s HEVC solution will be updated in first half 2014, he said.

While sports is a primary driver for leading-edge TV technology, “there are gaps in the technology today to do live sports” in Ultra HD, said Clyde Smith, senior vice president-new technology at Fox Network Center. “Sports are going to lag a bit” until standards are set and certain interfaces are developed, he said. Sports programming shot in 4K “is a different production experience,” Smith said. Frame rates of 60 Hz won’t be fast enough for sports, Smith said, with Fox looking at 120 Hz rates instead. “You can’t follow the action as tightly and pan the camera as fast because people will get disturbed by that rapid motion,” which becomes disorienting in a way that’s similar to fast camera motion issues with 3D, Smith said. Cameras will have to take a wider view, which will have the benefit of adding context, he said. Fox has shot roughly 20 NFL football games, a few MLB games and several NASCAR races in 4K, and most of the content “doesn’t go to air” except for footage shot with Fox’s Super Zoom” cameras, he said. “No matter how well a cameraman tries to frame a football tackle or whether a player is in or out of bounds, “he never quite gets it right,” he said. With content shot in 4K, “you can zoom in and extract a full high-def image out of that,” he said. In high-def, it’s pretty hard to tell if a player’s foot was in our out of bounds,” but with the Super Zoom feature, “you could see the little puff of chalk where his foot touches the line,” he said. Being able to see that level of detail in 2K has “been an advantage already for consumers,” he said.