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Electronics Fly Off Shelves—but That Might Be Bad News

Dramatic price cuts in consumer technology brought buyers to stores the week of Black Friday, but retailers may have gone a little overboard on the loss leaders this year.

Man watches home theater televisions at the Best Buy
AP
Man watches home theater televisions at the Best Buy

New retail sales data from the NPD Group shows that total revenue for Nov. 22-Nov. 28, the week of Black Friday, came in at just over $2.7 billion in 2009 — a 1.2 percent drop from last year, although better than the 3.4 percent decline stores saw in 2008.

Products were moving off store shelves, but unprecedented deep discounts prevented the high volumes from impacting the bottom line. NPD reports demand for flat-panel TVs was strong, but the price wars, which saw the average selling price fall 22 percent to $535 (a $200 drop from the 2007 price), ultimately resulted in a loss for retailers. While unit volume sales were up 15 percent, revenues on the TVs were down 9 percent overall.

“Consumers came out this year because there were deals to be had — the same reason they have been shopping for electronics all year,” says Stephen Baker, NPD’s vice president of industry analysis. “What made Black Friday different this year is how aggressive those price cuts were. This year, retailers and manufacturers knew it wasn’t going to be about increasing revenue, it needed to be about getting consumers excited to shop and moving those products out of the stores.”

NPD focused its research on consumer technology items, as they are typically the biggest movers of the holiday season. The numbers released Wednesday do not include the sale of video game systems or mobile phones, however.

Consumer Technology Black Friday Price Declines

2008
2009
LCD TVs -5% -22%
Notebook Computers -8% -26%
Camcorders -7% -33%
Point and Shoot Cameras -12% -7%
GPS -22% -14%
Stereo Headphones -11% -19%
Source: NPD

While TV sales posted a revenue drop, other items that were deeply discounted had more success.

Camcorder sales were up 55 percent, thanks to prices that are one-third lower than they were a year ago. Blu-ray players were just as hot.

New operating systems and low prices spurred demand for computers. Overall sales volume was up 63 percent compared to last year’s Black Friday week, as the average price of a notebook fell to $500 — $160 lower than a year ago.

Less successful were GPS units, which saw a 15 percent rise in unit sales from 2008, but are certainly not the hot item they were a few years ago. Meanwhile, point-and-shoot cameras and multi-function printers both turned in flat sales.

Analysts were expecting margins to be under pressure this year, given the deep discounting. “Even as we may see more boxes moving out of the door this holiday, the revenue is going to be a little bit harder to come by,” Steve Koenig, director of industry analysis for the Consumer Electronics Association, noted last month

The lower sales during Black Friday week don’t necessarily mean overall bad news for retailers this holiday season. Many stores, such as Wal-Mart Stores , Best Buy and Target, offered Black Friday level sales much earlier in the month, prompting some bargain hunters to begin their holiday shopping earlier. Amazon.com was also particularly aggressive with its early- and mid-November deals.

Online shopping is also expected to rise dramatically. Shop.org, the online division of the National Retail Federation expected 96.5 million American to shop online this Cyber Monday — a 10 million increase from 2008.

And preliminary results from those online sales are encouraging. Almost three-quarters of multichannel retailers and 80 percent of online only stores the NRF surveyed saw sales growth in November.

More from Consumer Nation:

Questions? Comments? Email us at consumernation@cnbc.com

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