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Will Electronic Device Sales Light Up the Holidays?

Wednesday, 14 Nov 2012 | 3:32 PM ET
Chris Goodney | Bloomberg via Getty Images

There's little doubt Americans love their electronic devices. Just looking at a holiday gift wish list for adults from the Consumer Electronics Association (CEA) shows how much. A tablet computer was the top choice for a Christmas gift this year — ahead of money and peace/ happiness. A smartphone came in third.

But will that affection for the digital compute into bigger and better sales this holiday season for the electronic device industry? Maybe, say analysts.

"I think sales will be good this year and perhaps beat last year, but it would be difficult to say they'll be great," said Shawn DuBravac, chief economist and director of research for the Consumer Electronics Association, a trade group for the tech industry.

"Technology is not growing as fast as other durable goods, like automobiles. When people spend on those types of items, they're not spending elsewhere and tech could suffer this holiday season," he said.

"There are no 'wow' products out there to get people all that excited," said marketing specialist Mickey North Rizza, vice president of strategic services for supply management company BravoSolution. "There are mainly changes to existing products for this year rather than great new ones."

New products or not, it may easy for this year to at least match 2011's holiday sales for consumer electronics. Consumers are on track to spend an average of about $252 on electronic devices in 2012, just about even with last year's $246 average per person, according to the CEA.

But the sales trend in recent years has been negative. Total consumer technology sales in 2011 fell 5.9 percent to around $9.5 billion from 2010, according to the tracking firm NPD Group. And 2010 was a slight improvement over the 6.2 percent decline in 2009. The only good news was that the 2011 figures excluded mobile phones, e-readers, videogames, and tablets — items that could be hot this year.

"No question what's popular with consumers are the tablets and smartphones," said Brad Thomas, a retail analyst with KeyBanc Capital Markets. "People love getting them as gifts."

What seasonal cheer there is could be spread among tablet makers. Apple's domination — even with its newly released $329 iPad Mini — will face some challenges at least when it comes to prices.

Amazon.com's Kindle is listed around $159, while the Google's 3G variation of its Nexus 7 Galaxy is dropping to $199 from an earlier price of $224. Barnes and Noble's Nook will be selling for around $140. And if not cheaper in price ($499), Microsoft's Surface at least offers an alternative to Apple. (Read More: iPad Mini Demand Is Huge)

"The consumer wins in all this when it comes to pricing," said Michael O'Hara, CEO of Yumani, an e-commerce platform that launched in early October of this year. "And because of Apple, more people will be buying different kinds of tablets devices. There's more interest in them (tablets) than ever before."

Helping to draw in customers will be holiday specials catered to the Internet, said DuBravac of the CEA.

"What consumers will see are special flash deals, deals limited to a five-hour window to buy something," he said. "And there will be more extras, like accessories or other items, to induce buying rather than any big lowering of prices from where they already are."

For example, one of Wal-Mart Stores' Black Friday specials is an iPad that will sell for its usual price, however, customers who purchase it during a one-hour period on Thanksgiving night will receive at $75 gift card.

When it comes to smartphones Apple will likely top the list with the iPhone 5, which sells for $199 with a new contract, but like the tablets, there will be competition from the likes of T-Mobile's yTouch 4G Slide ($49.99 with a two year contract) and the pricer ($549) Samsung ith its Galaxy S3 ($99 with two-year contract).

Paul Morris | Bloomberg | Getty Images

Other areas of electronics might see a holiday boost, including TVs, said Frank DeMartin, vice president of retail and distribution sales for Mitsubishi n the U.S.

"We expect our larger TVs, in the 50- and 60-inch size, to do well, at least as well as last year," he said. "New technology is improving the resolution on the bigger sets and people want to move up in size."

And don't forget accessories like Monster Beats by Dr. Dre, said James Brown, senior director of merchant accounts at price comparison website PriceGrabber.

"Accessory products like high-end headphones like Monster are popular," Brown said. "They give you a top level quality in sound at the $300 level."

At least the anticipation for electronic gadgets has one analyst seeing a very happy holiday.

"Electronic devices are going to charge up holiday sales this year," Sheri Bridges, faculty director of the Center for Retail Innovation at Wake Forest University. "Aside from toys, electronic devices electrify consumers more than any other product category." (Read More: Hot Holiday Toys for 2012)

As for which retailers might do well during the holidays, experts believe traditional chains like Best Buy, Costco , Wal-Mart, and Staples, will not do as well as online retailers and device makers.

"We've been talking about Amazon as a retailer for years and they're just getting bigger," said Thomas of KeyBanc. "In 2010, Amazon was one of the top retailers in the country. It could crack the top-10 list of retailers this year, and Apple's drawing in more customers as it increased its storefronts."

Big winners in retail will be those who know how to stock their shelves, said BravoSolution's Rizza.

"Having the right amount of inventory will be key," Rizza said. "They don't want to get stuck with too many leftover products."

What's troubling to some analysts this holiday season is the expected fall off in profit margins. There may be more items sold, but the lower prices will cut into revenues for manufacturers and retailers, said Yumani's O'Hara.

"I'm always worried about eroding margins," O'Hara said. "What kills a Best Buy is that people go in and research products, but then go online to find a cheaper price. That's why they (Best Buy) might not be around much longer."

Even with the expected increase in tablet and smartphone sales, it may not be enough to boost the whole sector, said Thomas.

"They (smartphone and tablet sales) will take away from traditional videogame sales, laptops, PCs, and televisions," Thomas said. "And with prices falling on all those products, final sales receipts could be low for the year." (Read More: Will It Be Game Over for Videogame Makers This Holiday)

And there's the consumer, said Rizza, who's still dealing this holiday with a slow economy.

"I think people are focusing on what they need and how it fits into their budget," Rizza said. "There's been resurgence in layaways, so they're looking at what they can afford."

In the end, it may end up a mixed bag for Santa when it comes to electronic devices.

"There are a lot of positives like prices that should support devices this holiday season," said CEA's DuBravac. "And the way the calendar falls this year, there are two more weekends of shopping between Black Friday (the day after Thanksgiving) and Christmas. But it's a real wait-and-see on what actually happens at the cash register."

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