updated 06:45 pm EDT, Tue October 26, 2010
NPD says holiday sales dark as prices, tech dull
The NPD today warned that technology sales during the holidays could be especially bleak. Industry Analysis VP Stephen Baker said estimates were looking "increasingly dark" and blamed it mostly on the culture behind the companies themselves. Price was a primary reason, as he accused companies of focusing too heavily on price and encouraging a culture that assumed it would get perpetually lower device prices, even when it wasn't realistic.
"With consumers trained to expect 20-25 percent price declines every year, small movements of 5 percent or less are unlikely to inspire them to rush into the stores and are more likely to convince them to wait on the expectation that those dramatic price declines will materialize," Baker said. "Unfortunately, we appear to be in a period of stable pricing as the price drops of the last few years have left little room to maneuver while absolute prices hit rock bottom and the industry searches for profitability."
Accordingly, many of those NPD had asked had now said they not only were cutting back electronics purchases but were in some cases buying nothing. The industry itself may have created the problem rather than economic factors, analysts said. Since much technology is now crucial rather than simply nice to have, shoppers have been holding off on upgrades for things they consider utilities where before they would bought a new model on their own out of desire.
Although not mentioned by Baker, the treatment of computers as necessities may have helped fuel the iPad's effect on netbooks. Netbooks as traditional computers have been slowing in recent months, with their results compounded by a lack of significant performance upgrades in the two years since the category began. A tablet like Apple's is both noticeably different and comes across as a special item rather than a basic utility.
Regardless of the technology, the researchers cautioned that many of the companies involved simply weren't developing innovative enough hardware to trigger repeat sales. Except for devices like the iPad, there was no "must-have hardware." Many customers were also buying an upgrade or had bought too recently to come back so soon without a meaningful jump. Only 50 percent of LCD and plasma TV sales were to newcomers where they dominated the field just a few years ago, and 80 percent of all notebooks were less than three years old, the study found.
The early look isn't definite but may pose trouble, especially for companies focusing on low-end computers and other electronics that treat them as commodities. High-end hardware like Macs and very large TVs have usually fared better in these environments, since their audience can both better afford frequent upgrades and often sees the technology as desirable in itself rather than strictly essential.