Electronics show turns down volume
The annual Consumer Electronics Show in Las Vegas - known in years past for its outsized booths, wall-to-wall crowds, and lobster dinners - is going to be a lot tamer next month.
The show's producers are expecting a 10 percent drop in attendance to about 130,000 people, down from 141,000 in January 2008.
Companies such as Cisco Systems Inc., Panasonic Corp., Seagate Technology, Belkin International Inc., and Sony Corp. are sending fewer people, eliminating show floor booths in favor of less expensive hotel suites, or retooling their marketing message to fit somber economic times.
Hotels, normally booked solid months in advance, recently offered promotions and discounts to fill empty rooms just weeks before the show, which runs Jan. 8-11.
While some attendees are looking forward to shorter taxi lines and cheaper accommodations, the shift in the show's tenor is an indication of how the recession is affecting the $173 billion consumer electronics industry, which has enjoyed uninterrupted annual sales growth for the past decade.
In December, the Consumer Electronics Association, the trade group that has staged the show for the past 42 years, revised its forecast of US consumer electronics sales for the fourth quarter, from a 3.5 percent growth rate to 0.1 percent.
While US sales of devices are still expected to grow 7 percent overall in 2008, consumers in recent weeks have significantly shifted how they spend money, said Jason Oxman, the association's senior vice president of industry affairs.
"Although unit volume largely held up so far this quarter, price declines were steeper than we had anticipated, particularly over Black Friday weekend," Oxman said. "Consumers were switching to smaller, less-expensive products."
In January 2008, half of all flat-panel television sets sold in the United States were 32 inches or bigger, according to CEA. But in November, that figure declined to 36 percent.
The trade group expects some products to do well this holiday, including game consoles, GPS devices, mobile phones, and digital cameras. But the industry's biggest category, which includes TVs and stereos, is expected to drop 5 percent this quarter.
That spells tough times for a sector that gets nearly one-fifth of its revenue from TV sales.
Consumer electronics retailers are feeling the pain. Circuit City Stores Inc. filed for Chapter 11 bankruptcy in November and said it would close 155 of its 700 stores by the end of the year. Tweeter, an electronics retailer based in Canton, Mass., liquidated its 94 stores in November.
Even Best Buy, the healthiest of the retailers, posted a 5 percent slump in same-store sales and a 77 percent drop in profit its third quarter ending Nov. 29. Last week it offered voluntary severance packages to almost all of its 4,000 corporate employees.
In response to the pressure on retailers, the electronics association has for the first time set aside $1 million to help defray travel and hotel costs for thousands of retail buyers, the folks who decide which products stores will sell.
Individual manufacturers are also rushing to aid hobbled merchants. Belkin, the Compton, Calif., maker of iPod peripherals and computer peripherals, is cutting back its spending at the show and using the savings to fund joint promotions in 2009 to drive consumers into stores.
Belkin spokeswoman Melody Chalaban said the company would send half as many employees as it did in past years and would forgo an elaborate booth in favor of meetings in hotel suites.
"We've exhibited at CES for as long as I remember," she said. "It is safe to say we'll be saving several hundred-thousand dollars by doing this."
Panasonic, one of the first and largest exhibitors, said it would eschew skits and comedy routines at its booth in favor of pragmatic presentations to help retailers sell the products.
"We don't think this economic environment is a time for song, dance, and entertainment," said Bob Greenberg, Panasonic's vice president of brand marketing.
Other companies will have similarly somber approach to the show, said Kurt Scherf, vice president at Parks Associates, a technology consulting company in Dallas.
"CES will be much more strategic for companies," Scherf said. "Employees are being sent with very specific goals. The idea of attending just to see a bunch of cool stuff is not going to play very well in this economy."
Cisco, for example, canceled plans for an exhibit on the show floor and instead plans to hold meetings at the Venetian Hotel.
"We will have the same number of meetings and product demonstrations, but in a less public venue," said Ken Wirth, vice president of consumer marketing for the San Jose, Calif., technology company. "Our activities at CES will be much more targeted." 