"It's the Economy, Stupid"…Again

by Team Sony 10/16/2008

I seem to recall this line (or something close to it) being used in a well publicized presidential debate many years ago.  Given the current economic climate with this year’s election coming up, the campaign line seems even more relevant today.

That said, like millions of Americans, I wonder what it will take to pull us out of the current funk. I believe eventually the $700 billion government rescue/bailout plan will help. So will interest rate cuts by the Federal Reserve and the government’s support of the commercial paper market — all designed to provide liquidity, open up lines of credit and boost confidence. Plus, there are some new proposals on the table by both presidential candidates that may bring some relief to people struggling to pay their mortgages or looking at the possibility of home foreclosures.

My question is:  How is the consumer going to respond in this environment? In recent years, consumer spending has been the fuel behind the nation’s economic vitality, as well as the economic development of countries around the world that are directly impacted by U.S. spending and investment — be they mature markets like Japan, Korea and western Europe, or emerging countries like China, India and Russia.

And relative to Sony, especially here in the U.S., my questions are: Will American consumers spend their hard-earned money during the busiest season of the year leading up to the holidays on our consumer electronics products?  Is the nation’s transition to digital television in February 2009 going to keep consumers buying HDTV sets and related products like Blu-ray players?  Will consumers be in a gift-giving and gift-buying mood as the holidays approach?  Will consumers opt for entertainment options provided by our great products, while perhaps forgoing that next new automobile purchase or an elaborate vacation?

We’ll soon see. For much of the year, consumers have continued to shop and continue to buy CE products at a pace outdistancing the economy as a whole and other segments like housing and automobiles.  In the past month or two, however, there have been signs of tentativeness. Retailers are now in a place where they have to start making some bets on consumer expectations as they place their holiday orders. And manufacturers like Sony have to be responsive and show the value that consumers will receive by sticking with the industry’s No. 1 brand.

Although the U.S. unemployment rate has increased somewhat, overall employment in the States pretty remains high. Call me an optimist, but even with the volatile stock market and shrinking retirement funds, I believe people still want to entertain themselves and their families with cool new products — perhaps now more than ever.

And one thing you can be sure of with consumer electronics is that the value of CE products keeps going up even when prices in general are often coming down.  This axiom is true for flat-panel LCD televisions, Blu-ray Disc players, notebook computers, digital cameras, camcorders, videogame consoles and more. What other industry can say that?

I also believe that rewarding yourself (or getting a gift) with a new product from Sony (and, yes, some of our competitors) is a pervasive motivation that will continue even in these challenging times. By the way, if you’re looking for some bargains for yourselves or your loved ones, you might want to check out this list of Sony outlet stores to see if there’s one near you.

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  1. guest_user wrote: October 16, 2008 11:56pm

    Thanks for the update and your take on Sony in the current market. I think
    there is room for optimism in the economy this holiday season. There are good
    reasons for client to go out purchase their Wish List items and even upgrades
    in the face of the digital transition and so forth. Being an investor in the retail
    empire Limited Brands (parent company of Victoria’s Secret and Bath & Body
    Works) I know that the retail industry no matter what the business must stay
    cautious and aware of the high level of concern from clients for their money
    and the fact that there is a credit crisis. Working for a bank, I know there are
    measures that must be taken to keep business as close to ususal but the
    crunch goes around to everyone.

    My idea for this post is to have a Sony MP3 player that counts the steps
    someone takes like a Stepometer. This would be something that is beneficial as
    the user of the product could then be able to listen to their favorite song and
    know their progress of their regime. Hopefully the same addition can also
    count the number of calories lost during the session of walking much like the
    line of Life Fitness treadmills at LifeTime Fitness.

  2. guest_user wrote: October 18, 2008 4:08am

    Sony has been doing no interest payment plans. With the tightening of credit,
    will Sony continue to do so in the future?

    I work with several electronic firms and I get emails about how raw material,
    shipping, and labor costs are all rising, and while the companies strive to
    contain costs, they cannot be counted on to maintain their prices.

    In addition, the major retailers are putting pressure on the suppliers for
    additional discounts, as they don’t want to cut their profit margins.

    The consumers are seeing their paychecks shrink and they are cutting back
    on all purchases, including food. I spend a lot of time watching what shoppers
    at Costco are buying, and I see them coming out of the store with a lot less of
    the luxury goods that they were buying in the past, and even foods purchases
    are less. Costco has a 42″ LCD 1080p Tv carrying the Westinghouse label at
    $699. The Panasonics and Sony units are hundreds of dollars more.

    I think this Holiday season will be very soft, even with discounts by the
    manufacturers and retailers.

  3. guest_user wrote: October 18, 2008 3:24pm

    Ah yes the shopping season. Unfortunately I am not in the US but canada so
    our economy isn’t doing so bad, but it is not that great either. But the economy
    is not what will determine what I will buy, but Sony. I am ready to buy a sony
    vaio laptop but sony canada is stalling and not releasing the product in canada
    and I have to wait. Sure I can wait but then if another brand releases
    something before sony on sale here I will buy that since first come, first
    serve. It is up to Sony to make the move and entice customers in canada and
    the US, since it is them and them only keeping me from buying a laptop which
    is not even on sale. Why deny the customer a product? Sony canada has
    done in the past with mp3 players, and they have lost my business since I
    have to buy from the abroad to purchase the mp3 player. Apart from that,
    calling the sony store here and asking about the forthcoming products on the
    site, available in the pre-order area, they employee instead offers to sell me
    the older vaio models when I want the new ones. This is not how to treat a
    customer by shoving old models into their face. If the laptop was on sale right
    now, I’d go and buy it, but it’s up to Sony.

    As for the mp3 player market, with poor showing of recent apple products I
    still think Sony has a chance to shine with any new product due. I know a
    new mp3 player is coming, albiet perhaps not as a Walkman and most likely
    touchscreen, it can’t get here soon enough. The Cowon S9 is slated to go on
    sale before the year’s end, even before december, and if I have to I will order
    it from abroad. I would prefer a sony, but it seems like the new walkman is
    due for early next year with a CES debut, and that is too late for me. Knowing
    sony canada, we probably won’t even receive the new walkman before
    march 09 and it will come with smaller capacities than other markets.

    So unlike most consumers, it is not the economy holding me back from buying a
    new sony product or CE, but Sony, for stalling and not failing to release
    products in Canada. I just hope Sony Canada realizes this fact and gets a
    move on it.

    excellent blog by the way.


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