Retailers Scramble to Stock Up on Electronic Gadgets

Some of the biggest fashion trends at department stores this holiday season have more to do with MP3 players than cashmere ponchos or fur-trimmed sweaters.

With high-tech gadgets at the top of many holiday wish lists, department stores such as Marshall Field's, Macy's and Bloomingdale's have stocked up on such items as $299 iPod (search) music players, $700 pink cell phones, and $300 digital cameras. It's a step backward for the big stores -- 10 year ago, they abandoned TVs, stereos and other electronics to focus on fashion.

"It's a recognition that these new electronics have become the must-haves as opposed to a new sweater," said Wendy Liebmann, president of WSL Strategic Retail (search). "Fashion is no longer what I put on my body in terms of fabrics, but it is also what I put on my body in terms of technology."

May Department Stores Co. (MAY) has quadrupled its electronics offerings this season from a year ago at its Marshall Field's, Hecht's and Robinson-May stores. Meanwhile, Macy's created an electronics area that includes a Sharper Image outpost, selling, among other things, pocket-size color TVs and cell phones. Bloomingdale's has increased its electronics offerings by 30 percent from a year ago with digital cameras, camcorders and miniature iPods.

The goal is to get shoppers to spend more of their holiday budget at their stores while also wooing new customers, particularly men who would otherwise spend time and money in stores like Best Buy Co. Inc. (BBY).

Shopper Kathy Posner of Chicago said she plans to spend 75 percent of her dollars budgeted toward holiday gifts on electronic items such as iPods; the rest in jewelry. That's a big difference from two years ago, when she spent half of her holiday money on gadgets.

"I am definitely open to buying gadgets in department stores," she said, noting that it will be more convenient to do all her shopping under one roof.

This season, 42 percent of consumers are expected to buy electronics as gifts, making it the fourth most popular gift category after clothing, toys and DVDs or videos, according to a survey of more than 2,000 consumers conducted by NPD Group, a market research company in Port Washington, N.Y. Jewelry is No. 6.

Electronics moved up in the rankings this year; in 2003 it was the fifth most-popular gift category.

Department stores eliminated their electronics sections a decade ago because they couldn't compete with stores like Best Buy and Wal-Mart (WMT). Now, the big stores aim to offer an edited assortment of electronic gadgets that have limited distribution to differentiate themselves from the competition. In some cases, they're offering their own fashion take on gadgets, developing exclusive partnerships with hip-hop fashion companies that are only too eager to expand their merchandise beyond clothing to cash in on the trend.

"Any guy who spends $500 on a cell phone will also spend $2,000 on a suit. It is part of the whole package," said Tony Romando, editor-in-chief of Sync magazine, which focuses on gadgets.

Bloomingdale's, for example, has an exclusive deal with hip-hop fashion company Baby Phat (search) by Kimora Lee Simmons to sell a collection of cell phones, including a $699 diamond-studded hot pink Motorola version. Based on strong sales of the phone, Baby Phat is planning to develop other products, though company officials decline to offer details.

Meanwhile, Macy's teamed with Damon Dash, one of the founders of Roc-A-Fella Records (search), to sell a collection of portable audio players called Rocbox.

James Campbell, ad director at Baby Phat, said the fashion company wanted to sell to a merchant like Bloomingdale's rather than an electronics chain because "it is a little more chic, but still mass."

Still, retail experts say that if department stores want to be successful at selling electronics, they need to do more than stock them in the stores. They need to have compelling displays, and also focus on service, with sales help that can answer customers' questions.

"You have to do things that keep me in there," said Robert Smith, 30, of Rockford, Ill., who plans to buy portable DVD players for his children and a DVD player for his bedroom.

May spokeswoman Sharon Bateman said electronics items are being displayed in areas with high traffic, usually on the main floor. At Macy's, the electronics are featured in the home departments, while the gadgets at Bloomingdale's are mostly sold in the men's section. Anne Keating, a Bloomingdale's spokeswoman, said the store has trained the staff to be able to answer shopper questions.