CES and New Realities for Consumer Electronics

Caught the news release about the 2009 CES show taking place in Vegas this week. The release is what you might expect for an event that is trying to put on a happy face when most of the news points to something rather dour.

A few random thoughts...

The trade show is where companies announce and demo new products, they are used as a venue to blitz the media and meet with customers and suppliers. Do it right and you can generate a lot of buzz for the products. They are also a good gauge of what's going on in an industry.

When I see a lead off of 20,000 new products helping lead the way to economic recovery I have to laugh. More so when I see "Innovation will restart the world's economic engine". Unless the innovations are going to significantly reduce costs or offer up a productivity proposition that warrants someone ponying up scarce money then take this one with a grain of salt too. (The only caveat for that I would offer is if you work for a PR firm or in the Marcom department then said innovations will likely keep you employed for a while) Supply is not our collective problem. It's all about demand and that is becoming harder and harder to find. See Mish Shedlock's blog.

I don't consider CEOs attending a trade show worthy of mention in a press release. Of course CEOs should be at major shows. In addition to meeting with press and analysts these people should be out walking the floor, visiting other booths and yes, talking to your average consumer.

However, if you are a CEO (or anyone in electronics) you should be gravely concerned about what is coming down the pike. Consumer electronics are in for a really rough stretch, business spending is falling rapidly and deflation is the current condition. The frantic discounting and panic selling of Q4 has not only destroyed margins but promoted buying of stuff today that manufacturers and retailers would have been able to count on a few quarters down the road. Karl Denninger of the Market Ticker Blog nails it in this entry where he touches upon what happens when we borrow against future demand. The writing style is a tad bit dramatic but the point is rather clear; how many more TVs, displays, iPod/MP3s, smart phones or other gadgets do people want and need right now?

Other issues:

There is talk of large scale reductions in the amount of retail outlets in 2009 and 2010. Clearly we have too many places to shop for goods and while it won't help unemployment numbers the contraction simply has to happen. For newer technologies though that means shelf space is going to be much harder to come by. Best Buy and Circuit City (in Chapter 11 right now) are places where people go to look at what's new then search on-line for the best price. If you get lucky you might actually find someone who can answer some product specific questions. If they go who is there to educate the consumer on why the next generation of tech is worth paying for? Companies cannot underestimate the effectiveness of retail outlets in the success of consumer technology. As retail stores dies off and competition for shelf space increases companies are going to have to come up with new means of promoting and selling products. That's why I found the mention of attempts at about trying to restrict attendance and making sure the "right" people come to the show the most outrageous of all.