Black Friday Disappoints Retailers

According to The NPD Group's Black Friday Report, retail results from the week may offer retailers little to rejoice about.

Given the massive advertising (and, ahem, online coverage) surrounding this year’s Black Friday, you would think retailers would be ecstatic about the numbers. Not so, says The NPD Group, a prominent provider of consumer and retail information. In fact, NPD claims that this year’s consumer technology retail sales grew by just 6 percent over 2006, less than one-half of last year’s growth rate. That’s the first time in the six years (tracked by NPD) that sales growth has dipped below the 10 percent mark.

“While revenue growth declined this year, we’re at least seeing a more rational pricing environment than last year, as well as a more stable competitive outlook,” says Stephen Baker, vice president, industry analysis, The NPD Group. “This is most certainly a positive harbinger of expected profitability throughout the holiday season, even if it calls growth prospects into some doubt.”

Last year NPD reported unfavorable unit-sales growth for consumer technology products, despite heavy customer traffic. Black Friday 2007 was different. This year unit-sales were up 9 percent, which is far ahead of the 6 percent dollar growth and a reversal from prior years. The consumer technology arena tends to be dominated by large and rapidly growing segments; however, this year there has been a further narrowing of the market, as the growth rate for plasma TVs, digital cameras and MP3 players declined sharply.

The Winners
Areas like notebook computer accessories and bags, camera accessories and cases, remote controls, digital cables, and computer memory all performed well—and likely contributed to the “basket-of-goods” mentality retailers were trying to impress upon their customers.

LCD TVs were the star of Black Friday this year. Unit volume increased by 45 percent and revenue jumped 80 percent. Most of this result was driven by the enormous change in the product mix that has occurred over the past year. This year 30-inch-and-larger products outsold the smaller sizes, which led to triple-digit increases in units and dollars among the larger sized TVs. The resulting triple-digit increases in units and dollars among the larger sized LCD TVs only required a 14 percent decline in average selling prices (ASPs).

Notebook computers also drove some solid unit increases and dollar gains during Black Friday, but—as they have all year—they represented something of a comedown from last year. Notebook sales volume jumped almost 30 percent, while revenue increased nearly 17 percent. Their average price declined by less than 10 percent this year, compared to 18 percent last year.

“When looking for the best performing category of 2007, don’t look any further than GPS,” Baker says. “While sales volumes were strong last year, it was more of an introduction for the category, than it was the establishment of a long-term opportunity. Sales this year appear to cement GPS as a long- term major player.”

GPS category growth this year was also impressive. Unit sales increased six- fold over last year. In fact, more GPS devices were sold this year, than PCs, 30-inch-and-larger LCD TVs, and plasma TVs.  Revenue increased 237 percent from last year, breaking the $100 million barrier, which pumped its rank to the sixth-largest category on a dollar-sales basis. Overall ASPs fell to under $200 from $322 last year.

Another category break-out performance was digital picture frames. Unit volume for Black Friday 2007 reached nearly 500,000 units and $30 million.

The Losers
For the second year in a row, more MP3 players were sold than any other product, but the year-long category sales slowdown was still felt during Black Friday. Unit-sales volume was up slightly (4 percent), which likely was driven by the success of recently introduced Apple iPod products.

Digital cameras have been a perennial staple of Black Friday advertising for many years. This year point-and-shoot Black Friday ASPs fell by 14 percent from 2006. Unit-volume growth in 2007 was just 11 percent; consequently, overall point and shoot revenues declined 5 percent against 2006.

“Despite the relatively poor overall results we remain optimistic about the holidays,” Baker says. “Given the position of many of the largest categories on the growth curve, it was inevitable that overall volume growth rates would decline; however, a continuation of the more benign pricing environment noted on Black Friday should make for a reasonable, but not spectacular, holiday selling season.”