LCD
Against the backdrop of an economy that grows more precarious by the
day, the outlook for holiday gift spending is bleak. Even so, consumers
will be buying gifts, and consumer electronics will be high on their shopping lists, even if spending will be lower this year.
Amid the diminished expectations, some product categories will hold
their own this season, industry and retail analysts say. An early
November survey of consumer intentions by the Consumer Electronics
Assn. found that U.S. shoppers expect to spend an average of $1,437 on
gifts this year, less than the $1,671 they spent in 2007. Still,
consumers say they'll allocate a larger percentage of their
spending—28% vs. 22% last year—to consumer electronics. The idea is
that families will opt for at-home entertainment rather than travel and
dining out.
And despite what you may have heard about video entertainment
migrating to the Web, the TV set is still the king of the home
entertainment universe. Prices are coming down quickly. In September,
the average price on a 32-inch LCD TV was $858, a drop of about $100
from the same period in 2007. Now, it's possible to buy a 32-inch LCD
set for as little as $399.
No Competition for Blu-ray
One reason, says iSuppli analyst Riddy Patel, is that there is an oversupply of LCD panels, so manufacturers like Sony (SNE), Samsung, and Sharp
can pass favorable component pricing on to consumers. "The prices are
suddenly very attractive on these sets," Patel says. "The only question
is how consumers will react." Her firm recently slashed its 2008
forecast for LCD TVs by 5 million units, to 94 million. It also trimmed
its 2009 forecast to 112.5 million units, from 124 million units,
meaning the market is growing, though more slowly than before.
Consumers may also be looking for stuff to watch on that new LCD TV. This will be the first holiday season that Blu-ray
disc players have had the market to themselves without their onetime
competitor HD-DVD. Consumers have so far been slow to embrace the
format; even without the competition, sales have been slow. The
Consumer Electronics Assn. expects Blu-ray sales of 2 million units in
the U.S. this year, vs. 20 million conventional DVD players in the same
time frame.
But fast-falling prices may get consumers interested, says iSuppli's
Sheri Greenspan. "Blu-ray will gain some attention this year because
the prices are coming down so fast, and because retailers are offering
package deals that include players with TVs," Greenspan says. Some
players, including Samsung, are also upping the ante by adding the
ability to play streaming movies from Netflix (NFLX) and music from Pandora to their products.
Ashton Kutcher Connects
The market for digital cameras, a product group that has suffered
slowing sales in recent years, is showing life in higher price ranges,
and high-end digital single-lens reflex (DSLR) cameras are expected to
sell well. "It comes down to the fact that the person buying a DSLR is
different from the one who wants a point-and-shoot," says Ed Lee,
director of consumer imaging at market research firm InfoTrends.
"Despite the economy, people are still buying them, and the prices are
coming down." The sweet spot of the DSLR market he says is in the $500
to $800 range.
