Tech Industry

Can gadget bargains be had before the holidays?

Consumers plan to spend less this holiday, which could lead retailers to offer some unusually good prices before the traditional shopping season.

When Leslie Martinez walked into a Los Angeles-area Best Buy two weeks ago looking only for a 40-inch Sony Bravia LCD TV, she walked out with a heavily discounted Blu-ray Disc player, some Blu-ray movies, and half-priced HDTV accessories.

After seeing the TV she wanted at Costco, she turned to Best Buy to see if they could match the price. In the end, after a bit of negotiating with a salesman, the electronics retailer did much more than that.

"He made it almost impossible to walk away," Martinez said.

Retailers have offered bundled Blu-ray players with TVs before, but the way Martinez was able to haggle over the details sounds more like buying a car, not purchasing a TV at the biggest electronics retailer in the nation. And this is before the all-important late-year holiday sales rush, when the most attractive prices are normally found. It could be a sign that many of the best deals offered this holiday will be earlier, when retailers are still nervous that they won't be able to sell the products they ordered.

Though there's been a lot of "cautious optimism" regarding how consumers already hit hard by a downturned economy will respond when the holiday sales season really gets in gear, retailers now have a better idea of what to expect. The Consumer Electronics Association on Monday released its annual CE Holiday Purchase Patterns Study, and the news isn't great. The trade association expects just 3.5 percent growth in electronics shipments during the final quarter of the year compared with last year. It's so low that as Jim Barry, a CEA spokesman, said, "Any increase is a good thing."

And though when consumers were asked what items were on their wish lists for the holidays, 4 of the top 10 were CE devices like TVs, cell phones, and video game consoles. While that's encouraging for the industry, consumers are still tightening their gift budgets this year. Respondents to the CEA survey plan to spend $1,437 this holiday, which includes gifts, food, and decorations. But more importantly, it's $200 less than what consumers reported they would spend last year. That means something is getting cut out this year, and it's probably not food.

Holiday 2008 spending stats

3.5: Percent increase in 2008 CE shipments this holiday compared with last
$1,437: What consumers plan to spend on the 2008 holidays
$1,637: What consumers planned to spend on the 2007 holidays
28 percent: Portion of holiday budgets allocated to CE purchases

That could explain the great deal Martinez was able to find even before the traditional holiday shopping season. She'd seen the LCD TV model she wanted in Costco for $1,399, and the closest one she could find at Best Buy was $1,799. Armed with a photo of the price tag of the set seen at Costco, she asked a Best Buy salesman if he could match the price.

"He said, 'Since (ours is) a newer model, we can come down to $1,499 for you,'" Martinez recounted to CNET News. After consulting with her more tech-savvy brother, she told the Best Buy salesman she'd have to think about it since the price was still more than she expected to spend.

Clearly not wanting to lose the sale, the salesman decided to sweeten the deal. He threw in 20 percent, then 50 percent, off her accessories like an HDMI cable and surge protector. When Martinez still wasn't convinced, they went back and forth a few times before he added a Blu-ray Disc player--discounted from $399 to $199--and three Blu-ray movies.

The pressure to move products like TVs and Blu-ray players right now is only the latest sign that this holiday is not going to be particularly healthy. We've seen the signs coming since earlier this year, and retailers have been understandably nervous coming into the fall and winter. Those springtime stimulus checks from the government weren't just for fun--the retail economy has been sluggish for some time now.

"As we've gone through the summer, even up to Labor Day, back-to-school was relatively slow. (Retailers) made decisions that demand was likely to be reduced this holiday. A lot of retailers weren't as willing to stock up," said Steve Baker, an NPD Group analyst who follows consumer electronics retail.

The decisions for the TVs, PCs, cell phones, and GPS devices we see on shelves in November and December are made between February and March. Retailers decide on what products they want, and gauge which sizes, features, and colors they want to push. For Black Friday pricing specials (the day after Thanksgiving) those decisions must be communicated to vendors by July in order to ensure the correct number of volumes can be produced in time.

But this year, with so much uncertainty, retailers have been waiting until "the last possible moment" to place their orders, according to Steven Cook, vice president of strategy for Samsung.

Inventory just sitting on shelves is a concern for retailers because they don't want to get caught with an excess of gadgets, and some may prefer to set up contingency plans instead.

Rather than ordering a bunch of TVs up front, for instance, vendors can be conservative about how many they take, and strike an agreement with specific brands ahead of time to supply smaller, emergency volumes of their TVs later, if it appears that they're selling better than they thought.

According to Baker, "They're thinking 'I'd rather run out than have a ton leftover.'"

This could work out well for consumers. If you're being conservative with your budget like many people have said they will be--and retailers are clearly aware of this--they know that on certain products no matter how much they lower the price, that's not necessarily going to get you in the door.

For that reason, trying to wait out retailers on their prices by buying as late as possible--as we've seen for the past few holiday seasons--isn't a sure bet. Because they'd rather have too few TVs than too many, there will still be good deals to be had, as Martinez' Best Buy experience shows, but it looks to be earlier this year than usual.