Report: Shoppers Losing Their Appetite For High-End Toys

Based on the first reading of holiday sales of consumer electronics, consumers seem to be losing some of their tech enthusiasm.

Total spending on electronics gained just 6%--to $2.2 billion--in the first week of the holiday season, compared to a gain of 12% in the same period a year ago, reports The NPD Group. And it's the first time in the six years that NPD has tracked this point-of-sale data that dollar-sales growth has dipped below double digits.

While that's not great news, there is a silver lining for retailers, many of whom got burned by massive price-cutting on big-screen TVs last year. "The biggest surprise is what isn't there," says Stephen Baker, vice president/industry analysis at NPD Group. "We didn't see big price-cutting during the Black Friday week."

A more stable selling environment and rational pricing bodes well for store profitability. "We also saw a significant change in the composition of what was selling-there were a lot more lower-dollar-value items than we've seen in previous years, and a lot of accessories, and those tend to be a little more profitable," he says.



Based on data collected by NPD Group, sales of LCD TVs, GPS and notebook computers made the best showing, with the growth rate for plasma TVs, digital cameras and MP3 players declining sharply.

"LCD TVs were the star of Black Friday this year," NPD says, with unit volume increasing by 45%, and revenue soaring 80%. Baker sees no sign of this slowing. "We're a long way from saturation yet," he says, adding that the category continues to revolutionize consumer expectations. "TV companies and retailers have changed the consumer's mindset, both in terms of price and quality. People used to expect to pay $200 or $250 to replace a TV set. Now, they expect pay upwards of $700 to upgrade."

And while average-selling prices in larger LCD TVs did decline 14% this year, they were offset by triple-digit increases in units and dollars among the larger LCD TVs, the report says.

Sales of laptops, which had a decline of 10% in average selling price this year, were also solid, if not as strong as last year. Sales volume gained almost 30% and revenue rose by 17%.

GPS units are red-hot, with unit sales gaining six-fold over the same week a year ago. Revenue increased 237%, breaking the $100 million mark. (Average selling prices declined to under $200 this year, compared to $322 last year.) Digital picture frames also sold well.

Sales growth in the MP3 category slowed to just under 4%, which Baker attributes to saturation. Growth in the digital camera segment was also slower, with revenues actually declining 5% from the prior year, due to dropping prices.

Baker is hesitant to make predictions, given that at any point a retailer or marketer might push the panic button and unleash a series of price cuts that changes everything. "We just don't know what will happen 10 days from now," he says. "But we are cautiously optimistic that while revenue growth will be below last year, the overall rationality of the market ought to make it a little more profitable."

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