Consumer Electronics Shows Strong Start

Consumer electronics sales were strong in the reports on the big Thanksgiving weekend kickoff to the Christmas shopping season, with most reports showing more sales growth for electronics than other types of gifts. For example, the consumer survey by the National Retail Federation reported that 37 percent of shoppers bought electronics this year compared to 31 percent in 2004. But this was at least partially due to the marketing strategy of the big box retailers that sell most of the consumer electronics products. They used consumer electronics products as loss leaders to attract shoppers and keep them away from the mall stores. Obviously, this can not be done for the entire gift buying season. Thanksgiving weekend sales were consistent with most holiday sales forecasts, which anticipated a 6 percent to 6.5 percent sales gain for all purchases versus last year. That is less than the huge 7.9 percent rise last year because of the diversion of some spending to cover higher energy prices. But it is still stronger than average growth. It takes considerable digging to reach this conclusion. The weekend sales reports ranged from -1 percent vs. 2004 (at malls) to 11 percent (shoppers using Visa cards), to 22 percent in a survey of shoppers by the National Retail Federation, as well as in a survey of online retailers. Each of these reports had to be adjusted to be consistent with Census Bureau reporting practices for retail sales which eventually becomes the “official” number. The electronics industry should still be cautious about holiday sales. Christmas shopping, mostly outside the U.S., will continue for four more weeks and the Chinese New Year is five weeks after Christmas this year. That said, all of the usually reliable drivers of consumer spending are both strong and strengthening. Consumer electronics prices have plunged about 10 percent compared to other gift alternatives since last year. Consumers will buy relatively more of items that have become relatively cheaper. James Haughey is director of economics at Reed Business Information, Electronic News’ parent company.