Analysts: Expect A New Face For CE Retailing In 2009

The consumer electronics retail marketplace will be rocked by more store closings in 2009, but at the same time see growth in new segments such as drug stores, home improvement stores and even toy stores.

That was the assessment of a trio of Consumer Electronics Association (CEA) analysts at the CES Show in Las Vegas assessing the 2009 retailer landscape.

"It is going to be a tough retail environment in 2009," said Shawn DuBravac, an economist for the CEA. He expects more retail locations to close in 2009 versus 2008 in the wake of a decline in discretionary consumer spending. Circuit City, for example, is in the midst of closing stores.

The retail marketplace is feeling the impact of big box retailers wielding their muscle, including a concerted push by players like Walmart and Costco into the CE market, said analysts. At the same time, new entrants are changing the face of CE retailing, including home improvement stores like Home Depot and Lowe's, which are now selling CE products such as flat panel TVs.

Tim Herbert, senior director, market research for CEA, said new players are emerging that are adding a new look to the retail marketplace, including drugstores like Walgreens and CVS and outdoor retail giant Cabellas, which is aggressively selling GPSs.

Toy stores like Toys R Us are also playing an increasing role in the CE retailing market, given that about 50 percent of the toys coming into the home now have some computing or processing power.

"For the first time at CES, we are seeing toy manufacturers coming to CES to distribute new toys," said DuBravac. He said that trend will continue in the years ahead as manufacturers look to build CE functionality into all kinds of mainstream products.

"A large number of retailers are offering technology that historically have never offered technology," said DuBravac. "To me that is a more interesting story (than the retailer slump). We expect unemployment to go up. We expect stores to close. That is what happens in a recession. But we are also seeing non-traditional retailers get into this market. We're seeing consumers buying legitimate consumer electronics products at non-traditional retailers like drug stores."

Herbert said the retailing market is feeling the punch of an economic storm not all that unsimilar to the dot.com meltdown in 2001 and the recession of 1994. The one difference: the overall economic environment is far worse today than in 2001 or 1994, said Herbert. Given that overall economic environment, CE retailing will fare much better than other industries including luxury consumer goods like jewelry, he said.

One difference between CE and other markets like jewelry is CE products are considered more necessity than luxury in many cases, said Herbert. For example, GPS devices can be used to save time and mobile phones and other devices are integral to communicating with family members, he said.

Speaking about the changing face of computer retailing, Steve Koenig, director of industry analysis for the CEA, said that it is important to "never forget that business creation and elimination are part of capitalist society. Businesses are created and go away everyday. Yes, it's a recessionary period. But we have a tendency to overfocus on retail closures. A lot of it may boil down to bad management."