Strong consumer electronics sales: Good news for Best Buy, Target

  • Article by: THOMAS LEE , Star Tribune
  • Updated: December 13, 2013 - 5:48 AM

Analysts already expected smartphones, tablets and video games to perform well, but even televisions and computers showed robust growth.

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Richfield-based Best Buy appears to have driven strong traffic through multiple categories in-store and online over the Black Friday/Cyber Monday weekend.

Photo: JEFF WHEELER • jeff.wheeler@startribune.com,

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Best Buy Co. Inc. won’t say a peep about its holiday sales thus far. But in some ways, it doesn’t have to — the industry is already speaking loud and clear.

Two recent reports suggest that the Richfield-based consumer electronics retailer, the largest in the world, will see strong holiday sales and some of that momentum likely will carry over into the next year and beyond.

Market research firm NPD Group said consumer electronics sales over Black Friday weekend rose 10 percent to nearly $5 billion compared with the same period in 2012. That’s the first double-digit Black ­Friday weekend sales increase in three years.

Even more impressive, the numbers don’t even include smartphones, usually a strong seller, and video games, which will get a big boost from the debut of PlayStation 4 and Xbox One consoles.

And by all indications, that boost will be significant. Microsoft and Sony have so far sold a combined 4.1 million game consoles around the world. Based on those figures, market research firm IDC predicts that retailers will sell 42 million consoles in 2014, a 17 percent gain from this year. And from 2015 to 2017, that number will hover between 42 million to 46 million consoles a year.

Best Buy declined to comment. Minne­apolis-based Target Corp., which also sells a good deal of electronics, said the reports confirm what the company has seen thus far.

“We’ve seen tremendous guest reaction to the season’s latest electronics and gaming products,” said spokeswoman Katie Boylan. “In fact, Black Friday sales in electronics significantly increased over last year, and we are seeing demand in this area of the store remain high in December.”

The NPD report was striking because televisions and notebook computers, two declining categories, and tablets made up more than 60 percent of the $5 billion. While the computer growth was somewhat of a fluke, the performance of televisions was particularly promising.

Television sales totaled $1.4 billion, a 5.6 percent gain over last year. While retailers’ Black Friday promotions certainly helped sales, prices for big-screen televisions are falling to $1,000 just as consumers are starting to replace their old sets, said NPD retail analyst Stephen Baker.

For example, unit volumes of 60-inch TVs jumped 62 percent. The average selling price of those televisions this year have fallen to $1,005 compared to $1,374 in 2011.

“These are prices consumers can afford,” Baker said. “Consumers are … more amenable to much bigger televisions.”

Sales from emerging cate­gories like high-end audio also were strong, especially Beats, the headphone maker founded by rapper Dr. Dre and music executive Jimmy Iovine. Both Target and Best Buy have devoted considerable space and attractive displays to Beats.

Best Buy drew heat from Wall Street after it warned that its gross profit margins for the fourth quarter would decline because the company intended to fight for market share through price ­promotions.

In a recent interview with the Star Tribune, e-commerce chief Scott Durchslag said the company was counting on sales of higher-margin accessories and services like Geek Squad to help cushion the blow.

In some very good news for Best Buy, sales of accessories for smartphones and tablets over Black Friday weekend jumped 18 percent to $130 ­million compared to $75 million in 2011. And these accessories are not cheap hard cases but more-expensive, higher-end, quality products, Baker said.

“You are always looking to move these kind of products,” Baker said. “They always hold their average selling prices.”

Overall, the consumer electronics industry is experiencing a revival just at the right time, analysts say.

“To sum up, we saw encouraging signs in this Black Friday report,” Baker wrote in a blog post. “Revenue growth across all the major large categories and accelerating revenue increase in the fast-growing midsize categories ... delivered an impressive start to the ­holiday season.”

 

Thomas Lee • 612-673-4113

 

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