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NPD: Behind the Numbers, February 2010
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NPD: Behind the Numbers, February 2010

March 15, 2010 Article Start Previous Page 2 of 5 Next

Justifying the Turnaround

One could be excused for doubting the prospect of industry growth in March by looking at the last two months. After all, January 2010 was down 13% compared to January 2009 and February was down 15%.

The important context here is that the retail industry, measured by the data provided by the NPD Group, changed dramatically between February and March 2009. According to NPD Group data for 2009, software sales dropped from 4.9 million units per week (on average) in February to 3.9 million units per week (on average) in March.

Moreover, average hardware sales dropped to 400,000 systems per week in March from over 580,000 units in February.

To put it as briefly as possible, sales at January and February of 2009 were significantly higher than they were in March.

Provided that a similar shock isn't present in the March 2010 sales, the figures so far this year clearly lead one to expect that its revenues will exceed those weaker March 2009 revenues.

The figure below demonstrates this concept graphically. The blue bars represent average weekly revenue for months in 2008 while red bars represent the analogous figures for 2009.

Where the red bars are higher for January and February 2009, the industry was growing. However, starting in March the red bars are shorter than the blue bars, and the industry was contracting.

Look closely now at the January and February 2010 revenues – represented by the green bars. Should a similar revenue rate hold through March 2010, the green bar for March will be taller than the red bar, and therefore the industry will experience growth. (You can click here to see to see a short animation annotating the above graph.)

Under that scenario, revenue for the first quarter of 2010 would be down a modest 6% over the first quarter of 2009. Maintaining that level of revenue through the end of June would result in the industry being down a very reasonable 3% compared to the first half of 2009.

To put this in context, the following figure shows the growth rates each half since the beginning of 2006. A decline of only 3% would be right in line with the slight recovery the industry experienced in the latter half of last year.

(For the calculus-inclined, the above graph is similar to a first derivative of revenue, to the extent that average rate of change is similar to instantaneous rate of change. A less negative first derivative is an improvement.)

Article Start Previous Page 2 of 5 Next

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