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Small Electronics Review

Jan 1, 2010
by Kevin Zimmerman

Trying to recapture some "Ho-ho-ho," from this past holiday season, as opposed to the "No, no, no," that characterized most of 2009, found many small electronics merchandisers betting even more heavily than usual that, amidst persistent news of an economic recovery, Santa might actually deliver some long awaited good news by year's end. "There's definitely been a slowdown with the economy and all that," notes Mo Bahadori, owner of Atlas California Trading (www.theatlasstore.com), "But we are seeing some of our business pick up as we go into the holidays."

"There have been a few dynamics working against us," agrees Gary Wilkinson, owner of Audio Warehouse Express (www.audio-warehouse.com), "with the recession of course being at the top of the list. And manufacturers and other suppliers continuing to discount items isn't helping much either." According to the National Retail Federation, approximately 195 million consumers visited stores and websites over the post Thanksgiving 2009 weekend, up from 172 million during the same period in 2008, but per-person spending declined to $343.31 from $372.57. Total spending was $41.2 billion, about the same as in 2008.

Meanwhile, the three hottest shopping categories, according to market research firm, NPD Group, were electronics, clothing and movies. Deeply discounted, limited quantity merchandise (or "doorbusters") was a key contributor to most of the sales, the group said. NPD Group produced its first ever Black Friday report, which revealed that 36 percent of shoppers reported that they went out looking for doorbusters, and 35 percent reported actually buying a doorbuster item. "This shows the power of the doorbuster," says Marshal Cohen, chief industry analyst, the NPD Group Inc. "Those consumers that went out to get deals found them and purchased them."

Most consumers shopped and purchased at mass merchants (73 percent shopped/68 percent purchased), followed by national chains (59/53) and electronics specialty stores (41/31). "The consumer is looking for value and one-stop shopping," says Cohen. "With the highest percentage of consumers telling us they not only shopped but purchased in mass merchant retailers, we can see just how well they have been able to convert shoppers into purchasers." The survey also found that the most common reason consumers gave for why they actually made a purchase during Black Friday was that they were, "Worried they wouldn't find an item again," with 44 percent; followed by, "great sale," (41 percent); "not likely to be a lower price," (32 percent); "was exactly what someone else wanted," (30 percent); and, "just wanted to be done," (16 percent). "These results suggest that the fact that consumers have concerns about leaner inventories, as well as concerns about not being able to find lower prices, are prompting early purchases," Cohen says.

Survey respondents were asked what items they purchased during their Black Friday shopping trips, with electronics (TVs, Home Theater Systems/DVD Players/Recorders, Home Audio Products, Satellite Radio, GPS Systems, Cell Phones, Desktop/Laptop Computers, Computer Peripherals, Digital & Video Cameras, and MP3 Players) being cited by 49 percent. "Electronics continue to be the early bright spot with consumers, for gifting as well as self purchasing," Cohen says. "Add in the thrill of hunting for bargains, and we have a winning combination."

Maybe for some, but not for all. Wilkinson at Audio Warehouse Express says that taking a slash-and-burn pricing approach to slow-moving merchandise may help in the short term, but ultimately doesn't work. "If a company comes into the marketplace now with, say, a mobile video product that's priced higher than their competitors, they'll probably have slow sales and figure that they've over estimated their product's value. Then they'll discount it, and if they don't sell enough to meet their expectations, they'll discount it some more. They then may be moving product, but they're not helping their bottom line as much." Compounding the problem, Wilkinson continues, is the fact that so many Chinese banks extended credit to Japanese electronics manufacturers before the global economic downturn; once the recession hit, he says, "Suddenly these companies can't pay their loans. They can't pay the Chinese factories who are building their products. How do you get out of that hole? For some companies, they can't."

Audio Warehouse specializes in car and home audio systems, as well as radar detectors, navigation systems and mobile video devices, which include reverse-parking sensor cameras and rearview mirror display wireless systems. The company offers products from a large array of suppliers, including Pioneer, Kenwood, Panasonic, QLogic and Polk Audio. As for where the business is heading, Wilkinson says he'll be listening even more closely than usual at the Consumer Electronics Show (CES), January 7-10 in Las Vegas. In the meantime, he says, "We had a decent first half of 2009 and then it sort of petered out. We'll see if the holiday bump carries over into next year."

