Accessories weather computer-sales decline - Industry Overview - Statistical Data Included

Home Channel News, March 5, 2001 by Faye Brookman

Products target replacement niche in a broader home-office category

Despite a dip in computer sales, home improvement retailers aren't disconnecting from the electricals accessories category. Instead, many are pumping up their assortments.

Retailers ranging from Lowe's and Home Depot to independent hardware store operators are expanding their selection to include products such as surge protectors with higher heat absorption, or "joule," ratings.

Some are even dabbling in high-tech gadgets to help people network multiple computers under one roof. Other retailers are looking beyond computers to do-it-yourself installations of satellite dishes and home theaters.

While computers continue to be the linchpins of this business segment, most experts don't expect a downturn in sales to pinch accessory sales, at least not immediately. "Computer sales are down due to the fact computers have penetrated more than 60 percent of households," said Bill Otte, vp-marketing for Gemini Industries, a. Clifton, N.J.-based supplier. "However, when you get to that level of market penetration, you see a pickup in sales of accessories ... it is just like TVs."

Statistics from OneChannel.net, a sales reporting service, show that computer sales fell 7.8 percent during the third and fourth quarters of 2000. PC Data, a Reston, Va.-based research firm, noted that unit sales in December alone declined 24 percent, even as the average retail selling price fell to $846 per unit. For all of 2000, computer sales decreased 0.8 percent to 10.1 million units, which PC Data stared was the first-ever year-to-year decline it has tracked.

While those numbers may be sobering, they don't automatically mean that accessories sales will crash, too. In fact, those sources contacted by NHCN say that accessories are sold more as replacement products, rather than items that are part of the initial equipment purchase. And home improvement stores are emerging as purchase destinations. "We see more and more people coming in daily for surge protectors and other things for computers," said Stacey Chelkowski, who manages Berman's Hardware, an independent dealer in Highland Park, N.J., that is stocking accessories from three or four vendors.

"People are constantly upgrading their current computers and adding new accessories," added a spokesman for Compton, Calif.-based Belkin Components, which supplies home office accessories to Best Buy, Home Depot and Staples, among other dealers. "That's why computer [accessory] sales aren't necessarily tied to computer sales."

Retailers added that the number of homes that have home offices has hit critical mass -- giving them a significant base of homes to serve. According to IDC LINK 2000, another tracking service, more than 37.2 million U.S. households have home offices, a total that's expected to hit 46.3 million by 2004. New homes are often being built with space for home offices, according to a floor sales representative at Sears Hardware in Bolingbrook, Ill. "We have many people moving to the area and setting up offices." Bill Stiefbold, the store manager of Douglas Ace Hardware in nearby Naperville, Ill., added that his outlet has been seeing "good" sales of electrical products used to set up home computers. "People either forget at the computer store, or need more supplies if they ordered [by] mail order. Many people are also setting up a second or third computer.

At Home Depot in Naperville, shopper Howard Shatinsky was purchasing an extension cord and surge protector. "I'd normally buy this at Best Buy, but I'm expanding our home office, so I'm here for other needs and picked this up."

Dealers add product, space

Beyond the home office boom, the current energy crunch is igniting sales of accessories in California. A Home Depot manager near San Clemente reported selling twice as many surge protectors as usual during the recent brownouts and blackouts. "People know that when the power comes back on, they can get a power spike, and they can lose everything," he said. The manager added that many customers were coming into his store more informed about the quality of the products. "They are asking better-educated questions and buying more expensive items.

Retailers are responding to this trend with a charged-up mix of sophisticated surge protectors and other accessories that can help consumers network their own personal computers within their homes.

Lowe's, for example, is featuring a new planogram created by its supplier, Woods Industries, that features not only more sophisticated products but also more information for the do-it-yourselfer. Point-of-purchase materials are provided to explain what each product is used for, according to Scott Ireland, vp and product manager for Woods. "People are looking to protect their investments and want surge protectors to protect computers and phone lines. Consumers are skipping the $5 product and stepping up to higher-end price points closer to $20 with higher joule readings." He suggested that retailers should expand their stores mix to surge protection products with joule ratings beyond 1500.