South Africans will likely spend on gaming consoles, cameras and netbooks this holiday season, while doing more comparative shopping when purchasing technology items.
BMI-TechKnowledge research analysts Astrid Hamilton, Clinton Jacobs and Ryan Smit expect retail technology sales to drop dramatically in real terms this festive season. “Many households have struggled through the year, and probably find themselves in more debt than they were at the same time last year.”
They say retail figures reported by Stats SA, and the forecast for 2009, agree with this. Stats SA reported in October that retail trade sales in real terms for the three months ended August reflected a decrease of 6%, compared with the three months ended August 2008.
“Technological goods are likely to come under some extra pressure as they are normally high price tag items, and the reluctance to plunge into more debt will likely mean that shoppers choose more affordable alternatives,” says BMI-T.
The analysts add that major factors impacting the way consumers spend this season include their level of debt, access to credit, and their economic outlook for the next year. “The overall trend is that consumers are doing more research before purchasing goods.”
Kalahari.net CEO Gary Hadfield says he expects traditionally popular Christmas purchases, such as iPods, cameras, camcorders, notebooks, netbooks, and GPS units, to remain popular, but that consumers will buy at lower pricing points.
“Consumers tend to look for more value when purchasing, and consume at lower pricing points.”
BMI-T predicts higher-priced tech items, such as TVs, gaming consoles, and PCs, will also benefit from the Christmas period, but not as significantly. “They could take a hit as shoppers look towards more 'classic' Christmas presents, but items such as games will feel this slightly less.”
The analysts add that PC hardware has also taken a knock, as many consumers are looking to upgrade rather than replace.
Rosy outlook
Despite tighter budgets, Incredible Connection CEO Dave Miller expects sales to be good. “We're anticipating good unit growth over last year. For one thing, the rand has softened and so unit prices have come down - which works in the consumer's favour.
“Also, consumers are actually getting more bang for their buck this year as technologies now offer far more functionality without having become more expensive.”
He adds that with certain products, such as digital cameras and MP3 and MP4 players, purchase prices are dropping, while functionality is being greatly enhanced. “So, for the same money consumers would have spent last year, they're going to get far more use out of the product.”
Another option is that of buying accessories rather than entire devices, says Miller. “The iPod Nano, for instance, now has the additional video component - and speakers would be a great accessory to give a Nano owner.”
According to BMI-T, low- to mid-priced tech items are usually more popular, as they fall into the Christmas gift price range, with games, digital cameras, DVDs, and mobile gaming consoles likely to fill holiday shopping baskets.
Windows 7, e-readers, and new smartphones, such as the Motorola Cliq and Droid, may also benefit from the Christmas period, but probably not as much as they would in the US, it adds.
Products like MP3 and MP4 players, Sony PlayStations, and Xboxes always do well at Christmas time, says Miller, along with gaming software. “In fact, 30% of all MP3 and MP4 sales happen in November and December.”
He believes traditionally popular tech items will continue to do well, despite economic pressures. “Consumers can seldom resist the latest developments in the smaller, more affordable devices that form such an important part of their lifestyles.
“Even though shoppers are tending to choose on price and on the deals we can offer them, they're still buying what they need. Information and connectivity are now such deeply embedded components in consumer lifestyles that most people feel they can't really do without, for instance, a computer or a cellphone.”
Stocking fillers
Hadfield is also positive about the outlook for the next few months. “We expect to see continued growth in technology sales this festive season.” The Wii, Xbox, PlayStation, cameras, camcorders, and notebooks and netbooks will be at the top of people's wish lists, he says.
New releases such as Forza 3, Borderlands, and Windows 7 are likely to spur spending these holidays, says Hadfield, adding that Kalahari.net is promoting bundle offers, particularly around gaming consoles.
Justin Drennan, CEO of local online store WantItAll, says the site is expecting this Christmas to be substantially better than previous years, and hasn't experienced a slowdown.
“Tech is extremely popular. Traditionally kids' toys have been big sellers and this year looks like it's going to be more popular than last year, as parents look for convenience and move their shopping online.”
According to Drennan, there's been a large increase in the number of people who are choosing to make purchases online. “We've seen customers shop around a lot more. As people become more Internet-savvy, they are able to make use of some price comparison sites to hunt for the best deal.”
Drennan predicts the coveted tech item of the year to be the Amazon Kindle, which he describes as “a really unique product”.
“Amazon Kindle is the 'must-have' item for this season. It's changed the way individuals are able to read books. Traditionally, you'd have to purchase your books from traditional retailers, and now you can have access to over 300 000 books instantly.”
Andrew Jackson, GM of DionWired, predicts netbooks, the Apple iPhone 3G, digital still cameras, Apple iPods, GPS navigation devices, and gaming consoles such as the Sony PlayStation 3, Xbox, Nintendo Wii, Sony PSP and Nintendo DS will all have shoppers opening their wallets.
BMI-T also anticipates netbooks to sell well, forming part of a larger trend. “There probably will be a move from notebooks to netbooks at consumer level, as netbooks are far more affordable and still have their novelty.”
Future view
According to a recent SA Information Technology Report Q4 2009 by Business Monitor International (BMI), sales have been hit by sluggish retail demand this year, with the wholesale and retail trade sector contracting by 2.6% in the first quarter.
The reports adds, however, that “despite a sharp deceleration in 2009, a number of fundamentals should mean that spending remains on an upwards trajectory during BMI's five-year forecast period [2009-2013], with the main drivers including low computer penetration, falling prices and vendor and retailer promotions, and the popularity of notebook computers and ultra-light products.”
Miller has high hopes for future tech sales, with Incredible Connection opening four new stores between August and November, and plans to open three more in the first few months of next year.
“We'd not be undertaking this kind of expansion if sales were not good right now and if we weren't expecting sales to get even better during 2010. We have nothing to fear from the downturn and everything to gain when the upturn makes its appearance.”
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