'Black Friday' Golden For Computer, TV Sales

LA Times

 

The number of items sold was up after Thanksgiving compared with last year, a report says. But customers grabbed bargains and ended up spending less on consumer electronics -- $2.7 billion, down 1.2%.

Holiday shopper Thanety Bunseam was reluctant to buy anything big this year, but a few days ago the 57-year-old factory worker could be seen resting on the curb outside a Best Buy store with his quarry: a 52-inch LCD TV and a new Sony PS3 game console.

"I got it free with the TV," he said, pointing to the PS3. "They have the game with the TV, so now I buy."

Despite tough economic times, consumers like Bunseam are shelling out money this year for big-ticket electronics such as laptop deals and flat-panel televisions.

During the week of Black Friday, a critical period for beleaguered retailers, the number of computers sold rose a whopping 63% over the previous year while LCD TV sales were up 15%, market research firm NPD said Wednesday.

But there was a downside.

The main reason for the increased sales volume was deep discounts -- so much so that overall revenue for consumer electronics was lower than last year, NPD said.

Combined sales totaled $1.2 billion for Nov. 22 through Nov. 28. That was down 1.2% for the Black Friday week in 2008.

At least that was a smaller decline than last year. In 2008, spending was down 3.4% from 2007.

"This year retailers and manufacturers knew it wasn't going to be about increasing revenue," said NPD analyst Stephen Baker. "It needed to be about getting consumers excited to shop and moving those products out of the stores." Consumers were looking for bargains and computer deals.

He expects the spending pattern for electronics to continue through the holidays.

"The overall picture is better than last year," Baker said. "But don't expect to see any sales growth, in dollars, in the industry."

Laptop computer sales were certainly aided by slashed prices. The average price tag on a laptop last year for Black Friday was $638, according to NPD. This year it was $475. That's a decline of a little more than 25%.

But there was another factor.

Both Microsoft and Apple came out with updated operating systems for computers in the last few months.

This made getting new computers or laptops, often with a faster processors and more memory, especially attractive.

"If there was the right product and the right price, consumers were very willing to go out and buy," Baker said.

"There was not a reluctance to spend, there was a reluctance to spend too much."

Shoppers were well aware that they were in the driver's seat.

"This year everything was about value," said Hovik Pogosian, a salesman at the Best Buy store in Atwater Village.

"When shoppers came in, what they wanted to know was: 'What are the best notebook deals I can get?' "

How Best Buy Plans To Beat Wal-Mart

CNN Money

The scariest six words a consumer electronics chain can hear are "Wal-Mart is getting into your space." That's exactly the problem Best Buy is facing this holiday season.

Wal-Mart (WMT, Fortune 500), for the first time, is offering shoppers installation as an extra on TV and computer purchases -- turf that Best Buy (BBY, Fortune 500) had carved out to differentiate itself from the discount retailer.

Best Buy CEO Brian Dunn says he's ready for the challenge. He plans to dull Wal-Mart's attack through the concept of "connectivity" -- getting all the gadgets in your life to talk to one another. If that sounds like a page from the Apple playbook, you're right.

Dunn, citing proprietary estimates, says connectivity holds the potential to be a $250 billion business -- that's far bigger than plain-vanilla sales of consumer electronics, which are expected to fall 7.7% this year to $165 billion.

Included under the connectivity umbrella are things like mobile services, satellite TV, and digital photography. Best Buy makes money by collecting installation and other fees from customers as well as from service providers such as DirecTV. Even better: Connectivity carries higher margins than sales of gadgets, which suffer from constant deflation.

To capitalize on this lucrative market and to offset declines in CD and DVD sales, Best Buy is experimenting with a new store layout. Gone will be the racks of CDs and DVDs that currently occupy valuable floor space. In their place will go stations for MP3 players, video Nanos, notebook computers, and cameras.

Each station will be manned by Best Buy employees -- known as "blue shirts" for the blue polo shirts they wear -- who will field questions like "How do I get the songs from my iPod to play on my TV?" Best Buy says it plans to open two prototypes in undisclosed locations before the end of its fiscal year in February.

Another edge for Best Buy: The technicians making house calls are part of Best Buy's Geek Squad division. By contrast, Wal-Mart is outsourcing installation to NEW, a firm based in Sterling, Va., that handles warranties for the retailer.

"The operative word here is 'owned,'" Dunn says. "Outsourcing works for back-office operations, but we believe that when an experience touches a customer, you must own it." Wal-Mart says it's very encouraged by early results of its program.

What about the lure of low prices that Wal-Mart has used to beat so many competitors (remember Circuit City) into submission? According to a recent Deutsche Bank study that compared flat panel TV prices at Wal-Mart and Best Buy over a 15-month period, Best Buy's prices actually averaged 1% less than the discounter's. "Low prices are table stakes," Dunn says. Creating a connected, wireless world -- that's the jackpot.