Retailers Should Prepare For Internet Appliances Growth
By Jimmy Schaeffler -- TWICE, 4/2/2001
The convergence age has arrived. According to The Carmel Group's February 2001 issue of Convergence Investor, cumulative sales of Internet Appliance (IA) products will reach $4.5 billion in retail dollars by year-end 2001, and more than $24 billion by 2010.
This will represent an installed IA unit base of 16.1 million by the end of this year that will achieve a compounded growth rate of over 16 percent for the next nine years, to reach a hefty 109 million units by year-end 2009. Internet Appliances will ship more than 5 million units, generating over $1.6 billion by 2002, and by 2010, manufacturers will ship nearly three times that amount, yielding over $2.5 billion in sales.
The trend toward IAs is clear, as seen today in the proliferation of cellular phones, personal digital assistants (PDAs), pagers and set-top boxes. These are defined as classic IAs because of their Internet connectivity, but unlike PCs, their primary function is typically not Internet access.
In fact, almost a year ago, one sub-subsector of the IA classification (i.e., set-top boxes) was so hot, that we found it strong enough to be the inaugural subject for this "Revenue Streams" series (TWICE, May 29, 2000, p. 28). In that article about set-top boxes, we estimated that 37 million units will be sold in 2003 alone.
Moreover, the next decade will continue to revolutionize the way Internet content is delivered, and the proliferation of IA devices will be central to that revolution.
Three clear benefits of IAs are cost, ubiquity and speed. Many home and business users of PCs may welcome a change to IAs for expense reasons alone. Despite the "free PC" movement today, users still face the incidental costs associated with PCs, such as software maintenance (e.g., virus protection upgrades), high support costs, and the near immediate obsolescence of new hardware.
Conversely, the vast majority of IAs combat this expense by running on an embedded operating system-which in most cases allows the IA to be a flexible platform that can be upgraded over time, without the hassle and expense of a complete system upgrade.
Ubiquity and speed are the other clear benefits to IAs. A current example is that of PDAs and cellphones, which allow consumers to access the Internet virtually anywhere in the world. A huge trend toward ubiquity and mobility has developed and is most likely to continue proliferating.
Other IA devices, such as TV set-top boxes, or kitchen pads, provide Internet access in rooms where a PC may not be desired.
In addition, three key developments are fueling the future of IA deployment:
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The expansion of digital cable set-top boxes that include Internet access (e.g.,WorldGate, ICTV and Microsoft),
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The growth of direct-broadcast satellite (DBS) set-tops with Internet access (e.g., AOLTV and Ultimate TV).
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The proliferation of stand-alone devices, such as Sony's eVilla, and Qubit's Atom and Orbit.
The next few years will be critical to making the Internet available "anywhere, anytime" (in the words of AOL's top execs), and the IA is crucial to the realization of that dream.
CE dealers are in a unique position today to begin lobbying CE manufacturers for early access to all manner of these IAs. Trade shows such as the Western Cable Show, CES, NAB, SBCA and NCTA are great places for retailers to start dialogues with these CE manufacturers and distributors.
By starting now, they are more likely to find themselves in the choice position of maximizing commissions and sales revenue from the IA group of products, and possibly even software-related commissions.
There's an old adage in the business world that goes something like this: "The harder you work, the luckier you'll get . "For CE dealers and other associated retailers, those who do their homework, acquire knowledge about the Internet Appliance explosion, and then leverage that learning to fight for a piece of this pie, should get real lucky. Jimmy Schaeffler is a consumer electronics analyst at The Carmel Group (www.carmelgroup.com), a publisher and consultancy based in Carmel-by-the-Sea, Calif., that specializes in telecommunications, computers and the media. He can be reached at jimmy@carmelgroup.com or by phone at (831) 643-2222.
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