Headphones, Bluetooth Speakers, Soundbars Lifted Holiday Audio Sales

Short TV supplies constrained some dealers during the holiday selling season, but audio was strong across the board, Consumer Electronics Daily found in a poll of retailers in the week after Christmas. Most dealers reported a general uptick in consumer confidence that was borne out through spending on CE during the holiday season, although at least one dealer reported possible shopper fatigue setting in post-Christmas in what has traditionally been one of specialty AV dealers’ most profitable weeks of the year.

"We were OK until Christmas and then our six days after Christmas have not been as good as I had hoped,” said Bjorn Dybdahl, owner of Bjorn’s in San Antonio. “I don’t know if customers have seen too much sales stuff or what,” Dybdahl said, saying a few other specialty dealers noted during a post-Christmas conference call that they were running about 5-10 percent down. “It could be the buys weren’t there” in a promotional-driven sales climate, he said. “Everybody’s got some kind of sale.” Where Bjorn’s at one time “was the only player” in San Antonio for the six days after Christmas, the store has far more competition now, he said. “Now everybody including Best Buy and Amazon are trying to move a lot of product” at year-end, he said. Bjorn’s began the holiday season in early November trying to beat the Black Friday hype with its own tent sale.

The high-profile San Antonio retailer was predictably creative this holiday season in an attempt to drive traffic. The store’s “twelve days of Christmas” promotion wasn’t particularly magnetic for store traffic, he said, but the free TV giveaway Bjorn’s holds with a local car dealer had the hoped-for results. The store doesn’t make any margin on the 32-inch JVC TVs it sold to the car dealer, but the Bjorn’s name is stamped on ads and each TV that the dealer offloads. Bjorn also tacks on an envelope telling consumers not to open the TV box until they've read the enclosed card, which offers them a $250 gift card to Bjorn’s if they bring the unopened box back to the store. The 25 customers who took advantage of the offer “wasn’t a big number when you look at 1,000 TVs, but it’s 25 people who wouldn’t have come into store otherwise,” Dybdahl said. Most customers who bought into the deal swapped the card for headphones, but one spent north of $8,000 on home theater gear, he said.

Bjorn’s was held back during the holiday season by a shortage of TVs, Dybdahl said. “We didn’t have enough product or differentiation,” he said, saying Sony warned dealers early on that TV supplies would be limited. While 4K has been selling well, the selection of promotional TVs Dybdahl hoped to have during the holiday season didn’t materialize.

HiFi House in Broomall, Pa., a member of the Home Technology Specialists of America buying group, didn’t experience TV supply shortages, said CEO Jon Robbins. “Supplies were phenomenal,” he said, citing “terrific” jobs by Samsung and Sony at “channel discipline” at the high end of TVs versus “the wild west” that characterized holiday TV sales at big-box stores. The TV makers “made sure there was a clear delineation in higher tech products,” he said. The 4K TVs “didn’t have as big an effect as one might think,” Robbins said. “Not everybody is ready for the idea of 4K. A lot of people are more concerned about the evolution of smart TV,” he said.

Abt Electronics, Glenview, Ill., struggled with TV supply for nearly two months at the end of the year and it was still “an issue” after Christmas, General Manager Phil Hannon told us. Panasonic’s exit from the plasma TV category was a major factor, Hannon said. “There’s a lot of TV” business that Abt “did with Panasonic that just [isn’t] available anymore,” he said. The supply issue that Abt had with Panasonic was mainly related to its exit from plasma, he said. But Sony also was “having some issues” with supplies, as was LG, he said. “There’s a lot of brands that are struggling to get merchandise to us,” he said. The supply issues were “across the board,” regardless of screen size, he said. There were “pockets everywhere in each brand that’s got holes in it” in terms of product availability, he said. Abt had “plenty of notice that it’s going to be tough” getting supplies over the holiday season, so it “brought in supplies a little bit earlier this year,” especially for TVs, he said. Samsung, however, “seems to be pretty strong” on TV supplies when compared with the other brands, Hannon said. Customers who wanted to buy Panasonic plasma TVs were still buying TVs, but there’s still demand for the company’s plasma sets, he said.

Dealers who had hoped to get a rush of last-minute plasma business from consumers snatching up Panasonic plasma TVs before they disappeared from shelves for good were disappointed, we found. At The Little Guys, Mokena, Ill., Unilateral Pricing Policy pricing didn’t hold up on Panasonic plasmas, said owner David Wexler. “Everybody had plenty of inventory for November and most of December,” he said. Wexler had hoped the end of Panasonic’s plasma run might mirror the end of Pioneer’s Elite series of plasma TVs when “instead of going for how cheap they could be, it was almost how much you could get for them.” The Panasonic plasma situation was just the opposite, Wexler said, attributing it to “too much inventory out there.”

The other problem for specialty dealers, Wexler said, is big-box stores “are just sitting on their inventory” of plasma TVs. “The only way they can sell premium product is to discount it, and they certainly can’t sell a TV that’s perceived by some to be old technology,” Wexler said. Wexler and other specialty AV dealers were bitter over Panasonic’s decision to sell the well-reviewed ZT plasma models through big-box dealers, and Wexler for one didn’t go out of his way to sell the series. “Maybe we hurt ourselves but I don’t think so,” he said.

