CEA: In Tough Economy, CE Holding Its Own

By John Laposky -- TWICE, 6/22/2010

New York - The post-recession macroeconomic recovery is proceeding at a glacial pace, according to Consumer Electronics Association (CEA) chief economist Shawn DuBravac, but consumer spending on CE products remains relatively strong compared with other sectors.

Shawn DuBravac, CEA chief economist and research director, addresses CEA Line Shows attendees.

DuBravac presented CEA's "Consumer Technology Reality Check '10" at the CEA Line Shows event, which kicked off here this morning, and painted a picture of a challenging second half at retail.

Calling the overall economic climate "mediocre at best," DuBravac said he remains wary of "the delicate handoff the economy faces, from a government stimulus-driven surge to one that must be moved forward by private industry."

As a whole, compared with past recessions, this recovery is slower, wage and salary growth have been minimal, and consumers' willingness to spend is less, DuBravac said. However, there are some good signs on the horizon for CE.

For one, overall consumption has held up relatively well, though at the expense of saving, and consumer spending on technology as a percentage of their spending on all durable goods is steadily climbing, continuing a decades-long trend.

"Technology has held up well. We saw unit volume of flat-screen TVs rise 19 percent last year. That's incredible in this climate. Look at some other consumer sectors: major appliances, home furnishings, housing ... they got absolutely decimated. Tourism and hospitality suffered. Part of it, I think, is that technology is being perceived as more of a necessity, as opposed to a luxury."

DuBravac identified several categories that he expects will see strong sales in the second half and into Q1 2011. One of them, higher-ticket LED TVs, saw strong unit and dollar sales in March and April and should continue to gain share. "One in three households is expected to buy a new TV this year. That's showing a willingness on the part of consumers to invest in their homes since the average American home already has 2.6 TVs."

3D TV sales should also gain some critical mass in the second half, with CEA expecting sales in the 2 million to 2.5 million units range. "That's solid for a new technology," DuBravac said. "Interest is growing rapidly for 3D," he added, citing results of a survey of 257 CE salespeople conducted in stores by CEA and partner ChannelForce. Eighty percent of salespeople said consumer interest in 3D has increased in the previous few months.

There is still work to do on behalf of the industry, though, as sales associates on average said that half of all consumers are confused about 3D technology.

CEA expects that, mirroring the launches of past new technologies, 3D TV sales for this year should spike in the fourth quarter, with anywhere from 50 percent to 70 percent of sales occurring during the holiday selling season.

Another hot segment will be tablet computing and DuBravac expects this year's holiday sales for tablets to unfold much like the e-reader market did last year, with 6 million to 8 million tablets moving through the market between Q4 and Q1 2011. 

DuBravac also cited gaming as a continually strong segment for Q4 sales, with console sales expected to pick up a bit and accessories and software accounting for the bulk of sales. "Expect a lot of bundling of accessories this year," he said.

Outside the hotter segments, DuBravac predicted "a longer Black Friday than ever this year. Retailers will be looking to drive momentum early, so expect very early promotions. Cyber Monday -- it's now Cyber Week. Events drive traffic, retailers have learned this, so expect more of it," he said.

"And we have exported Black Friday," he continued. " '˜Black Friday' was the top Google search term on the day after Thanksgiving in Syria, Israel, Greece ... in countries that don't celebrate Thanksgiving. It's now a global event."

In response to a question from the press, DuBravac did not rule out the possibility of retailers bundling 3D Blu-ray players with 3D TVs for the holidays. "It would make some sense," he said.

Looking ahead, DuBravac said that Internet-connected TVs may be another niche poised for growth "probably not in the second half, but maybe in 2011." He said the app model for handhelds is being adapted to the IPTV market, offering one-click unique entertainment and content. "Once the industry figures out the best way to deliver a unique experience in a simple way to the consumer, connected TVs should take off," he said.