Vintage Filings Business Blog

Consumers continue to buy technology products to improve their lives, although the consumer electronics (CE) industry will see overall shipment revenues decline in 2009, according to new data released today by the Consumer Electronics Association (CEA). The semi-annual U.S. Consumer Electronics Sales and Forecast shows that industry revenues will contract to $165 billion in 2009 but grow slightly in 2010.

The consumer electronics industry will see shipment revenues fall 7.7 percent, to $165 billion this year, the first decline since 2001. While consumer demand for CE products remains high, several market forces are contributing to lower revenues, including lower consumer spending, price declines and compositional shifts in key product categories. As consumer confidence rebuilds, industry revenues will grow, albeit at a pace of less than one percent in 2010. CEA’s forecast projects industry revenues will bottom out by the second half of 2009, although many risk factors remain causing industry growth to remain muted.

The CE industry continues to hold up favorably compared with other industries. Most recessions are marked by steep declines in durable goods purchases as individuals defer discretionary purchases that can be pushed into the future. Despite the worst recession since the Great Depression, CE spending as a percentage of all durable goods is as high as it has been in 50 years. Vehicle sales are down 40 percent since the recession began in the fourth quarter of 2007, according to Autodata Corporation, and existing home sales are down 34 percent from their peak in August 2005, according to the National Association of Realtors.

“The CE industry is not impervious to the economic downturn but remains resilient compared to other industries,” said CEA President and CEO Gary Shapiro. “Through innovation and global access to consumers and open markets, technology companies will restore economic growth and prosperity. American consumers continue to purchase CE products despite cutting back in many areas, showing that consumer electronics are vital to everyday life in this country.”

Digital displays continue to be the primary revenue driver for the industry, comprising 15 percent of overall industry sales. Unit shipments of displays remain robust, projected to be up eight percent in 2009. LCDs remain the display of choice for consumers with unit volumes jumping 24 percent. Lower price points and an increase in consumer demand for mid-size displays are reducing revenue. TV display shipment revenues are expected to drop six percent this year to $24 billion.

One year after emerging as the next-generation DVD format of choice, Blu-ray players are poised for growth in 2009. Unit shipments of Blu-ray players will jump 112 percent this year, reaching nearly six million. Even as prices drop, revenues are expected to top one billion dollars, an increase of 48 percent over 2008.

Continued innovation in the smartphone category is leading to high consumer demand and increased shipment revenues. Smartphone shipment revenues will increase almost three percent in 2009, to nearly $14 billion, despite declines in average unit prices. Smartphones will account for one in four total handset sales this year as consumers continue to seek devices capable of Internet access, navigation and media playback while on the go.

CEA’s updated sales and forecast also shows netbook momentum is building within the PC category. Unit shipments are forecasted to nearly double in 2009, rising 85 percent, to eight and a half million units. Even as more consumers opt for lower-priced netbooks, the category will reach $3.4 billion in revenue in 2009.

“Consumers continue to buy CE products at high rates, showing that CE is a must-have even during the darkest of economic times,” said Steve Koenig, CEA director of industry analysis. “Notably, consumers are buying CE products that fit today’s budget, like mid-sized displays, netbooks and private label products. Some categories, such as digital cameras, Mp3 players and video game consoles, have reached maturation as most American homes now include such devices.”

If you have a company in the retail industry, it is vital to understand the importance of consumer experience.  Over 50% of all shoppers have experienced truly great “WOW” shopping experiences, according to “Discovering WOW – A Study of Great Retail Shopping Experiences in North America,” a new study examining the loyalty dynamics of outstandingly positive shopping interactions. But the study – released today by the Jay H. Baker Retail Initiative at the Wharton School, the Verde Group and the Retail Council of Canada – establishes that not all great experiences deliver impact for retailers in terms of shopper loyalty and intent to return. In fact, of the 26 “great shopping experiences” assessed in the study, fewer than half measurably improved loyalty.

The study found that great shopping happens frequently:

• A majority of customers (52%) have enjoyed a “WOW” shopping experience
• 35% of all shoppers encountering great shopping within the past 6 months.

Notably, great shopping occurs when a number of things go well for the shopper: on average over 10 distinct elements are required to create a single great shopping experience for a customer.

