Experts predict aggressive promotions for electronic goods on 'Black Friday'

Lorraine Harrison scanned the flashy laptop computers seemingly yelling at her to buy them from the stuffed shelves at Circuit City.

The hard drive in her old Hewlett-Packard died, and a high-octane Toshiba model caught her attention, but it listed for just under $1,000. Beside it, she looked at a 15-inch Sony with less computing power for just over $500.

Though the Sony was in her price range, she said she probably won't buy it this year.

"I'm working in landscaping, and the economy is horrible right now," the North Charleston resident said. "If I get anything this year, it would probably be an iPod for my daughter."

Over at Best Buy meanwhile, Edna Carlton of Santee was in Charleston looking for a new 32-inch flat-screen TV to replace her old 19-inch analog bedroom set before the nationwide switchover to the all-digital TV signals in February.

The retired secretary set her budget at no more than $600 for a new television, but she didn't buy the Panasonic she was looking at. She's bargain hunting and planned to look around at competitors before making a purchase.

"If it works out, I will get it this year," she said.

Harrison and Carlton represent the struggle that consumer electronics retailers face this year in not only luring customers into their stores, but getting them to buy once they are there. This is the time of year when such retailers ring up more than 30 percent of their annual sales, yet no one has a clear picture of just what shoppers will focus on. Many consumer electronics merchants already are hurting.

The faltering Richmond, Va.-based Circuit City closed 155 stores earlier this month and then filed for bankruptcy a week later. Its two stores in North Charleston and Mount Pleasant remain open, but it's anyone's guess how long they can survive the economic turmoil that has enveloped the nation.

Canton, Mass.-based home and car stereo retailer Tweeter is closing all 103 of its stores, including one at Mount Pleasant Towne Centre, and liquidating the merchandise and fixtures, another sign of the trying times in not only the consumer electronics market, but the retail market in general.

Flat screen, flat line?

The National Retail Federation predicts sales this holiday season will be about 2 percent above last year, and some retail analysts predict flat or negative sales this year.

"It's scary," Harrison said. "All the places that are going out of business. Linens 'n Things ... and now Circuit City has filed for bankruptcy. Where's the bottom?"

"I think it's going to get worse before it gets better," said Don Kleckner, a retired IBM programmer who moved from Colorado to the new Del Webb retirement community in Berkeley County earlier this month.

He and his wife were shopping for a flat-screen TV for their new home at the new H.H. Gregg store in North Charleston. They settled on a 47-inch model worth about $1,700.

To counter what is expected to be one of the leanest shopping seasons in at least six years and possibly decades, consumer electronics merchants are pulling out all the stops to ring up what in past years were considered average holiday sales numbers.

Though wounded, Circuit City hasn't given up. It touts its one-price promise no matter whether customers buy in a store or online.

Tweeter is discounting everything from 20 percent to 50 percent off until it's all gone, said Patrick Clise, a project manager who specializes in installations. He laments the store's demise and the 20 employees who will lose their jobs.

"In the long term, this is going to hurt everyone. It's the Wal-Marting of consumer electronics," said Clise, who plans to open his own installation business to be called Tech Savvy when his job runs out.

Unlike other retailers this year, who have their own problems with tight-fisted shoppers, consumer electronics merchants face an even harder sell.

"Their fortunes do not look very good," said Britt Beemer, chairman and founder of Charleston-based America's Research Group, a consumer research firm. "We have watched an incredible deflation in the electronics industry."

He said Wal-Mart, the world's largest retailer, introduced 42-inch, flat-screen TVs for $999 two years ago and $799 last year. This year, a leaked advertisement showed that Sears will offer a similar TV for $699 the day after Thanksgiving, known in retail circles as Black Friday, to lure shoppers into its stores.

If true, Beemer said, he would not be surprised to see Wal-Mart undercut that.

"They could break $599 on Black Friday," he said. "Wal-Mart's prices will set the floor on where prices will be on toys, electronics and other holiday items."

With so much competition at lower prices, merchants will have to sell a lot more electronics to break even, Beemer said.

"They can't weather the storm very long," he said.

'Seismic changes'

Consumer electronics and home appliance sales fell nearly 14 percent in September after a 5.5 percent decline in August, according to MasterCard Advisors' SpendingPulse survey.

The sharp drops in consumer spending forced Best Buy earlier this month to cut its earnings projections for the rest of the year.

Comparable store sales for Best Buy fell by nearly 8 percent in October, the second month that Best Buy locations open for 14 months reported a drop in sales. The company predicts comparable store sales through February could decline between 5 percent and 15 percent.

Best Buy's move indicates it's not counting on any benefit from the fall of rival Circuit City, at least in the short term.

"Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen," Brad Anderson, Best Buy's vice chairman and chief executive, said in a statement.

Electronics industry promoters are not plugging into all the gloom and doom. The Consumer Electronics Association projects sales of televisions and audio equipment will be 4.7 percent higher than a year ago, while predicting video game hardware sales will rise 3.5 percent.

They are counting on consumers buying electronics instead of going out to dinner or sporting events.

"There's a nesting phenomenon going on," said Anthony Chukumba, an industry analyst with FTN Midwest Securities.

The concern for retailers is that customers might just nest with the TVs and other hard-wired gadgets they already have.

"It's going to be a challenging year with profit margins falling and other things going on in the marketplace," said Beemer of America's Research Group. "I'm sure this year is going to weaken everybody before it's done."

Reach Warren Wise at 937-5524 or wwise@postandcourier.com.