'Market Saturation' Playing Role in Slow Start to 2016 CE Season, NPD Says
DANA POINT, California -- “Market saturation” is partly to blame for lackluster CE sales over the first half of 2016, NPD analyst Stephen Baker told Consumer Electronics Daily at the ProSource spring meeting. The total market “continues to be soft,” continuing a trend seen for the past few years where the biggest traditional CE categories -- TVs, PCs, tablets and smartphones -- “are the weakest performers on a revenue basis,” Baker said. “We’re in a country where people have money, and we’ve been buying tech for a long time, and the installed bases are very high,” he said.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
The latest and greatest gadgets have a value proposition that in many cases is “not so significantly different from what people own, so there’s not a compelling reason to buy,” Baker said. While price typically is given as the culprit for CE market woes, “the revenue problem is not pricing, but volume,” said Baker. “The challenge is that people are buying less tech products, the products they have they’re holding on to longer, and the newer products typically don’t sell for the same kinds of price points and at the same rates as the more mature categories do,” he said.
A bright spot is a wave of new tech products that are “making more of a difference in the market” this year. Baker cited smart home products, wearables, smartwatches and drones as difference-makers that are “starting to add some volume.” Streaming speakers and phone accessories also are providing a lift in the mass-market segment, he said.
ProSource CEO David Workman told us TV sales started the yearly slowly, and the buying group expects small growth for the category overall in 2016. The keys to success in the TV market for ProSource dealers are OLED and 75-inch-and-larger 4K LED-lit models along with high dynamic range, a feature that needs to be demo’d for consumers to understand the value.
In his outlook for dealers, Workman said TV models priced over $2,500 accounted for only 1.1 percent of the total TV market in 2015, or roughly 366,000 units. The challenge for 2016 is for ProSource dealers to help grow the business to more than 500,000 units, he said.
Some dealers told us there’s been confusion and hesitation from some consumers to upgrade​ TVs, fearing they’ll choose the wrong version of HDR or that HDR and wide color gamut will go the way of 3D TV. NPD’s Baker said feature confusion is a CE industry preoccupation rather than a customer concern. “They buy what’s available,” Baker said, “and there’s not much value in waiting.” He acknowledged the modest group of important early adopters willing to spend a lot for a TV, but for the most part, “there’s not a huge amount of people willing to spend over $1,000 for one."
At the same time, Baker downplayed the idea that consumers are moving away from TVs. “There’s a fallacy out there that TV is less important to consumers,” Baker said. It’s less important to have a TV in every room of the house,” where a tablet, PC or smartphone might suffice, but “there’s no replacement for a nice-looking 55-inch TV in the family room,” Baker said. NPD projects all TV growth this year will be in 50-inch and larger screen sizes based on consumer interest in the bigger picture. TVs in the 40-inch screen class have moved well on pricing activity, he said.
After their hot start in 2010 and a cooling off last year, "traditional tablets seem to be dying," Baker said, due to a “weak value proposition." Tablets are used as a “price-based holiday traffic builder,” said Baker, but sales roll off over the rest of the year. IPads will continue to reign over the segment, while Amazon’s aggressive effort with Fire tablets will come at the expense of Android tablets, Baker said. “Amazon has made a great play with Fire tablets,” he said. “After pretty much an abject failure for a few years,” Amazon chose to sell Fire tablets “as cheaply as it can” to leverage device sales into content and apps purchases, he said. Much of the decline in the rest of the Android market is because when consumers buy a tablet as a gift, “they buy the Fire for being the cheapest kind of product out there,” Baker said.