By Quentin Fottrell
Despite weak December sales in electronics, analysts say retailers should be careful about rolling out new gadgets too fast or too soon — especially if the upgrades aren’t up to scratch.
As SmartMoney.com reported, analysts say consumers are bored with the current crop of gadgets on store shelves. But many pros, including Seth Rabinowitz, a partner at management consulting firm Silicon Associates, say people won’t part with their cash in 2012 unless they’re wowed by cool new features. “There is upgrade fatigue,” he says. Scott Sutherland, a senior analyst with Wedbush Securities, agrees, pointing out how poor sales were last year for 3D TVs, despite all the marketing.
Electronics are usually a sure-fire hit over the busy holiday season, but despite offering steep discounts in many categories, many big box retailers have been left polishing unsold gadgets this January. At Best Buy, televisions posted a mid single-digit decline. At Costco Wholesale, TV sales fell by double digits on the year in December, while Target also reported lower demand for electronics.
Some stores say it’s the weak economy, not upgrade fatigue, that has hurt sales. Kristy Welker, a spokeswoman for Target, says electronics sales were softer than the company had expected in December, but she says the company will continue to pursue initiatives “designed to deliver compelling value” against the backdrop of continued slow and volatile economic growth. (CostCo did not return calls or emails seeking comment.)
Other stores have acknowledged that consumers aren’t spending, but because they are waiting for the next big tech wave. A spokeswoman for Best Buy cited a letter issued by Brian J. Dunn, Best Buy CEO last Friday, in which he said: “We’re in the midst of a generally flat technology curve which is driving contraction in our industry, and providing us with fewer must-have products in many of our key product categories.”
A case in point: The last round of 3D TVs wasn’t enough to redefine the category. Slimmer, wider and/or marginally better picture quality is lost on most recession-scarred consumers, especially given the weak economy, says Louis Ramirez, senior features writer for dealnews.com. An upside: Upgrade fatigue likely means deals on older and even some newer TV. “Stores have to move the 2011 models to make way for the 2012 stock,” he says.
Even with smartphones – which most often upgrade their software – consumers are increasingly cautious. They are ripe for upgrades because they crack and newer versions only work with some of the hottest new apps. However, expect consumers to take pride in holding onto their old one. “With 4G-capable phones consumers are being pressured to upgrade their phones more frequently,” Ramirez says, but they’re growing wise to the chicken-and-egg approach to the marketing of smartphones and “must-have” new apps.
Apple has tested the patience of its most loyal customers. There were widespread reports about the gimmicky nature of Siri on the iPhone 4S when it was released last year and customers complained about the short battery power. As SmartMoney.com reported Monday, a Boston-based social media analysis firm, Crimson Hexagon, recently scoured the opinion of over one million Tweets: 11% mentioned that the battery drained too fast.
But Apple’s strong pipeline of new products may only last as long as the slightly older iPhones and iPads maintain a strong re-sale market, experts say. (Apple did not respond to a request for comment.) Expectations are high among consumers spoiled by dramatic innovations in iStuff, says Yung D. Trang, president of TechBargains.com, but budgets are low. “Consumers will upgrade if they can perceive the value they are getting for the extra dollar,” Trang says.