But not all of these “great shopping” elements drive loyalty. The study determined that there are five categories of great shopping experiences:

• Engagement – being polite, genuinely caring and interested in helping, acknowledging and listening
• Executional Excellence – patiently explaining and advising, checking stock, helping find products, having product knowledge, providing unexpected product quality
• Brand Experience – exciting store design/atmosphere, consistently great product quality, making customers feel they’re special and that they always get a deal
• Expediting – being sensitive to customers’ time and long check-out lines, being proactive in helping speed up the process
• Problem Recovery – helping resolve and compensate for problems, upgrading quality and ensuring complete satisfaction

The presence of “great” clearly makes a difference: customers who have enjoyed a “WOW” experience are over 75% more loyal to a given store than customers who have not enjoyed “WOW” shopping. However, only “Brand Experience” and “Engagement” elements measurably build shopper loyalty. Ultimately, “Brand Experience” is the most critical quality, nearly 40% more important than the next closest factor.

“The good news for retailers is that consistent “greatness” is possible, and can have a significant impact on the loyalty bottom line,” said Paula Courtney, President of the Verde Group. “Our research shows that retailers are excelling at delivering on “Engagement” elements. Their biggest challenge is that they deliver significantly fewer “Brand Experience” elements than elements from the other four categories.”

“The research makes clear that “WOW” shopping is a complicated phenomenon,” said Stephen J. Hoch, director of the Baker Retail Initiative at Wharton. “Retailers that want to deliver great shopping experiences that build loyalty must understand their customers deeply. But the payoff of that understanding can be very large.”

In spite of economic uncertainties, many of the nation’s largest retailers held onto their coveted spots at the top of the retail ladder last year, according to an annual ranking of retailers by sales. The STORES Top 100 Retailers, featured in the July issue of STORES magazine, ranks retailers by annual revenues as reported in SEC filings, public statements by the companies and estimates based on Planet Retail research.

“The economy hasn’t been a losing proposition for everyone, and retailers who have made it through this recession will be well positioned to grow in the future,” said Susan Reda, Executive Editor of STORES Magazine. ”As retailers shift their primary focus this year from expansion to core operations, companies who stay in tune with their customers will reap long-term rewards.”

As consumers grappled with high gas prices and shrinking home values in 2008, discount retailers and warehouse clubs became more appealing to penny-pinchers. Accordingly, Wal-Mart (#1), the world’s largest retailer, tops the list once again with revenues exceeding $405 billion in 2008. The company found much success with the re-launch of its Great Value line and attracted new customers because of the economic environment. With food sales throughout the country remaining steady even through the economic downturn, Target (#5) also bulked up food offerings in both traditional and SuperTarget stores, attracting budget-focused shoppers. Warehouse club Costco secured the number three (#3) spot this year with families looking to buy items in mass quantities to stay on budget.

Having been the first to target consumers who received stimulus checks, Kroger (#2) comes in as the second-largest retailer in the U.S. With gas prices topping $5 a gallon in some parts of the country, the company benefitted from consumers who, in addition to groceries, loaded their carts with non-food items on the same shopping trip in order to conserve fuel.

Even with existing home sales and home values dipping through much of 2008, The Home Depot snatched the number four (#4) spot on the list. The company’s rival, Lowe’s, came in at number eight (#8).

The health and personal care sector remained a bright spot for the industry in 2008 as people invested more on essential items and less on discretionary purchases. Walgreen (#6) and CVS Caremark (#7) both secured top spots.

Sears Holdings Corporation’s holiday layaway program and attractive private label merchandise landed the company at number nine (#9) on the list.

Rounding out the top ten is Best Buy (#10), which benefitted from sales of new iPhones and game stations like Wii and Playstation that remained popular investments for those making discretionary purchases.

The report was sponsored by ADT Retail Solutions and Tomax Retail.net.

The world will not emerge from the current recession without a reliance on global trade, the chairman and CEO of UPS said this past week.  Addressing an audience of government and business leaders at the Detroit Economic Club’s National Summit, UPS CEO Scott Davis described global trade as a “positive force” at a time when “we are operating without a map and without precedent.”

“As many as 57 million Americans are working for companies engaged in global trade,” Davis added. “One in every five manufacturing jobs is linked to exports of goods and services.”

