Big Box Consumer Electronics Retailers Crash in Latest DS Index Survey

Though the consumer electronics retail industry saw its confidence rise in April, it was a very telling month for how this industry is trending four months into 2018. Independent and regional stores both saw growth, month over month, while their big box counterpart saw the largest single month crash in DS Index history and set a new all-time low for a confidence score.

As a whole, the industry saw confidence rise four points this month, reaching 189.29. Year-over-year the DS Index is down nine points in April, but the month-over-month growth is actually double what we saw last year.

That said, the DS Index sits at an incredibly critical juncture moving forward. Last year at this time, the CE retail industry was teetering on the edge of a sharp downturn in confidence that started in the spring and lasted nearly half the year. Judging by the individual open responses, many retailers are still waiting for consumers to come into their stores with tax return checks in hand and ready to spend. That likely won’t be the case—as we covered recently—which could result in a similar downward slide for the DS Index this year.

Big Box Blunders

The DS Index could have experienced an even larger increase in April had it not been for a historically poor performance by the big box segment of survey respondents. That category of retailer scored a 126.7 in April, the lowest single-month score ever recorded in our survey. Additionally, that represented a 75 point drop month-over-month—the largest single-month drop ever.

Conversely, independent store retailers, while still hovering below the overall averages, saw their confidence level jump 10 points in April to 179.83. And regional chains continue to set the pace, rising half a point to 216.13.

For big box retailers, the sharp drop off in confidence comes during a month in which there hasn’t been a lot of great news to go around. March saw Toys R Us, the largest big box toy retailer in the country, decide to close up shop, and the list of major store closings continued to grow in 2018: Walmart will close 63 Sam’s Club stores this year, Sears continues to “right size” its retail footprint; and Best Buy announced last month that it would shutter all of its Mobile stores. Add on top of that reports that consumer spending continues to lag and all of the worries around Trump Administration tariff policies, and you’ve got the perfect recipe for a complete collapse in confidence.

Sales and Products

Despite the slight rise in overall confidence for the industry, the growth didn’t really extend throughout the rest of our April DS Index survey.

Starting with sales, there was incremental improvements made in retailers performance against sales goals. For February’s sales goals, 59 percent of retailers hit or exceeded their sales goal, while 41 percent missed. That’s a 3 point improvement over March. The biggest shift was seen between those who hit vs. those who exceeded their sales goal.

Exponentially more retailers exceeded their sales goal in February. While not stated in the survey, it’s safe to assume that TV sales throughout the month for the Super Bowl likely had an impact on sales performance.

Looked at by store type, 100 percent of regional chains exceeded their sales goals, two-thirds of big box missed theirs, and it was a near 50-50 split for independent consumer electronics stores.

For products, the narrative was similar to how it’s been the past few months—everything seems to be trending down. While 10 of 13 product categoriess were up on a month-over-month basis, all but two product categories have seen their lifetime averages drop since the start of 2018.

Interestingly, the two product categories that are up are Wearables and Emerging tech—historically, two of the worst performing categories. And, on the opposite end of that spectrum, the worst-hit categories have been some of the best performing: Gaming (down 1.5 points), smartphones (down 1.2 points), and Laptops/Tablets (down 1.1 points).

The next month is a critical one for the consumer electronics retail industry. The April to May transition will help us gauge how the remainder of the year could go for retailers, and given that it’s already tracking lower on a year-over-year basis, any downturn could have a major impact on the DS Index.