MANILA, Philippines - Owing to weak consumer demand for electronics and household appliances in the first months of the year, a report released by GfK Market Insight (GMI) said that some retailers have closed shop or resorted to cheaper goods from China to cut their losses.

The report stated that retail sales continued to slow down in February since consumers were mostly focused on spending on other necessities. The GMI report noted that despite efforts to entice buyers, sales were still low.

“Due to the general weakness of consumer durables, some retailers have resorted to certain contingencies aimed either at maximizing sales potential or at curbing losses. Regarding the former, a handful of retailers have shifted toward the faster-moving and cheaper China brands; aside from less investment, this generates more buying interest as lower prices continue to be the key factor for consumers,” the report stated.

“On the other hand, a few chains outside Metro Manila have unfortunately been saddled with intolerable losses and have already resorted to store closures,” it added.

GMI said that the only factor that somehow kept retail sales of electronic products and appliances were discounts and promotions that were introduced during the period.

The discounts and promotions, as well as the seasonal effect on gadget sales, particularly mobile phones, portable media players and digital cameras as well as air-conditioner and cooling appliances, made these items the top sellers in the industry.

Gadgets like cellular phones and portable media players, GMI said, were the most popular graduation gifts while vacations spurred the sales of digital cameras. The summer heat, on the other hand, increased the sales of air conditioners and cooling appliances.

“Retailers are now realigning their strategies toward promoting these products, and store displays are being adjusted to set these items as the main sales theme,” GMI stated.

“The usual promos remained in effect, generally on longer-term 0%-interest schemes for credit-card users, and on lower in-house installment mark-ups,” the report added.

The report showed that there was a 20.1% year-on-year growth in units and 36.6% year-on-year growth in value of consumer electronics.

Demand for mobile phones decreased by 15% in volume while the average selling price fell by 4% from the previous period. However, on a year-on-year comparison, demand for mobile phones increased in volume, due to the robust sales of second-tier local brands, specifically Cherry Mobile and My Phone. These brands, GMI said, are patronized due to their value-for-money features found in a smartphone.

Demand for smartphones also contracted in both volume, with a year-on-year contraction of 2%, and value, with a contraction of 6%. The average price of these goods showed a contraction of 5% from January 2010.

“In spite of these setbacks, smart- phones are still expected to increase in sales as most manufacturers continue to produce more affordable models,” GMI stated.

The demand for information- technology (IT) products grew insignificantly from the previous period except for mobile computers, which posted a 6% growth.

The sales of mobile computers, GMI noted, also showed a slowdown in growth from its usual double-digit growth. This meant that February was a slow month for IT products since the school year was about to end.

Prices of IT products, GMI said, however, continued to decline due to intense competition among brands and the tendency of most consumers to buy low-priced models. Only desk computers’ prices increased. This, GMI said, indicated that consumers recognize the performance and value of higher-priced models against entry-level ones.

In terms of digital still cameras, GMI said that there is continuing trend of lower average prices to P10,201 per unit in February 2010 from P13,144 in February 2009.

Compact cameras, GMI said, was the growth driver in the genre by posting an increase of 44.8% from the previous year. Digital single-lens reflex cameras, on the other hand increased by 4.6%.

“Photo registered a decrease of 5.4% in volume from previous period as is usually the trend in a post-Christmas season. In addition, consumers suspend their purchases as they are anticipating new models to be launched,” GMI stated.