Wilshire Home Entertainment, Thousand Oaks, Calif., is “sorry to see Panasonic go out of the plasma business because we sold a lot” of Panasonic plasma TVs, said CEO Lyn Perry. The store has had to “shift some of our inventory around” as a result of the manufacturer’s exit from that category, he said. Wilshire stocked up on Panasonic plasma TVs to satisfy demand and sold through all of those, but Perry wouldn’t go as far to say the store lost sales as a result of Panasonic’s plasma exit.

Price cuts from LG, Samsung and Sony have made it easier for dealers to steer customers who might have been interested in buying a high-end plasma to 4K instead, dealers said. Wexler of The Little Guys still sees the ZT plasma sets as “great televisions with a great picture,” but “if you're talking to a customer now, is it the right thing to sell them a 65-inch ZT60 for $2,700 or is it the right thing to do for another $1,300 to be able to buy a 65-inch 4K set?” he asked. When the difference between a high-end plasma HD set and a starter 4K TV was $2,500, 4K was a tougher call, he said. “But at $1,000 or $1,300 it’s not a tough sell” to move to 4K, he said.

Wexler was pleased with the way 4K margins held up during the promotional holiday season on the next-gen TVs from Samsung, Sony and Toshiba. “The 4K thing has turned it all around for us to where we're back to selling premium televisions,” Wexler said, citing 30-point margins for 4K compared with margins of 14-19 points on HDTVs.

At Abt, meanwhile, Sony “seemed to be doing much better” in the 4K TV category than other manufacturers, according to Hannon. While there is consumer demand for 4K TVs, it’s “still a little bit pricey” for most customers, he said. Lower pricing in 2014 will “probably help” sales of Ultra HD TVs, along with more 4K content, he said.

Adorama in New York, meanwhile, did “very well” focusing on smart TVs and 4K, the latter being held back by not being “embraced by many consumers because of a lack of content,” said Strategic Planning Director Ahron Schachter. “This was really our second season selling TVs” and Adorama’s unit sales were up 20-30 percent due largely to its carrying a broader assortment of products, he said.

Value Electronics, Scarsdale, N.Y., had an “exceptional” holiday season on sales of home theaters, a jump in large-panel TV sales and a “very very robust 4K business” in the 65-inch screen size, owner Robert Zohn told us. Deals from Samsung and Sony helped fuel 4K TV sales with Sony’s media server driving a lot of them, Zohn said. Value Electronics exploited the price cuts Samsung and Sony made on 4K TVs with direct-mail notices, he said. “We took the manufacturer’s promotions and re-promoted it, and it was very effective, Zohn said. The store spent more on advertising during November and December than it typically spends, including magazine ads trumpeting 4K and in-store demos. “That drove a lot of people to see the new category,” he said. “The manufacturers’ promotions got us off our ass to drive those demos,” he said.

Sonos’ promotion through Jan. 4, offering a free wireless bridge with the purchase of any Play speaker product, helped drive sales, dealers said. Sonos is Value Electronics’ only multiroom audio solution because it can extend to any room in the house, it’s Apple-friendly and integrates with a surround-sound system through its Connect product, Zohn said. “We would have made the sale anyway but it drew more attention to Sonos because of the advertising,” he said. “Whenever you increase your advertising you're going to drive some amount of extra business,” he said. Abt, too, referred to Sonos as a “huge partner” in 2013. And Bjorn’s “did well” with Sonos thanks both to the free bridge offer and a new Sonos section in Bjorn’s that opened just before Christmas. “We were doing fine with Sonos before and now we're doing even better,” Dybdahl said.

Abt’s audio business was up from 2012, said Hannon. The category was on track to be up “pretty significantly” for the year and the retailer had a “real nice December” with audio, he said. “It seemed like consumers were back buying in that category” again in 2013, he said, with B&W joining the roster in 2013 and becoming a “strong performer.” The retailer enhanced its displays in the category in 2013 and that may have helped sales also, he said.

Overall, December revenue at Abt was on track to be up at least 8-9 percent from December 2012, including its store and e-commerce business, Hannon told us. He attributed that largely to “acquiring more customers” and “market share expansion.” Blu-ray players were one of the strongest categories for Abt in December, said Hannon. Their sales were up significantly from the prior holiday season but it was a “soft” category for the year, he said. “The vendors were giving them away” during the holiday season, with some “really cheap prices” well under $100 that drove sales, he said. The product category was “not profitable, but certainly a lot of business” was generated by Blu-ray players in December, he said.

The overall computer category was also strong for Abt, but it was driven by tablets, said Hannon. “We saw a real nice computer business” throughout 2013, with “a lot of accessories being sold,” he said. Customers are buying tablets “before they even need a new computer,” he said. Units were up at Abt in the computer category overall for December and 2013, he said. But stripping out tablets, that business becomes “tougher,” he said, saying tablet sales cannibalized netbook and laptop sales. Abt was up almost 35 percent in units for all of 2013, while laptop sales were about flat for the year and netbook sales were down significantly for the year in units and revenue, he said. The latter is “almost a non-existent category” now, he said, telling us it’s “really fallen off pretty dramatically.” But desktop computer sales were up slightly in 2013, he said.

