Recession May Affect How Gadgets Pitched At Expo

This week, the biggest TVs will meet the smallest phones to compete for attention with the coolest game consoles at the biggest gathering of consumer electronic buyers and sellers: the annual Consumer Electronics Show in Las Vegas.

Going in, the recession is the No. 1 worry, but consumer electronics is a retail industry that is in better shape than many others. The reason, marketers say, is called nesting. When the economy is bad, people want to stay home to be entertained by their electronics.

"We saw this after 9/11 in 2001 as well, where people took that money that maybe they would have spent on things outside the home and reallocated it toward products that gave them some kind of an enjoyment or entertainment in their own home," says Stephen Baker, an analyst with NPD Group.

Outside a Best Buy in San Francisco, Tyler Bradford is a prime example. He has just moved to a smaller apartment to save money.

"Now I'm justifying that I can get a nicer thing, a flatter TV, if I go to a smaller apartment," he says. "I'll spend more time at home and not on other things."

Flat Sales

Nesting or not, for an industry that is used to double-digit growth, 2009 is unlikely to be a great year. Steve Smith of This Week in Consumer Electronics says holiday sales are still being tallied, but he expects that compared to 2007, sales in 2008 will be flat, or down 3 or 4 percent.

"It has done better than the car business. It has done better than men's and women's clothing," he says.

As Smith sees it, in this environment, not having double-digit losses is something to be happy about. He also expects that after the holidays, there will still be plenty of people in stores buying televisions because of the national conversion to digital TV in February.

As companies get ready for the Consumer Electronics Show, the weak economy is having an impact on how they plan to pitch their products. It might even be an advantage for some. At least, that is what the makers of a device called the Ooma are hoping.

Smaller Parties

An Ooma is a white plastic box that connects a regular home phone to a broadband Internet connection. It costs $250 upfront. Then, you can get rid of your home phone line and the monthly bill.

"We do talk a little bit more about how much people are saving on a monthly basis," says Tami Bhaumik, the marketing director for Ooma, a 1-year-old startup. "We are playing that up from a sales standpoint more."

Bhaumik says that in this economy, that is the company's big pitch. As the economy gets worse, Ooma sales are going up, she says. But the company, which is making its Consumer Electronics Show debut, isn't going to make its display too lavish.

The electronics show has always been as much about selling gadgets as it has been about partying with colleagues and competitors. This year, the parties will be smaller; it's an industry that is nervous about its future and in a little bit of shock because a decade of double-digit growth has come to an end.

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