Holiday is just the beginning
October 17, 2008

It’s anybody’s guess what kind of a holiday season retail is going to have this year. According to the Reuters/University of Michigan Surveys of Consumers, consumer confidence in October suffered its steeped monthly drop since the confidence index began in 1952.

Studios believe home entertainment will fare well during these lean economic times because of its relatively low price and high perceived value by consumers (see story, page 1). This was backed up by an NPD Group’s holiday survey that found that sales of DVDs and videogames are less likely to crop because of consumer cutbacks than are higher-priced items. Movies trailed only apparel and toys as the most likely item Americans will purchase as gifts, while videogames are the sixth most likely item, NPD said.

Nevertheless, expect retail markdowns to be early and extensive this holiday season, say the analysts at TNS Retail Forward, which held its Strategic Outlook Conference in Los Angeles last week to examine mostly longer term trends.

TNS envisions a slow economic recovery (the bottom is in 2009, with the bounce not starting until 2010) coupled with a more long term shift in consumer attitudes creating new challenges and opportunities for product marketers and retailers.

In the short term, the turmoil in financial markets will cause most consumers to cut back, with lower- and middle-income households, as well as some affluents, being significantly affected, TNS believes. Even when financial stresses ease, however, TNS believes changes in consumer behavior will endure, with people being more wary of debt, more concerned about the impact their consumption creates on the Earth, and holding a new idea of luxury that embraces high quality and durability.

TNS Retail Forward executive VP Dan Stanek and senior VP Lois Huff described these changes, the seeds of which were planted after 9/11, as a shift away from rabid consumption and a desire to slow down and simplify life. People will place a higher importance on corporate responsibility and will forego some luxury for products and retailers that they perceive as have OK quality and a good price.

Consiering how this might translate to the home industry, I began to that that:

* Rental might be positioned for new growth. Rental--of physical media, digital files or through cable VOD--allows consumers to access the entertainment they want at a low cost without owning more stuff.

* Sales of used discs might grow. It’s the last thing studios want to see happen, but if OK quality is, well, OK, and the cost is less (on average, $7 for a used title vs. $18.50 for a new one, according to Redbox), it seems reasonable to think more consumers might like this option. It’s also environmentally friendly.

Blu-ray is well-positioned despite its higher cost relative to DVD. It’s a durable, high-quality product that fits the idea of sensible luxury. TNS research shows that people – particularly Boomers—will continue to spend for items that they find highly valuable and relevant—and consumer electronics top that list.

Posted by Marcy Magiera on October 17, 2008 | Comments (0)