But if global trade is to help vanquish the global recession and become an even bigger force for the economic growth of smaller nations, the world must address three imperatives, the CEO continued. They include the creation of a system of trade that not only is fair and rational but compassionate; deploying technology to reduce the friction that today slows down the flow of commerce, and moving immediately to rebuild transportation infrastructures.

“Trade is a major force for good, for growth and for jobs,” Davis said. “The threats are from both economic turmoil and the protectionist impulses it drives. We must argue that protectionism is the worst response at the worst time. We can’t let political expediency cloud global reality.”

It also is clear, however, that all countries must do a better job of helping those workers who are displaced by global trade.

“We are going to have to pay more attention to those displaced,” Davis said. “I see a very encouraging step in that direction with the return of the expired Trade Adjustment Assistance Act as part of the stimulus package. With this we can reposition the American workforce and give our workers the skills to stay in the global game.”

The second imperative of using technology to lubricate the flow of commerce will be critical to businesses if they want to flourish in a global marketplace, Davis continued. Companies should not accept the delays, for example, that come with a reliance on paper customs forms to move items across a border.

“Global competitive advantage means the right product at the right place, at the right time and at the right cost,” he said, noting that will require the deployment of new technologies to better “see” and control goods moving around the world.

Finally, the “infrastructure of trading partners must be up to the demands that a new era of country cooperation and company connectivity will place on it,” Davis said. “The U.S. is falling behind, and we’re already paying a price. Our ports aren’t deep enough; our inland waterway locks are functionally obsolete; our highways are jammed, and declining rail capacity is causing choke points across the country.”

The effort to solve these problems, he noted, will “be measured in years and billions of dollars.”

“The power of global trade is undeniable,” Davis concluded. “It changes lives, reduces conflict and gives us the motivation and the means to address shared issues. We have to do it all and we have to do it right. The future of the global economy depends on it.”

The first quarter of 2009 fulfilled an expected trend that will last throughout the calendar year. The worldwide mobile phone market shipped 35 million fewer units than it did during the same period one year ago, and all indications point to that trend continuing through Q4 2009.

The mobile phone industry has long been characterized by its seasonal trends, where the first quarter always delivers a sequential decline after a busy holiday season. However, the drop in this first quarter was especially sharp, according to ABI Research practice director Kevin Burden. “The 255.6 million handsets shipped represented a 20% decline from Q4 2008, which was already a down quarter, and a nearly 12% decline from Q1 2008.”

Shipment reductions are a new reality for the mobile phone market. “The industry and consumers have gone into protection mode,” says Burden. “Protecting profitability has led handset manufacturers to produce less and to operators and retail outlets holding smaller inventories. Consumers are also realizing that many of the features they desire are already in the handset they currently use, and are willing to forego an upgrade until they have more confidence in their own futures.”

The Asia/Pacific region, with handset volumes triple that of the next largest region, had been widely expected to feel more than a fair share of pain due its very troubled economic conditions. However it posted only an 8% YoY decline, which was a spot of encouragement. The Latin American market, however, tempered any encouraging news with a reminder of how deeply the recession can cut. The region had a nearly 28% decline in shipments, the largest decline of any region, due in large part to the devaluation of its currencies leading to higher prices of imported mobile phones.

More than two out of every five Americans (42%) have considered starting a business since the economic downturn. Among those Americans, roughly a quarter (24%) have actually acted on the idea. Additionally, three out of four Americans believe new entrepreneurs will do the most to revive the economy and four of five say that at some point they have considered starting their own business.¹ These findings, among others, were revealed today in a national survey from Alibaba.com.

Also according to the 2009 Alibaba.com Newpreneur Survey, more than four in ten (44 percent) of Americans who considered starting a business said not knowing “how to handle the logistics, such as where to make or get my products” was one of the top two reasons why they didn’t start their business. That’s greater than those who say that they were afraid of failure (37 percent). The survey also includes specific data points for Los Angeles, Dallas, Miami, Chicago, San Francisco, New York City and Seattle.

“The renewed confidence in entrepreneurs is evident across the country and proves that the American dream is still alive and well,” said David Wei, chief executive officer, Alibaba.com. “As the data shows, Americans strongly believe the down economy provides an opportunity for a new class of what we call ‘Newpreneurs’ – people who are using the recession as a catalyst to start a business or develop an idea. Alibaba.com can help Americans turn their dream into a reality by connecting them with business partners and helping them succeed in global trade.”

