Cheap Times Coming Up at Holidays?
Last week we had news from the Consumer Electronics Association and CNET that consumer confidence in electronics was up. Given how dismal the numbers looked in context, maybe the headline was supposed to read that consumers are more certain that their cell phones will turn on when so required. For those tech companies that have been hoping for cheerful news, you might want to skip the rest of this post.
The Wall Street Journal ran a story in which it had interviewed a number of retail chain technology buyers, and the results aren't pretty:
As they fight grim forecasts that sales this holiday season will be as bad as last year's, leading electronics sellers Best Buy Co., Wal-Mart Stores Inc., Sears Holdings Corp. and RadioShack Corp. are counting on merchandise such as $300 netbook computers, private-label speakers and electronic-book readers to appeal to customers who have put thrift at the top of the list.The impact of a shift in average sales price is major. Last year, consumers cherry-picked discounts and then left the stores on Black Friday last year. But those were deals on more expensive items as well. Last year, Best Buy saw a steep drop in profits even as it gained in, yes, mobile phones and GPS units, but also home theaters. Swing the balance toward the portable devices and the margin slide gets steeper.
On another front, apparently analysts are suggesting that the time may finally be ripe for virtual desktops, and Gartner is predicting that within five years, 15 percent of desktops will be replaced by thin-client PCs. That means lighter hardware -- read as smaller, therefore higher commodity factor and lower margin -- and even a bigger problem for Microsoft. Or, for that matter, Apple, Google, and the various flavors of Linux.
What we're seeing is the beginning of a fundamental realignment of the tech sector, whether consumer- or business-oriented. Happy Holidays.
Image via stock.xchng user iprole, site standard license.