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Electronic News, Dec 8, 1997 by Carolyn Whelan, Carol Haber, Ann Steffora

Christmas sales are just okay, according to a spot-check of consumer electronics and PC retailers, who add that if it is going to be a truly joyous season there will have to be a tremendous surge in demand this week and next. Not only retailers are counting on a tremendous turnaround, but so are PC manufacturers, semiconductor and passive components suppliers, distributors and others, who know that if sales don't pick up sufficiently, excess inventory will be a damper on their sales in the first half of `98.

Retailers' responses were tepid, mostly consisting of words such as "average"; "probably meeting expectations," and "maybe a bit stronger." Not far behind were "hopefully" and "optimistic."

Retailers pointed to an earlier than usual selling season, stretching robust PC sales over a longer period making sales look flatter, and a traditional lull between Thanksgiving and the final weeks before Christmas. They expressed concern about falling PC prices. It's bound to be better this year, it was suggested, since last year at this time Intel's MMX technology introduction was delayed, stalling sales.

Most retailers pointed to the popularity of the sub-$1,000 PC and the rush to the fastest of modems, the 56K. They agreed on an interest in digital cameras but difficulties in completing the sales due to the complex nature of their use. There were decidedly mixed reports on notebooks, with most reports "down" or "stable." On handheld devices, sales were termed "explosive" and "growing." WebTV and DVD were laggards.

`Frantic Friday'

November 26, "Frantic Friday" for most retailers, was relatively quiet for J&R MusicWorld/ComputerWorld, one of New York City's biggest retailers. "No one was here, they were at the malls," said a PC salesman there, adding that customers were asking for sub-$1,000 computers, with the Compaq Presario laptop selling well. "They're buying clothes, food" piped in another, who said that sales this year of PCs and laptops had only been average.

J&R spokesman Abe Brown blamed the quiet day on an earlier-than-usual buying season, adding that PCs, particularly Compaq desktops, Toshiba Laptops and Hitachi Notebooks were big sellers. "PC sales have been robust thus far," he said, "and software seems to be doing better than last year. He also confirmed that many customers were seeking under $999 PCs like their $800 Compaq, while others proved willing to spend a little more for a fully-loaded computer at much cheaper prices than prior years.

Among other consumer electronics products that seemed to be selling well, according to Mr. Brown, were monitors, modems, handhelds and software--particularly utility, desktop graphic and Internet/Web software. Some general trends, Mr. Brown said, were that customers were buying US Robotics and Tsion PDAs, while the 56K modem was more in demand than the 33K one. "When Motorola dropped the price from $160 to $110 sales increased," he added. "And scanners are selling phenomenally well."

WebTVs, digital cameras, and DVDs didn't seem to be selling quite as well. Mr. Brown called the WebTV market "limited" and said that consumers still need to be educated about digital cameras.

And as the world watches to see how Apple fares in the months ahead, an Apple spokesperson at a J&R promotional event for Apple confirmed that East coasters, unlike Californians, were slow to jump back onto the Apple bandwagon.

Lull Between Holidays

Over at Computer City, a division of Tandy Corp., Richard Donnelly, VP, merchandising, wholeheartedly agreed that thus far the sub$1,000 PC is hot this season, although he described a traditional post-Thanksgiving/preChristmas lull that had settled over the retail sector, and expressed some concern about falling PC prices.

"Customers gird up around Thanksgiving and the Friday, Saturday and Sunday after that," Mr. Donnelly noted. "Then they traditionally sit back and contemplate. There's a lull between Friday and the few weeks before Christmas; hopefully, it will begin to pick up now and continue to build after that."

Strong interest has already surfaced for PCs, notably at the sub-$1000 price point, he said. Mr. Donnelly also cited an early, but growing season, with a substantial--if not major, portion--of computer units sold below $799 "though we've seen a lot of interest at the $999 price point when bundled with a monitor." He added: "In August, the $999 would serve for a standalone CPU but now you'd have to offer something more than a computer; the computer and monitor together at $999 seem to be pushing the consumer hot button."

He discerned no special interest in sophisticated graphics, and when asked whether the microprocessor brand impacted sales at the lower price points, Mr. Donnelly commented that though customers inquire about Intel chips, showing some familiarity with the brand name, the lack of that name didn't seem to slow product purchases. More important, he said, was configuration with enough memory and a CD-ROM drive allowing access to the Internet and the ability to run a lot of basic software programs.