Home Blog It’s Time to Change Again

Last year in our Black Friday blog we noted that it appeared most retailers had the holiday figured out. When to open on Thanksgiving, how focused to be on online shopping vs in-store, when to promote and how to do it. Sadly, I think we were a bit premature in declaring a victory (or least an armistice) in the holiday shopping wars. This year many electronics brick-and-mortar retailers succumbed to the reality that opening on Thanksgiving was only for the biggest traffic aggregators, like the malls, and pushed their promotions to Friday morning. Unfortunately, what they missed is that Black Friday, as an event and a shopping experience, has ceased to exist. There were few if any lines at 6:00 a.m. on Black Friday, as that traffic long ago migrated to Thanksgiving Eve or online, yet many retailers continue to chase it. While I am sure that there will be plenty of volume on Friday afternoon and over the weekend, the need to open early and promotionally on Friday morning seems to have passed. It’s now truly the  Thanksgiving weekend that kicks off the holiday season. And the imperative is now to be truly successful over both Thanksgiving week and Cyber Week. That will be what makes, or breaks, the season for retail. We have seen Thanksgiving week share of holiday sales increase by about 2.5 points over the past 10 years. When combined with Cyber Week, those two weeks are approximately one-third of the nine week holiday season results, up about 5 points overall from results posted in the last 2000’s.

We noted on Twitter the strong lines on Thanksgiving evening, but most of those were at the largest retailers. Best Buy’s success on Thanksgiving, as a more specialty retailer, seems more and more like an aberration, a function of the strength of electronics as a draw for promotionally focused early holiday shoppers (as we would once again note that many of Thanksgiving night’s retailers, even those with only a tangential relationship to CE, such as Kohl’s and Dick’s, led with or focused on CE products as traffic drivers and interest builders).

On the product side, my colleague Ben Arnold has done an admirable job of calling out the new  sales opportunities for consumer electronics in 2016, including Smart Home, VR, Drones and Smart Hubs. However, the real focus of holiday 2016 has been big screen and 4K/UHD TV with record low pricing and seemingly endless demand over the last two days (check out my Twitter timeline for some comments on that) propelling what promises to be a record end, to a record year in TV sales.  Among the other traditional categories, PCs, tablets and mobile phones remain heavily promoted, but the broad appeal of TV, especially the newer technology and bigger screens, has been the prime catalyst for retail interest. Alongside TVs, an increased emphasis on mounts, cables and soundbars, all of which are exceptionally well positioned add-ons to big screen TVs, and benefit from the cleaner sales floor environment (less pile-it-high, pallet stack outs for 60 inch TVs than 32 inch TVs in the past) allowing retailers to fulfill demand for accessories that can add revenue and profit to the challenging Thanksgiving week TV pricing environment.

Despite the positive sprouts we have seen during Thanksgiving week, we would be remiss if we did not note the lackluster results for the first two weeks of November for CE  and the weaker start to Q4 for CE. While these results can be explained by looking at the difficult comparisons to strong launch events in 2015 (iPad Pro and SP4/Surface Book), they do not account for the entire story. Sales in 2015 never capitalized on that strong beginning and left CE with poor results. Those weak comparisons give us reason for hope for this year’s performance. While the final judgment of the holiday, as always, awaits a complete accounting of sales for the entire nine week holiday season (which we will provide in our CES Research Summit wrap up) the CE business has faced challenges around pricing and demand throughout 2016 and despite the easy comparisons, success is not guaranteed.