Abt had some “pretty good supply” in 2013 on videogame consoles, but that business was “slightly down” for the year, said Hannon. Sales lifted in late November after the store received PS4s and Xbox Ones, but those units “went very quickly,” he said. The PS4s “disappeared in a couple of days … a few hundred units came and went very quickly,” he said, telling us Abt received the units within about three days of that console’s November launch.

Abt couldn’t get as many Xbox Ones as PS4s, Hannon said. The retailer gets consoles from “wherever we can,” including distribution, he said. “If we had some more supply it probably could have been a positive category” for Abt during the holiday season “because there was a lot of demand” for both new consoles, he said. It wasn’t clear if the PS4 was the more popular new console because some customers who bought Sony’s console may have been doing so because Abt had no Xbox Ones in stock, he said. Game hardware sales were slightly down for the year in units and revenue, he said.

Crutchfield’s holiday sales “pretty much” followed the trends prevalent throughout 2013, which included strong sales of audio components and Bluetooth speakers, the latter “accelerating” during the gift-giving season, said Rick Souder, executive vice president-merchandising. Products including digital cameras and TVs that suffered slow sales throughout 2013 continued that trend during the holiday selling season, although the downturn in TVs was offset by gains in 4K models, Souder said. Despite the slowdown, Crutchfield’s TV inventory was in “good shape to be out in time for the arrival of the new models” in the spring, Souder said. “There may be inventory, and if there is, it’s probably in the retail channel and not with manufacturers” who kept a tight rein on supply, Souder said. “Manufacturers aren’t coming to us and asking if we can buy this or that so if there is excess inventory I am guessing it’s in the retail channels more than with the suppliers."

Wilshire Home Entertainment was on track to be up about 10 percent in revenue for the period from Black Friday to Christmas, with margin up 2 percent, Perry told us. One major factor was that the two previous years were “so weak,” he said. What helped give business a lift was that there’s “probably more confidence in the economy, at least more confidence maybe in the stock market” than there was during the 2012 holiday season, he said.

Wilshire sold “a lot of wireless technology” products and premium flat-panel TVs during the holiday season and consumers opted for more integration than in the previous year, Perry said. But “we don’t see near the number” of TV and Blu-ray player units sold as in prior holiday seasons, he said. Many consumers are treating those products as “commodities” now and Walmart, Costco and Best Buy are getting more of that business, he said. When consumers need integration of devices in their homes, “they seek us out,” he said. Growth in Wilshire’s installation business helped drive sales growth also in the 2013 holiday season, he said. Although the number of installations was about the same as during the prior holiday season, the number of attachment products sold with TVs for installations grew and that boosted total gross sales, he said. Customers bought more wireless solutions, automation, lighting and audio products, as well as furniture, than they did a year ago, he said.

December sales “ran considerably ahead” of 2012’s at Pflanz Electronics in Sioux City, Iowa, owner Vance Pflanz told us. “The business seems to have some strength to it right now,” he said. “We're selling quite a bit of higher-end video -- quite a bit of 4K [and] quite a bit of 80-inch [HDTV] panels,” he said. The retailer’s revenue for the month was up 18.6 percent from 2012, he said. The increase was driven by 4K TVs, larger-screen TVs in general and projectors, he said. The 4K TVs “moved better than I anticipated,” while higher-end 1080p TVs “did not do as well” as he had hoped. There was some cannibalization of higher-end 1080p TVs by 4K TVs, he said. If customers were willing to spend $1,000 for a 55-inch TV, they opted to buy a 4K model, he said. The retailer’s strongest TV business is with Sony and it sold “quite a few” Sony Ultra HD Media Players during the holiday season, he said.

Audio was also strong for Pflanz and its speaker business was up “considerably” from the prior year, he said. The retailer sold “quite a few floor model speakers” during the holiday season, unlike in recent years, he said. Soundbars did “quite well” and it also continued to sell a lot of surround sound systems, he said.

Adorama’s holiday sales closed with a rush as customers waited for expected sales, said Schachter. The retail’s store sales were down nearly six percent, but it had a shift to “customers buying online,” which offset the decrease, Schachter said. Store traffic increased as customers scouted out products before buying them from Adorama online, he said.

A sharp 20-30 percent drop in Adorama’s unit sales of point-and-shoot cameras left the retailer’s digital camera business flat overall. But the addition of five models of smartphones and Verizon as a carrier helped offset that downturn and enabled Adorama to sell more tablets. Tablet sales were up 35 percent in units, Schachter said. Adorama’s shift to selling higher-end notebooks, including Ultrabooks, enabled it to post a seven percent gain in the category, Schachter said.

In TVs, “the customers got smart and waited until the end of the holiday season,” Schachter said. “We have conditioned the customer to wait on the assumption that as you get closer to the end of the holiday season, you are going to get the deal.”