Thursday, June 19, 2008

Consumer Electronics and E-Commerce

JUNE 16, 2008

Many consumers to pull back on gadget spending

Despite the jittery economy, eMarketer predicts that retail e-commerce sales in the US will reach $146 billion this year, up 14.3% over 2007.

However, some categories of retail e-commerce may not fare as well as others. Two traditionally strong online sales categories—computers and consumer electronics—may see a slowdown, based on a Piper Jaffray study of online buyers. Along with jewelry and watches, more respondents said they were likely to decrease spending on these categories than on any other.

That conservative approach will also affect total retail sales for those categories, judging by a similar study by The NPD Group. More than one-third of responding consumers said they planned to spend less on entertainment products and devices, compared with 18% who said they would spend more. Almost one-half said they would keep spending the same amount as last year. As a result, NPD said that sales of such products would slow slightly.

Seasonality is another important trend to watch. For online retailers, the holiday season is the best time for consumer electronics sales, according to Nielsen Online data. In November 2007, the average order size for consumer electronics hit an annual high of $135, a rise from October's $127 average, settling to $132 in December. The rest of the year, Nielsen data shows the average order size hovered around $93 to $100.

By contrast, online sales of computer hardware peak in summer based on strong back-to-school demand. The category had monthly average online sales of $272 and $256 in October and November 2007, respectively. These sales were far larger than those in the consumer electronics category—but also far lower than the averages posted for computer hardware in July ($455) and August ($387).

While last year’s monthly sales patterns will likely hold true this year, exactly how much consumers will spend remains in question.

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