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Don’t Overbuild: Sales May Lag End-of-Year Forecasts

From my corner of the world, the outlook for the end of the year is weak at best and dismal at worst. Euro-zone nations and the United States are stuck in a financial and economic mess, Japan is still mired in a pattern of lackluster decade-long growth, and recently, oil prices have turned down and fears are rising that even the fast-growing Asian economies could catch the cold drifting over from developed nations.

All these things tell me that electronics manufacturers need to be very wary as they plan for end-of-year sales. The response so far to a poll question on the subject on EBN reflects the concern many have about how the market will perform in the second half of the year. (See: Business Environment.) So far, almost 60 percent of the respondents have said they expect sales in the second half of 2011 would be either weak or fair: About 32 percent of the 73 respondents said they expect weak sales, while 27 percent are expecting sales to be fair. Approximately 29 percent of the respondents are forecasting strong sales, while more than 12 percent were unsure.

I am in the fair-to-weak camp. Sales for the fourth quarter will likely lag expectations, but the first quarter of 2012 will be horrendous if the current economic malaise persists. There are already indications consumers aren't too comfortable with their financial and employment prospects. But the greatest indicator of a likely dismal sales environment is coming from a traditionally reliable corner of the economy. Weak energy prices have been a reliable predictor of economic conditions three to six months ahead and current trends do not bode well for the market.

Crude oil prices jumped in the last several months as the dollar weakened, but prices have started weakening again. This may be good news for motorists, but it is also pointing to the likelihood of below-expectation or even dismal demand in the holiday season, a period many manufacturers use to beef up annual sales.

The danger is that many companies won't believe a derailed train could be heading their way. Production for end-of-year sales is either in full swing or getting cranked up. The current production schedule might be based on forecasts generated in June or even earlier when conditions were rosier and the global economic environment was less turbulent. The forecasts aren't likely to be completely off the mark, but even a few percentage point swing in the wrong direction could cause untold headaches.

22 comments on “Don’t Overbuild: Sales May Lag End-of-Year Forecasts

  1. Anand
    September 20, 2011

    Crude oil prices jumped in the last several months as the dollar weakened, but prices have started weakening again. This may be good news for motorists

    @Anna, weakening oil prices is very good news for developing nations like India. Compared to other countries India is one of the biggest importers of Oil. Weakening oil prices means this will push down the inflation which is good news from industry point of view.

  2. Daniel
    September 20, 2011

    Anna, I think crude oil pricing is only one of the factors for global slowdown, there are other ‘n’ numbers of factors and among them the weaker trade value of US currency is important. Adding to the fuel, recent happenings in Libya, tsunami in Japan are also key factors.

  3. saranyatil
    September 20, 2011

    Anna,

    As you mentioned Economic slow down is slowing down the sales and affecting the complete forecasts. Already companies are rephrasing their sales target to the present situation.

  4. Jay_Bond
    September 20, 2011

    It definitely looks like end of year sales are going to lag behind most companies and investors forecasts. The main issue is going to make sure these companies lower their expectations and try not to pump up volume of their inventory in anticipation of larger sales. In this current economy these companies will be better off coming up a little short in inventory and not meeting demand rather than having a stock pile of merchandise just sitting in warehouses losing money.

  5. Eldredge
    September 20, 2011

    With 59% of the poll responses predicting fair to weak forecast, and 12% unsure, certainly the poll results don't bode well. Even if end of year fares better than expected, I'm sure everyone will be monitoring demand and inventories very carefully.

  6. _hm
    September 20, 2011

    Is it possible to compensate the lag in sales by more innovative and low cost product? Business may also need new marketing models to augment sales.

     

  7. Ms. Daisy
    September 20, 2011

    @_hm:

    Yes, new marketing strategies will be needed to lift up the mood of the holiday season and help the elctronic supply chain ride the this global wave of uncertainty.

  8. eemom
    September 21, 2011

    This is always a tough call for manufacturers.  Forecasts seem to have gone up and down again.  If manufacturers prepare for a slower than expected season, and the things start looking up, they may miss a good opportunity to boast annual sales.  If they decide to boast inventory, and sales are weak then they are left with product on the shelves.  I would be in the camp of fair sales, I do agree that marketing will be crucial to move the product and try to make the best out of the situation.

  9. Anna Young
    September 21, 2011

     @ Saranyatil, thank you for your contribution. As you may have noted also- EBN ongoing electronics sales  poll reflects a fair to weak sales is expected in the second half of 2011. This is an indication for electronics companies to brace themselves for a dismal end of year production target. I agree, it is expedient for companies to rephrase their sales target to the current global financial decline. 

  10. Anna Young
    September 21, 2011

    @ Ms. Daisy, I'm just pondering, what will the marketing strategy entail? Are we going to see further reduction in sale prices? Although it will be beneficial for consumers if there's a further slash in electronics sale prices. How will this pan out for electronic' supply chain?

     

  11. Anna Young
    September 21, 2011

    @ Jay_Bond, I concur, companies will have to lower their expectations. It is crucial in this current financial climate.

  12. Anna Young
    September 21, 2011

     @ Jacob, In addition the Current financial upheaval in Europe is equally a contributing factor. The austerity measures in place is not helping. Here in the UK, the government is now seriously considering measures to stimulate growth to help boost the economy in year 2012.

  13. t.alex
    September 25, 2011

    Yes, companies need to start pushing for these kinds of products in time for year-end sales.

  14. _hm
    September 25, 2011

    Does any US university offers some special course to produce potential visionary like Steve Job and others? It may be nice excercise for University and organization to inculcate this skill in youth and young graduates. In current situation, senior level managers are very poor in knowldge of most kind and they decide product future and features. We need to get young visionary.

     

  15. t.alex
    September 26, 2011

    _hm, isn't it true Steve Jobs build up his visionaries through a series of failures as well?

  16. _hm
    September 26, 2011

    Yes, this true in general. But I am afraid to say no for Steve Job.

     

  17. Adeniji Kayode
    October 4, 2011

    @_hm. vision is something deeper than that, its an inside thing and only little of it can be taught.It is better taken advantage of by looking in-ward seeing the future and coming out with product relevant to the future.

    Steve jobs had a vision,it might be from much studying,thinking, observations or hearing, noticed a problem and decided to do something about it and through this generate a vision(solution) and that is how it comes most times

  18. Adeniji Kayode
    October 4, 2011

    @ Anna. I feel with the present state of the economy everywhere now,electronics that must sell must really look in to slash in the selling price because people will rather prefer to keep the money for a top priority than to spend it on a liability except if ti going to be generating money other than entertaiment

  19. Anna Young
    October 5, 2011

    @Hm, I understand the point you're making. Catch them young.I am aware of mentoring programmes. Never heard of special courses on “young visionaries”. Perhaps we need to advocate for one. Lol… Now to answer your question the drive, the Will and Vision can be encouraged.  What's your thoughts?

  20. _hm
    October 8, 2011

    It is possible to identify potential visionary in early days of school. Through feedback from teachers, it may be possible. Second step is to provide them with environment and tools so the blossom to the fullest. Big oraganizartions like IBM, MS, Apple and other should support this program.

     

  21. itguyphil
    October 9, 2011

    This is true. They say the ones with the most potential are the most disruptive ones. It just matters if that 'disruptive personality' is channelled down the right path.

  22. _hm
    October 10, 2011

    Yes, to make major difference from others, you need to go for disruptive technology. This will give lead for few years and this  product can have good profitability. Another aspect is to find out who has money and who will pay for it. This will also help improve sales.

     

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