It's Thanksgiving week in the US which not only means a holiday focused on family, friends, and lots of food, but also shopping. Retailers in the US look to what has always been the kick-off to winter holiday shopping as the critical step to meet yearly sales and revenue targets. With many US retailers still struggling in the face of wait-and-see, conservative consumer sentiment, this year has been one in a string of challenging (and disappointing) sales years.
Third quarter results have been trending upwards for many, but the biggest US retailers are still facing significant pressure and falling sales. Enter the Black Friday App to help shoppers navigate through the deluge of offers. Importantly though, the reliance on Apps and online shopping underscores that consumer electronics is holding steady for positive sales increases this season, despite challenges.
Notice Shoppers: Black Friday has been moved?
Typically, the Friday after Thanksgiving was the chance for shoppers to brave the traffic in parking lots and stores in order to vie for the most desired gift items at the most alluring discounted prices. The rush and excitement of the Friday after Thanksgiving – Black Friday – lead to the highest volume and revenue sales day of the year.
This year, Black Friday seems to have been creeping into shoppers' email inboxes earlier and earlier. The deluge of pre-Black Friday deals in stores and through online coupons and alerts has raised questions of what exactly the outcome of this year's critical retail numbers will be for businesses. There's a race to the bottom in pricing among major retailers with price matching and even Sunday deliveries by Amazon in choice locations. The aggressive pricing and earlier sales enticement of consumers indicates that competition is fierce and retailers are steadfast in holding onto market share and those critical holiday sales. Why all the rush? It's not just about increased competition and the desire for the (currently good) third quarter numbers to continue, it's because Thanksgiving is late this year and there are fewer shopping weeks before the end of the year because of a fluke in the calendar.
In response, major retailers in the US are opening for the first time ever on Thanksgiving Day to increase sales opportunities. Among them are the major electronics retailers, offering pricing incentives for consumer electronics (gaming, toys, personal computing and smart wireless devices) and smart appliances (with increased semi content); our industry is at the core of the shopping frenzy this week.
Not only has Cyber Monday (online sales the Monday after Thanksgiving which competes with Black Friday's in-store sales) increased rapidly as the new means for shopping, but more people are deciding to save the time, fuel, and energy and sit at home while they compare prices and purchase their gifts online. According to research on sales activity, "one third of average monthly traffic for leading retailers […] is from smartphones and tablets […]." To navigate the now earlier and more complicated, meandering trails of sales (Pre-Black Friday days, Thanksgiving Day, Black Friday, and Cyber Monday), there are new smartphone and tablet software applications (Apps) to help compare pricing, track items, ensure sales and coupons are stored, and even help navigate the best logistics for in-store shopping.
Also supporting strong forecasts for our industry are the data showing consumer electronics are forecasted to again make up roughly one-third of consumers' gift budgets this year. When you add in that the shopping itself is increasingly moving to smart shopping, that means people will increasingly need smart devices to track the deals and/or shop online.
So what does this mean for semi? Red or black fourth quarter?
The economic outlook has been mixed for the second half of 2013 (2H13), and while early data for 3Q13 are indicating mostly "stonger-than-expected growth in jobs and the broad economy," few retailers are willing to rest on data alone. Importantly, while the lower-income shoppers are forecasted to have a more conservative spending budget still this year, higher-income shoppers are pushing the final quarter sales into black territory. The major OEMs are not blind to the demand for electronics across the pricing spectrum though. Lower priced devices are set to be released this week to tap into the lower-priced market for tablets. HP's Android platform, Mesquite tablet is priced at US $89 and focused for Walmart sales in the US. As PCWorld explained the pricing strategy, "To meet the sub-$100 price tag, device makers usually leave out some features from tablets. Sub-$100 tablets tend to have low-resolution screens, limited storage and an older version of Android."
For the semiconductor and electronics industry, the set of combined factors point to the continued strength of our industry during the 4Q13 shopping season: (1) increased reliance on smartphones and tablets for shopping online and/or price comparing and tracking items for purchase; (2) continued hold of minimally one-third of gift budgets allocated to consumer electronics purchases; (3) the continued proliferation of semiconductor content into less-traditional items such as large appliances and "Smart Home" items; and (4) the new hopes for a gaming console revival as the latest Microsoft Xbox One and Sony PlayStation 4 have recently landed and sales are brisk.
US retail data are showing "electronics and appliance retailers enjoyed a 1.4% upswing from September [to October] and a 4.8% surge year over year." Forbes' early forecasts for the US online holiday retail sales for November and December "[...] are expected to grow at a double-digit pace and pull in over [US]$78 billion.This represents about one-third of the overall retail sales volume for the year."