Consumers value gadgets above good health, CEA finds

If Black Friday and the holiday weekend was any indication, consumer electronics (CE) vendors have little reason to fear the economic crisis. According to several analysts and industry associations, CE devices ranging from high-definition televisions to gaming consoles will be a bright spot in struggling retail sales this holiday season, with many consumers valuing these devices above their good health.

The National Retail Federation (NRF) found that 172 million people spending around $41 billion total visited or planned to visit stores and Websites over the past weekend, up from 147 million last year. Clothing was the main reason consumers braved the Black Friday crowds, but 36% were out to purchase CE devices. According to the Consumer Electronics Association (CEA), CE purchases will beat out the NRF’s overall projections made for retail this holiday season despite declining from years past. CEA surveys have found that nearly 80% of adults expressed interest in electronics this year, up from 75% last year. In fact, four of the top 10 items on consumer’s wish lists were CE devices, according to Steve Kidera, CEA coordinator.

“It’s a tough time, but compared to other industries, CEs are still faring well,” Kidera said. “In the top list, number 10 was good health – peace and happiness was number one, computers were number two and good health was number 10, so I guess a lot of people would rather have a cell phone, a computer or a television than worrying about their health this year.”

In particular, CE devices that have fared well so far include major gaming consoles, the Guitar Hero World Tour video game, Canon PowerShot digital cameras and the Acer Aspire netbook computers, according to Mark Sue, managing director of RBC Capital Markets. Other popular presents have been digital picture frames in the $49 price range for a 7-inch frame and the Garmin Nuvi 200, a personal navigation device retailing at $97 over the weekend.

“Anecdotal comments suggest consumers will spend 15% to 50% less this holiday, yet consumer electronics seem to be holding relatively well due to dramatic price cuts and share gains from other segments such as clothes and sporting goods,” Sue wrote in a research report today, classifying Black Friday and the start of the holiday selling season as mildly encouraging. “Margins can't be too healthy, nonetheless, and there might not be too much profit to be shared from a $189 Blu-Ray player – $289 two months ago, an $18 Gig USB flash drive or a $279 Atom-based netbook computer.”