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Industry Association Says Consumer Electronic Sales Up, But Why?

Is there gold in them thar components?The Consumer Electronics Association is predicting that some key categories will see good sales during the holiday season. But this is not a report that should necessarily cheer anyone in the industry, because there are probably three big words fueling the "strength": really low margins.

Shawn DuBravac, the trade group's economist, said yesterday that retail sales for consumer electronics were up 1.2 percent in August from the same period last year. By contrast, sales of home furnishings were down 6.8 percent, and auto sales were down 13.5 percent."Despite all of the other indications that we're in a recession, consumer electronics spending continues to hold up pretty well," said DuBravac. "In some categories, they're doing phenomenally well." For instance, sales of flat-panel TV sets are up 40 percent so far this year, GPS navigation systems sales are up 95 percent, and sales of video gaming hardware have grown 21 percent.
The first question is since the organization was talking about sales in August overall, is that the same time period in question for the other categories? According to NDP Group numbers, the pace of growth in video game consoles and titles actually slowedin August, with hardware ahead of August 2007 by only 3 percent. And if CEA is counting all sales to date, then certainly the nudge that Microsoft apparently has enjoyed from dropping prices helped. But those sales are bringing in less per unit.

As for the 40 percent that flat panel television sales are supposed to be up, that economics on that are downright scary. First of all there's the transition to digital television that is undoubtedly driving a lot of these sales. Second is the "stunning" price drop in HDTVs reported by PriceScan.

A PriceScan report entitled "LCD TV Prices Fall Fast in Advance of Holiday Shopping" has found that prices for 40-inch 1080p LCD HDTVs fell 12 percent in the third quarter of 2008, including eight percent in September alone.According to Jeff Trester, PriceSCAN Co-CEO and Chief Economist, "This is a fairly stunning drop in the price of state of the art high-definition televisions of a size sought by many households. One would have to consider 40 inch 1080p LCD televisions a bellwether of the consumer electronics market, so this current accelerating price decline may be indicative of the economic slowdown and financial crisis affecting the retail sector."
In other words, sure, people may be buying, but when margins have to take body blows to support the sales, it isn't good economic news for the industry.

Circuit board image via stock.xchng user stockers9, standard site license.

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