Deep Price Cuts Persist, Electronics Sales Soar

Sales Loss In Weak Economy May Be Less Than Retailers Feared, Some Experts Say

December 22, 2009|By Andrea K. Walker | Andrea K. Walker,andrea.walker@baltsun.com

Vanessa Johnson was content watching favorite shows on her 36-inch "regular" television, but her husband was pining to see the Ravens on a much more impressive high-definition, flat-screen model. And though Johnson might have ignored his wish not so long ago, heavy discounting this season allowed them to buy a 58-inch Samsung model for about $2,000.

"The price is down considerably for that size," Johnson said recently while making a final layaway payment for the television at Sears in White Marsh. "This is his Christmas present, birthday present and everything else."

Shoppers like Johnson, taking advantage of heavy discounts, are driving up sales on big-ticket electronic items and improving the holiday season for retailers despite the weak economy. Stores usually reserve price cuts on electronics for the day after Thanksgiving, but discounts have stretched this year throughout November and December, as retailers tried to lure shoppers. Many analysts expect the price cuts to last through the rest of the holiday season.

And it's not just televisions consumers are buying. With prices down as much as 24 percent in categories such as laptops, according to research firm NPD Group, shoppers are scooping up computers, video cameras, iPods and gaming systems. Sales of technology rose slightly in November to $7.1 billion, the first month this year that didn't see a decline, NPD Group said.

Velda Haley, a 50-year-old optician who lives in Baltimore, nabbed an Xbox 360 elite gaming system for $299 as a "house" gift for the family from Sears. She's watching her spending this year, but said the good deal was worth it.

Some retailers are offering additional perks as well as discounts. Walmart, for instance, ran a special that included a $50 gift card with the purchase of a Wii gaming system

"Electronics are certainly one of the highest areas of interest for our customers," said Walmart spokeswoman E.R. Anderson. The world's largest retailer has featured bargains on electronics each week since Nov. 1, and though Walmart doesn't break out sales on specific categories, Anderson said officials are "pleased at the continued interest in electronics items again this year."

Electronics are nearly tied with toys as the top Christmas gift item for the first time in 25 years, according to a survey of shoppers conducted by America's Research Group.

Such consumer demand has caused one retail analyst to raise his holiday sales forecast. C. Britt Beemer, the CEO and founder of America's Research Group, had expected overall sales to fall by 2.9 percent, but now expects a 1.2 percent drop.

Most analysts, like Beemer, still forecast an overall sales loss for November and December. Last weekend's record-breaking snowstorm made matters worse as many Baltimore-area malls closed early on Saturday, and shoppers chose to stay home. Retailers hope to make up the lost revenue during the rest of the week, and malls such as Towson Town Center are staying open until midnight today and Wednesday to give consumers more shopping time.

Despite the storm, the National Retail Federation is keeping to its earlier prediction that sales will fall 1 percent this year, the second worst showing since the group began tracking sales.

The heavy - but discounted - sales of consumer electronics bring less profit for retailers. "Falling prices make it more difficult for everybody to be successful," said NPD analyst Stephen Baker.

Best Buy said in a recent earnings call with analysts that the average price of televisions has fallen 17 percent. The retailer expects profit margins to be squeezed for the rest of the year.

Jon Collazo, general manager of Best Buy in Bel Air, said consumers are focusing on price this year. Computers, televisions and the newer models of iPods have been selling well, and even with lower margins, the climate has started to improve, Collazo said.

"Sales are stable," he said. "The electronics segment has made a great rebound since last year."

Beemer said prices of flat-panel TVs hit a $499 level, sending sales "up like a rocket." Two decades ago, a similar turning point occurred as VCR prices fell to $249, making them accessible to more consumers.

"That's been the way electronics have been for a hundred years," Beemer said. "There has always been deflation in the electronics industry. You bring something out and each year they make it cheaper and cheaper."

He added that the high demand for electronics means that stores might not have much inventory left for many post-Christmas sales.

Sales at Sears have been helped by a layaway program, an option the retailer didn't have for big-ticket electronic items last year, said Rich Dorn, an assistant manager at the White Marsh Mall store. He said Sears will also match competitor prices.

Vanessa Sidberry put a 32-inch Vizio flat screen on layaway at Sears in White Marsh and was recently there making a payment. She said the low prices have put a flat-screen within her reach. She's buying the television as a Christmas gift for her mother.

"The prices are really good. It's hard to pass that up," said Sidberry, a 47-year-old government worker.

There's only one reason Pat Wolsey would trade her clunky older model-television for a sleeker flat-screen version - for the sake of her four grandchildren.

"They tell me it's not in the right century, but it's in the right century for me," said Wolsey, 72, who was looking at televisions at Sears in White Marsh recently. She's been monitoring the prices and was pleased to see them fall in recent weeks. She might be ready to buy one in time for a Christmas visit from her grandchildren.

"Maybe I'll surprise them," she said.

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