Manufacturers and retailers at the Consumer Electronics Show here are wondering if they can have the best of both worlds -- rising sales and rising prices -- or whether they'll just have rising prices.
Flush with optimism, the Electronic Industries Association has boosted its earlier 1986 sales forecast for everything from color televisions to compact disc players, and now expects total factory sales to top $26.1 billion, up 7 percent over 1984's $24.4 billion.
At the same time, Japanese companies, which make the bulk of America's consumer electronics products, are being pressured by a yen that has risen nearly 40 percent in value against the dollar since last year -- creating a strong incentive to raise prices. While some of Japan's consumer electronics giants such as Hitachi and Sony publicly assert that they plan to hold the line on prices, most of them have not yet decided to what extent they will absorb or pass along to consumers the cost of their currency.
If Japanese manufacturers do raise prices dramatically, it will be a major change in an industry that has seen steady price declines even amid the inflation-ravaged 1970s. Then, a weaker yen combined with volume manufacturing efficiencies created low-priced products in everything from stereo equipment to color television. Similarly, volume manufacturing economies cut the price of video cassette recorders from more than $1,000 in 1976 to less than $300 in 1986.
Consequently, consumer electronic sales have grown even in the worst of economic times and the industry has been described as "recession proof."
"Now, we may find out if the industry is price-proof as well as recession-proof," said a Toshiba executive who asked not to be named. Both retailers and manufacturers here are unsure whether a rise in prices will create a corresponding drop in demand -- or whether consumers are so infatuated with electronics devices that a few extra dollars simply won't matter. Retailers are confident, however, that their Japanese suppliers are not willing to subject American consumers to the consumer electronics equivalent of sticker shock.
Most price increases so far have been in the 1 percent to 5 percent range and the real impact of the rising yen won't be known until the end of summer, said retailers.
To help offset the life of the yen, many Japanese manufacturers -- most notably Sony Corp. -- are exploring offshore manufacture of their products in countries such as Malaysia, South Korea and Singapore.
One fast-growing category unaffected by the yen is pocket television. Citizen Watch Electronic's John Witt projects that more than 1 million hand-held TV sets will be sold this year, with his company, Seiko, Casio and Sony the major suppliers. More than half of those sets will sell for under $100.