The sense of scarcely contained excitement for the 2010 Consumer Electronics Show is palpable, and extends beyond the desire to see new smartphones and smartbooks. Since pundits tell us we are officially exiting a recession, this seems like a midwinter coming-out party after an extended dry spell. Yet for that reason alone, CES attendees will have to watch out for irrational exuberance, if not downright hubris.
The 500-pound gorilla sitting in the middle of the Las Vegas Convention Center is called the hangover from a jobless recovery. It’s likely to have a domino effect not only on the consumers still out of work, but on the entire consumer supply chain behind it. Thankfully, smartbooks and netbooks will suffer less from the problem than bigger-ticket items such as flat-panel digital TVs and very high end smartphones.
The problem is, this slow and subtle rip-tide from the recession will operate in such an invisible fashion, gadget-hunters at CES will be able to hop from booth to booth in a state of pure denial. After all, the Semiconductor Industry Association tells us that manufacturers have worked off their chip inventories and are ordering chips again. This must mean that shipments from OEMs to retail chains have kicked into high gear, correct? Not necessarily.
Retailers with Black Friday sales and e-tailers with constant 20-percent off coupons had to lure customers over the holiday season with every conceivable trick in the book, just to get purchasing trends in a nominal uptick for Christmas. Come January, it’s certain that BestBuy, Costco, et al. will be slashing prices to the point where margins represent an effective zero. Will consumers buy, even at that point?
If there’s any silver lining in the jobless numbers, it’s that many of those counted as unemployed are working at part-time benefitless gigs. Some may be able to shell out money for a few “luxuries”, including electronic toys. If netbook and smartbook marketers can offer decent systems for a couple hundred bucks, they may register sales. If Vizio and similar companies can offer decent DTVs in the $250-$500 range, sales will recover. But such an environment will favor the Asia-based OEM far more than familiar players like Dell and HP.
I am not trying to shout “Bah humbug!” on the eve of Christmas celebrations, nor dismissing the worth of the January CES. This is only a note of caution. The next calendar year will remain tough in consumer electronics, particularly if jobless trends do not improve by mid-year. The continuing recession hangover will favor small devices, low prices, and profit margins close to zero, which will place OEMs based in North America at a distinct disadvantage. And expect to see a smartbook or smartphone with a price tag of $200 or less to do much better than one with every conceivable bell and whistle.
Loring
