It seemed like everything was going so well. Holiday mall traffic was said to be brisk, consumer sentiment seemed to be thawing a bit, even the unemployment numbers made a U-turn just before critical mass and started heading nicely downward. Then came reports of exceptions to the general rule of an improving U.S. consumer economy in Q4 2011, most notably from big-box retailer Best Buy, which reported lower same-store unit sales for the quarter and flat revenue.
So what happened; did a piece of the sky fall and someone forget to blog about it? Some clues came this morning from analyst firm NPD Group, which reported a 6% overall drop in holiday consumer electronics sales compared to the same period in 2010. Sales were sharply lower for MP3 players, digital picture frames, point-and-shoot… whoa, whoa, wait a second! MP3 players? What decade are we talking about again?
A 20.5% decline in MP3 player sales in the period from from November 20 to December 24, versus the same period in 2010, was one contributing factor to NPD’s sales decline figure. Add to that a 32.6% decline in stand-alone GPS device sales, a 42.5% decline in camcorder sales, and a 20.8% decline in point-and-shoot camera sales should be an indicator of something.
You’d think it would be on the tip of everyone’s tongue. Tongue, tongue… maybe something else starting with “t?” Nope. The message this morning was doom and gloom in advance of the first official (public) day of CES 2012 festivities. Desperately trying to recover from the agony of a gospel choir failing to lift the spirits of the last Microsoft keynote, attendees awoke this morning to TV reports that the holidays were actually a bust for retailers.
Hidden in the one place where no one reading Web articles looks any more (the first paragraph) was this bit of information from the NPD report: Its sales figures tracked only PCs and certain discrete CE items, and excluded two components which the firm tracks separately: smartphones, tablets, e-readers, and video games.
The four components of the CE economy which, by all accounts thus far, performed extremely well over the last quarter.
So, did tablet and smartphone sales end up cannibalizing desktop and notebook PC sales? Here’s where you would think someone would have spotted the good news, as articulated by NPD’s vice president of industry analysis, Stephen Baker: Revenue from both PCs and TVs outpaced the rest of the market. It’s these stand-alone, discrete-function devices that people just aren’t buying any more. “The accelerated rate of decline in older technology categories such as DVD, GPS, and MP3 players put a ceiling on how well the industry could perform during the holiday,” said Baker.
Um… yea. That makes perfect sense, doesn’t it? So any retailer that experienced a downturn over the holidays probably had too much invested in these discrete-function devices. With one exception: Hard disk drive sales dropped 25.1% annually in the sample period. Of course, that was due to the global hard drive shortage and subsequent price spike, on account of the Thailand floods knocking out manufacturers.
So why doesn’t NPD discontinue tracking CE market segments that have already atrophied? Baker and his colleagues are at CES as we speak, and were unable to provide comment by press time, though his statement this morning does speak to this question somewhat: “Many newer technologies posted strong gains, although most of those products, such as streaming devices, still generate volumes too small to impact the overall market trend. These newer technologies are likely to be the ones to watch in 2012 as the industry continues to search for high growth opportunities to replace aging product segments.”
