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Holiday gadget sales could be grim

NPD, which tracks consumer technology spending, says the outlook for retailers this holiday season is increasingly bleak thanks to the economy and products that aren't "must have."

While iPads might sell well for Apple this holiday, the overall tech retail industry is expected to decline compared to last year's impressive sales numbers.
While iPads might sell well for Apple this holiday, the overall tech retail industry is expected to decline compared to last year's impressive sales numbers. Marguerite Reardon/CNET

Consumer electronics retailers have good reason to be scared right now, and it has nothing to do with Halloween.

Retailers typically do one third of their annual sales between October and December, and this year's holiday shopping season is not on track for big gains, according to an analyst firm that follows the industry and interviewed shoppers. In fact, the outlook is pretty bleak.

The NPD Group says it is expecting a 1 to 3 percent decline in sales for the approaching holiday shopping season for tech retailers. And that's unfamiliar territory for an industry that's been growing by leaps and bounds even amid a poor economy the past few years.

"Unit volumes last year were up 30, 40, 50 percent. [Sales of] TVs were up 25 percent," said Stephen Baker, vice president of industry analysis for NPD, said in an interview today. "What people have is pretty new, and people don't need to buy new stuff [this year], especially when the technology isn't particularly advanced from where it's been the last couple years."

In other words, what people have is working for them, and if they do buy something this fall, it's probably not going to be the kind of high-priced item like a flat-screen TV, high-end digital SLR camera, or a brand new laptop, the categories of gadgets that have kept cash registers ringing the past few holiday seasons.

There are other reasons why consumers generally are not expected to spend a lot of money on new gadgets this holiday season, Baker points out in a post on NPD's blog: prices have stayed relatively stable, meaning there's unlikely to be drastic price wars among retailers, the thing that gets most people in the door.

Shoppers are accustomed to expect 20 percent to 25 percent discounts on products around the holiday, and this year the actual number is going to be closer to 5 percent, Baker reports. And those small price declines are "unlikely to inspire them to rush into the stores and are more likely to convince them to wait," he says. And that's bad news for retailers hoping to grow over last year's numbers.

Additionally, there's no new "must have" product category this year. And no, the iPad, as hot as it is, doesn't count, Baker says. The volume of potential iPad sales--and the few other tablets you'll be able to buy this holiday season--just do not amount to enough to move (or save) a whole tech retail sales season.

Large, big-ticket items like PCs or TVs, if popular, can completely turnaround a sales season, says Baker, because "you're talking about tens of billions of dollars of sales. With iPads you're talking about low single-digit million sales."

Looking to next year, there is somewhat of a silver lining however, he adds: "I don't know that things will get much worse."