"It hasn't been our best fourth quarter," concurs Jiten Kalwani, VP of sales at Zenex USA (www.zenex-usa.com), "but considering what the economy has been through, we've been doing all right." Zenex will also be eagerly following developments at both CES and at merchandise trade show, ASD Las Vegas, held Feb. 28-March 3. "We've been established in Hong Kong for 25 years now, and this is our third year in the U.S.," Kalwani says. "We're taking an optimistic approach to the business."

Media players rule the roost at Zenex, with a full range of MP3 and MP4 players, as well as digital photo frames, alarm clocks, and headphones and earphones. Call for prices. In fact, Kalwani says, the company will be introducing "hundreds of SKUs," in the earbud and headphone categories at CES. "We really feel that's the way to go," he says. "That's an area where we did really well this year." One area that's not doing so well, he says, is phones. "They're a very low margin product for us," Kalwani explains. "It's something that we feel we have to carry, given what we sell, but for the most part we don't really push it. We do some sales with drugstores and the like, but nothing phenomenal."

Bahadori at Atlas California Trading says that his three year old company has been staying ahead of the game with its line of air purifiers and accessories. Among its strongest sellers are an electrostatic ionic carbon filter UV air purifier, with a negative ion generator (retail $299, wholesale $60; discounts available for multiple orders, topping off at $48 each for orders of 101 or more), and the Atlas 300A Air Purifier, which covers up to 3,500 sq. ft. of living space, utilizing both activated oxygen and negative ions (retail $699, wholesale $200; discounts available for large orders, topping off at $160 each for orders of 101 or more). Atlas also offers a range of other products, including dehumidifiers, photographic equipment (light reflectors, studio tents, photo cutters, etc.), security cameras and metal detectors. But it's the company's line of air filters and other such products, "That people keep buying on a weekly basis," that are its strongest sellers for now.

TTI Plus (www.tti-plus.com) made its name on such security items as closed circuit television (CCTV) systems, security cameras, alarm sirens, and the like, but recently has seen more of an upswing with car audio, according to owner, Troy Reynolds. "People have been stashing their money," Reynolds says. "We're hoping that after Christmas, once they get their tax refunds, we'll start seeing a big turnaround. This year has really been up and down, and although lately it's been more up, we're still not anywhere near where we used to be."

TTI's car audio category features speakers ranging from 3.5-inch ($39.99/pair) to 6" x 9" three-way speakers ($89.59); sub-woofers of various sizes priced from $119.99 to $329.99 each (with additional discounts applied when added to a shopping cart); and mono, two-channel and four-channel amplifiers ranging from $89.99 to $419.99. "A lot of our non-essential categories, like home theaters, have really dropped off," Reynolds says. TTI is now working on integrating the Amazon Payments system into its website, "To give people more options to pay," he adds.

Meanwhile, home theater accessories became strong performers for Powercam Inc. (www.powermatecellular.com) once football season started, per director of sales, Mike Zalta. Plasma and LCD television mounts, noise canceling headphones, projector accessories and cable are among its Digicom division's big sellers, and Zalta says the company has also been doing excellent business with its iPod and iPhone accessories (skins, chargers, speakers, and the like).

The following companies were interviewed:

Mike Zalta, director of sales
Powercam Inc./Digicom Digital
140 58th Street, Suite D1
Brooklyn, NY 11220
Toll Free: 866-485 4500
Tel.: 718-439-8881
Fax: 718-439-8883
Email: www.powermatecellular.com/powermate-digicom/contact.cfm
Website: www.powermatecellular.com

Troy Reynolds, owner
TTI Plus Inc.
60 Narcissus Road
Kings Park, NY 11754
Toll Free: 888-672-1070
Tel.: 631-326-6034
Email: sales@tti-plus.com
Website: www.tti-plus.com

Mo Bahador, owner
Atlas California Trading
27 Spectrum Pointe Drive, Suite 305
Lake Forest, CA 92630
Tel.: 949-716-4410
Fax: 949-716-4410
Email: www.theatlasstore.com/g/33851/contact-us.html
Website: www.theatlasstore.com

Jiten Kalwani, VP of sales
Zenex USA/Kimaya
USA700 Penhorn Avenue, Unit #3
Secaucus, NJ 07094
Tel.: 201-863-8811
Fax: 201-863-8833
Email: info@kimayausa.com
Website: www.zenex-usa.com

Gary Wilkinson, owner
Audio Warehouse Express
44 Stelton Road #145
Piscataway, NJ 08854
Toll Free: 800-831-5622
Tel.: 732-926-8900
Email: contactus@audio-warehouse.com
Website: www.audio-warehouse.com

Topic: Product Trends

Related Articles: electronics 

Article ID: 1258

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