A dull holiday season for consumer electronics?

Posted by Wolfgang Gruener

El Segundo (CA) - Because of product delays, supply problems, and consumer confusion in various areas of the consumer electronics market, Isuppli, a marketing research firm, is predicting a "dull holiday season" for sales of electronic devices.

According to the report, sales of consumer electronics during the holiday season will be around $302.3 billion. Although this is more than last year, the margin of increase is substantially smaller on a year-to-year scale than it has been in the past. In 2004, there was an increase of 11.6% over the previous year. 2005 went up 13% from that. However, the prediction for this year shows an increase of only 2.4% from last year.

Isuppli said the reasoning for this is attributed to a few factors. First of all, there are a handful of products that, much to the dismay of their respective companies, have had to be pushed back to early next year. The research firm singled out the iTV, the anticipated Apple-manufactured accessory that allows users to stream content from their computer to a TV. The device was planned for a holiday release but had to be pushed back to January 2007.

Then, one of the most anticipated products of all, the PS3, while it will still be released in time for the holidays, was scaled back in terms of units available at launch, due to a problem with the supply of the blue laser diodes used to reach the Blu-ray discs. Global shipments by year end were cut to about 500,000. Isuppli believes the low volume essentially precludes the PS3 from being a hot seller. The Wii, however, will meet originally planned shipment amounts and it is expected to sell very well, though its relatively low $250 price point means it will not have as huge an impact on the industry's bottom line as if the PS3 has been able to fulfill product demands.

The other major sector that's hot in consumer electronics right now is high definition (HD). Early reports in the beginning of the year said that the new generation of HD media would be a big seller in time for the holiday season, but that has turned out not to be the case, partly because of the still-existant competition between HD DVD and Blu-ray. Isuppli said consumers are now either waiting for one format to become the standard, or for some sort of co-existance between the two, like a player that can read both formats.

Of course, consumer electronics will still make up a large chunk of holiday spending, with TVs, video games, and computers always selling well during the season, but it's the lack of a bunch of really blockbuster items that Isupply says is at the root of the sales plateau.