To help support Newpreneurs, Alibaba.com today launched its national “Newpreneur of the Year” contest, which will award a total of $100,000 to small business owners who see the recession as an opportunity to start a new venture. The contest, presented in partnership with Inc., is hosted at www.inc.com/alibaba where entries can be submitted until August 14, 2009.

A select panel of judges will review the online submissions and invite 30 semi-finalists to present their idea at regional events in October that will be held in six cities; New York City, Miami, Dallas, Chicago, Seattle and Los Angeles. After the regional judging, 12 finalists will be profiled on www.inc.com/alibaba for public voting. Then the top five finalists will be invited to the finale event in San Francisco on November 18, 2009, where the grand prize winner will be revealed. The grand prize winner of the Newpreneur of the Year contest will receive $50,000 to invest in their business, with the four remaining finalists taking home awards totaling an additional $50,000.

“For three decades, Inc. has celebrated entrepreneurs as the most vibrant business segment of the economy. Their ability to find opportunities to start and grow companies, even in challenging economic times, is truly unique,” said John M. Teabeau, publisher, Inc. magazine. “Partnering with Alibaba.com for the Newpreneur of the Year contest is another example of our support for this important community. We’re aiming to inspire and educate business leaders while helping to get a few companies to the next level.”

Since Twitter first came on to the scene two years ago it has taken off as a social connector and become an extremely popular method of communication. While the success of Twitter is not surprising, what is surprising is the benefit that it can offer financial institutions that can successfully leverage it as an efficient and cost-effective communication strategy.

Research released today finds a record number of marketers will turn to text messaging to grow their email subscriber lists this year, as consumers opt-in to increase their interactions with brands online and in stores.

Featured in the 2009 List Growth Whitepaper, the joint research conducted by Ball State University, Email Marketers Club and ExactTarget found the fastest growing and best way to grow email subscriber lists is to collect customers’ email addresses during times of high engagement – at the point of sale, during online shopping and in-store via text messaging. These onsite list growth tactics rated as much as 60 percent higher than offline methods such as list rental and mass advertising.

“The best performing list growth tactics are built on gathering subscriber data rather than hunting for it,” said Morgan Stewart, ExactTarget’s director of research and strategy. “Whether you are a B-to-B or a B-to-C marketer, the best way to grow your subscriber list is to collect information during customer-initiated interactions.”

“There is no silver bullet, and no one tactic that will provide meaningful list growth,” said Tamara Gielen, founder of The Email Marketers Club. “Successful list growth strategies employ multiple tactics to drive new subscriptions and compel subscribers to register because of the value of the communication itself.”

Key findings of the research include:

• Onsite registration is the best performing list growth tactic, followed by capturing information through inbound call centers, at the point of sale and through social sharing.
• The worst performing list growth tactics include outbound call center attempts to collect email information, list rental, email append and offline advertising.
• B-to-B marketers are more successful in driving new subscriptions with incentivized registration, while B-to-C marketers find non-incentivized subscriptions most effective.
• Mobile capture, or allowing customers to subscribe to emails via mobile phones, will increase faster than any other list growth tactic in 2009 – more than 500 percent.
• Enabling subscribers to share email content with their social networks is expected to increase more than 348 percent in 2009.
• One-third of all email marketers rarely or never evaluate the performance of their list growth sources.

How is your online marketing efforts going?  The Fournaise Marketing Group has measured that the marketing and advertising campaigns it tracked in offline and online media around the world generated 21% less response from the target audience during the first quarter of 2009 compared to the first quarter of 2008.

Specialised in tracking, measuring and auditing the real-time performance of marketing and advertising campaigns deployed in both traditional and online media, Fournaise used its proprietary marketing effectiveness tracking solutions to measure the ability of its clients’ advertising campaigns to generate tangible and intangible, direct and indirect engagement with their target audience, and therefore their ability to boost the advertisers’ Profit & Loss (P&L) through:
- increase in leads/prospects captured;
- increase in positive target audience conditioning;
- increase in retail traffic; and/or
- increase in sales.

