Consumers have ‘mixed sentiment’ about economy, but interest remains in HDTVs

It’s difficult to get a handle on the direction of the U.S. economy these days. One day, news headlines trumpet a dip in the unemployment rate, the next, a record high in the price of a barrel of oil.

Interjected into this time of economic uncertainty comes the taxpayer rebate — a monetary government incentive that is putting a minimum of $600 into the pockets of millions of Americans. Will that sum be used to ease the pain of filling up the gas tank or to buy groceries? Or, will it be used to help pay for less essential goods, like consumer electronics including HDTVs?

That’s exactly what market research and consulting firm Parks Associates set out to learn with its “Consumer Electronics Purchases: Quarterly Monitor” report, which is based on an Internet survey conducted in April. “HD Technology Update” spoke with Park Associates VP and principal analyst Kurt Scherf to learn more.

HD Technology Update: What has Parks Associates found about how the public intends to use its tax rebate — particularly as relates to consumer electronics and HDTVs?

Kurt Scherf: I think the results of the study that we did, “Consumer Electronics Purchases: Quarterly Monitor,” actually show a mixed sentiment, which is a consistent theme with all of the economic reports that we’ve all seen for the last few months.

I think the consumer sentiment is reflecting that one day there is good news that the price of oil drops and today’s news that the unemployment rate dropped, and then tomorrow we will get hit with news about rising food prices.

It really is a double-edged sentiment. Fifty-six percent of consumers said that they are planning to make a consumer electronics purchase this year. Twenty-three percent said that they were specifically going to use the tax rebate check to make a purchase.

Then if you turn it around and ask people who indicate they are not going to make a purchase this year, a third of them specifically cite economic concerns as a reason for holding onto their dollars. You go back and talk to the people who say they plan to make a purchase, and 50 percent of them say that’s sort of a tenuous position if the economy doesn’t improve. They will delay or altogether cancel that purchase.

HD Technology Update: What did you find regarding consumer desire for HDTVs, computers and other electronics as they stack up to essentials, such as food?

Kurt Scherf: We did not provide a completely comprehensive list of all the CE products that are for sale. We were pretty limited in the questions we could ask.

I’ll say this: From doing Internet surveys in the past, we’ve found that 85 percent of households surveyed have bought at least one consumer electronics device in the past year. That includes everything from a new mouse for their computer, keyboard and smaller ticket items. I don’t think at this point that it is a trade off of groceries for consumer electronics.

I think we are seeing — and we fully expected this year that items like HDTVs and Blu-ray DVD players were going to sell in significant numbers just because of how the market dynamics were setting up — that we are now less than a year away from the digital transition when analog broadcast switches to digital, and I think that is going to provide encouragement for consumers who have been sitting on the sidelines for awhile about a digital TV or HDTV purchase to go ahead and make that purchase.

I think continually falling prices of digital displays are going to be another bit of encouragement. On the DVD player front, we’ve just exited this format war that left consumers confused about which format would be left standing. I think you are going to see some aggressive promotions toward the end of the year when it comes to pricing. I actually expect to see some bundling taking place when you buy an HDTV you are going to get a steep discount on a Blu-ray player.

So the dynamics, I think, that were setting up were very encouraging. Then you bring in the economic concerns and that sort of turns things on their head a bit.

HD Technology Update: It seems like it’s a very tough time to get a handle on where things are headed.

Kurt Scherf: Yeah, if you were creating a purchase model here, it would be unbelievably complex given all the variables. It would be enough just to try to predict sales in steady economic times. But to add those variables, it gets really complex.

I think one of the interesting things is what we call “recession-proof” consumer electronics products. One of the interesting things we did with the study was to ask people what their purchase intentions were for 10 different consumer electronics products and then to follow up with the question of: “If the economy gets worse, which products are you likely to delay or cancel?”

If you compare the numbers coming from those, we found things like MP3 players seem the most recession-proof at this time among the products we surveyed. Among the likely buyers, 19 percent said they would delay or cancel the purchases if their concerns grew. Interestingly enough, right behind that were home theater systems.

HD Technology Update: There have been examples in history that consumers may spend on entertainment for the home as the economy weakens. Could that propensity actually benefit sales of HDTVs?

Kurt Scherf: That’s exactly right. One of the interesting things about home theater systems, and they are very affordable as a home theater in a box, today, they are still several hundred dollars. We’ve actually done some qualitative work in this space and found that high-end home entertainment centers, some of those purchases, in some part are driven by consumers’ desire to actually save money.

That sounds odd, but whether you call it “cocooning” or “nesting” or whatever term you want to apply to it, I think there are a couple of things going on. In an uncertain world, people want to bring their entertainment home; they don’t want to battle the traffic; they don’t want to spend $4 on a Coke at a movie theater — or at least they are less inclined to do that. So bringing that higher-quality entertainment experience home appears to be an offshoot of uncertain times.

HD Technology Update: Just to clarify, what specifically are you referring to as “home theater in a box?”

Kurt Scherf: There’s actually a new definition this year, which the Consumer Electronics Association (CEA) is now using, which is a TV at least 40in diagonal in screen size plus at least four external speakers. That’s typically the rule we use here. Home theater in a box would include the receiver, the speakers as well as the subwoofer in one box.

HD Technology Update: What did the study find in terms of home theater systems?

Kurt Scherf: Overall, 8 percent of households that we surveyed said they were planning to buy a home theater system this year. Of those, only 20 percent said the economic situation would cause them to delay or cancel that purchase.

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