As we predicted in our recently released Q2 2017 DS Index white paper, the confidence level for the consumer electronics retailer continues its downward trend. Heading into August, we’ve reached another new low for the DS Index, with a total score of 167.9, down nearly 10 points from the previous month.
This is the fourth straight month that the DS Index score declined.
In July, we highlighted how independent stores were the drag on overall CE retailer confidence. While their confidence level did decline month-over-month, it was actually the big box retailer that saw the most dramatic decrease in overall confidence for August. Last month, big box stores lead the way in the brick-and-mortar space with a confidence score of 198.33; for August, though, their score dropped nearly 40 points to 159.5. Regional chains remained flat with a confidence score of 189.5, up 0.05 points from July. Independents decreased slightly, dropping to 154.27 from 161.12.
Even ecommerce stores experienced a decline in overall confidence. Last month, they lead all retailers with a score of 209.66. This month, they fell off 17 points to 192.46.
Similar to the responses we received in July, retailers said the hot summer months have pushed consumers to take vacations. As a result, foot traffic is down, and consumers are spending money on things other than consumer electronics. Other retailers blamed their struggles on things like rapid and extreme market fluctuation, a soft economy, and ecommerce struggles.
“Customers expressing that some items are cheaper online, but at times the customer fails to realize the products are not the same,” one retailer said. “It is frustrating at times that you feel you are being window shopped for information to educate on products that will be used to purchase an item online.”
Product Confidence Tanks
Over the course of the past year, we’ve noticed a relatively consistent trend where product category confidence scores have outperformed the overall confidence score. Whereas, the DS Index score has dropped, the by-product confidence level had remained relatively high.
That’s not the case over the past two months. Now, average product confidence is starting to take a major hit. At 6.02 (based on a scale of 1 to 10), the average product confidence level is at its lowest point this year.
For August, Dealerscope looked at each product category score for the month and compared it to the average for the year. What we saw is that every product in August scored lower than it’s average score year-to-date.
Since the start of the year, the categories that have seen the biggest drop off in confidence have been Connected home (down 1.43 points), Headphones (down 1.19 points), VR (down 1.17 points), and Gaming (down 0.92 points).
Sales Performance Suffers
One of the more damning trends we’ve seen during the past few months is how CE retailers are performing against their sales goals. Though the late summer months are typically slower as consumers head out for vacation, which means more tepid sales goals, CE retailers are still struggling to meet their goals. Put beyond struggling to meet them, their underperforming by a lot.
In April, just 4 percent of CE retailers missed their sales goal by 11 percent or more. That number has skyrocketed over the past two months, reaching 30 percent in our most recent survey. Another 16 percent missed their sales goal by between 1 and 10 percent.
On the opposite end of the sales spectrum, 8 percent of CE retailers reported beating their sales goal by 11 percent or more, the highest percentage since March when 8 percent did it then as well.
Looking ahead, CE retailers have hope that the back-to-school shopping season will bring some additional traffic into their stores—both brick-and-mortar and online. And they have every reason to have a brighter outlook: According to the National Retail Federation’s recent back-to-school spending analysis, consumers will spend $8.8 billion on electronics this year. That makes up roughly 10 percent of the $83.7 billion the NRF expects consumers will spend overall this year. Further, 60 percent of consumers said they plan to purchase electronics this year, and 24.6 percent of consumers said they plan to go specifically to electronics stores for their back-to-school shopping.
Between back-to-school and the looming holiday sales period, the future should look a little brighter for the CE retailer.