Fournaise tracked that the overall 1Q2009-versus-1Q2008 fall in advertising response in mature markets (such as the US, Europe and Australia) was the highest at 28%, while developing markets like China and India experienced a relatively lower 14% decrease.

“This decrease in marketing and advertising response is very much in line with what’s going on in the world economy right now. Despite the stimulus packages released by the local governments, consumers and businesses in recession-hit countries in Europe, the US and Australia have been tightening their belts and controlling their expenditures, and this makes them much less receptive to the campaigns targeting them” says Jerome Fontaine, CEO & Chief Tracker of Fournaise.

“However for consumers and businesses in relatively less-affected (developing) economies such as China and India, there seems to be much less of a change in their response to the messages pushed by the brands” Fontaine added.

Fournaise revealed that overall, big-ticket item industries seem to be the most hit. The industries for which it tracked an above-21% decrease in target audience response to the advertising campaigns it measured were:
1. Automobile
2. Travel and airlines
3. Financial institutions (including banks, investment and insurance companies)

On the other hand, the industries for which it tracked positive growth in response were retail and fast moving consumer goods (FMCG), a sign that the current economic crisis may have a lesser impact on lower value products and services.

Not surprisingly, Fournaise also measured that despite the budget cuts it noticed in the first quarter of 2009 and despite the better deals proposed by media organisations in both mature and developing markets, the average global Marketing Wastage Rate (MWR) it tracked in the first quarter of 2009 reached 61% − a 13% increase compared to the first quarter of 2008.

Some live paycheck to paycheck. Financial uncertainty is the rule, rather than the exception. And all look for ways to stretch their dollars, while maintaining a positive outlook.

Those were some of the stories that emerged Thursday at a series of Intuit Town Hall meetings held at the company’s Mountain View, Calif. headquarters and moderated by personal finance expert and author Farnoosh Torabi.

The 30 participants also shared personal accounts of the recession’s effect on their lives and the steps they are taking to save and make money. With no clear end in sight to the recession, they also received tips and advice from Intuit (Nasdaq:INTU) and Torabi on how to move forward until the inevitable upturn.

“Consumers have been hit hard – losing investments, jobs and even their homes – but our conversations at the Intuit Town Hall revealed there is a silver lining in the downturn,” said Torabi. “While being forced to get creative with finances and maybe even finding an entirely new livelihood, people are connecting more with friends, family and their communities.”

As a result of the Town Hall, Torabi and Intuit recommended seven ways to save money:

• Make just five phone calls. Call your credit card company; ask for a lower rate. Call your insurance company; take advantage of every available discount. Call your cell phone company; check out shared plan savings with family and even friends. Call your college; ask about more financial aid. Call your utilities company; request the latest deal or incentive. It may take several calls, but persistence can produce savings.
• Save six months’ cash for emergency and then spend wisely. Squirrel away enough money to cover at least six months of living expenses for emergencies. And while saving is important, now is actually a good time for some purchases, thanks to low prices and tax breaks. Buying a house, taking a vacation or stocking up on common household goods can be a great bargain. Taking a calculated risk now can bring benefits in the upturn.
• Be open to bartering. The number of listings in the barter section of craigslist jumped 100 percent in the past year. If you have a valuable skill, check if your doctor, hair stylist or plumber will trade your skilled labor in exchange for theirs.
• Join the freelance economy. Whether you’re unemployed or just looking to moonlight for extra cash, know that freelancers are bringing home the bacon. Employers are turning to part-time or contract workers because they are less expensive since they don’t have to pay benefits. Sites like Elance.com or Odesk.com may have freelance work for you.
• Look beyond your regular bank. With the FDIC guaranteeing balances up to $250,000, don’t be afraid to look beyond your regular bank. Consider keeping that cash in online banks or credit unions for higher returns. Compare rates at BankingMyWay.com or Bankrate.com.
• Free money is free money, keep investing in your 401(k). While your 401(k) may feel more like a 201(k), make sure to invest at least as much as your company will match; odds are it will pay off in the long run.
• Go generic. These days, generics are a great value and are typically the same formulas as higher-priced brands. The FDA says that generic drugs have the exact same exact ingredients and effects as brand name versions. From groceries to prescriptions, it’s money in your pocket.