Tech Bright Spots on a Bleak Friday

According to NPD's recent Consumer Technology Holiday Spotlight Report, the economic malaise is going to affect a number of popular holiday gift items.

The report includes results from a fourth-quarter survey that asked consumers about their plans to buy items, such as flat panel televisions, desktop and notebook PCs, digital cameras, MP3 players, GPS devices and digital picture frames.

Across the board, consumers said the economy had caused them to reconsider planned purchases, with big-ticket items giving the most pause. The most adversely affected were flat panel televisions with 40-inch or larger screens.

Sixty-three percent of those surveyed that had been planning to buy such a TV said they now definitely or probably would not.

In retail, the day after Thanksgiving, which has come to be called Black Friday, is known for consumers forming long lines in search of limited-quantity deals on products. In comparison to years past, however, more consumers will be focusing on credit lines and unemployment lines.

In its third-quarter financial reports, Best Buy cut back its revenue forecast, citing the economic environment as the worst it had encountered in its 42-year history, and Circuit City recently closed 155 stores as it declared Chapter 11 bankruptcy.

Tweeter, a northeastern retailer of high end AV-equipment, also recently closed its distribution centers and sold itself to a liquidator.

Compounding the challenges of the macroeconomic softness are the high levels of penetration that have been achieved by many products that have seen strong sales for the past few holiday seasons. According to NPD's 2008 Household Penetration Study, fielded in May 2008, flat panel TV penetration is now at 53 percent.

Notebook PCs are now at 48 percent. Among less expensive portable electronics that are easy to buy online, digital cameras are now in 76 percent of U.S. households, while MP3 players are now at 50 percent.

As many categories reach maturity, there simply has been less fat to cut after the Thanksgiving feast. However, certain products will continue to see growth as they cannibalize alternatives and exploit niches. Among them are LCD televisions, which continue to grow at the expense of other TV technologies, and notebook PCs, which continue to eat into sales of desktops.

Of particular interest this holiday season are "netbook" PCs -- inexpensive ultra portables tuned for student usage, quick Web sessions and light computing.

Other products that have headroom include Blu-ray players, GPS devices and digital picture frames, which will all be promoted heavily this holiday season. And as small, inexpensive camcorders that take advantage of flash memory -- such as Pure Digital's Flip Mino -- embrace high-definition, they should complement sales of high-definition televisions.

Nobody expects this Black Friday to drive as much green as it has in years past, but consumers still plan to come out for the big shopping day, and even wait in line for door buster specials.

For some, the general allure of great deals will be enough, but according to NPD's holiday spotlight report, to maximize the Black Friday opportunity, retailers will have to offer the key products as consumers more carefully consider every expenditure.

Ross Rubin is director of industry analysis for consumer technology at The NPD Group.

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