FRS/GMRS: Softer Market Will See MP3 Combos

By Amy Gilroy On Oct 25 2004 - 6:00am

FRS/GMRS radios are facing a slowdown this year, particularly in dollar volume, as prices fall and the radios achieve mass market status.

Giant International, which markets and supplies Motorola radios, expects a 16 percent to 17 percent decline in FRS/GMRS units this year and a 19 percent decline in dollars. Cobra, Audiovox and Xact, although less specific, foresee a narrower decline, claiming unit sales will be flat to down, and dollar sales will be down.

Giant, which derives its forecasts from NPD TechWorld, Port Washington, N.Y.; from sporting-goods forecasts; and sell-through data from key individual retailers, said sales will continue to fall in 2005. An 11 percent decline is expected in units and a 16 percent decline in dollars. However, Giant foresees the market leveling off in 2006. At that point, the company says, “we're anticipating an upswing because of new multifunctional products and technological improvements,” Cheryl Gray, marketing director, said. Motorola and Xact are considering offering MP3 players in their FRS/GMRS radios.

According to David Rose, sales manager for Xact, MP3/FRS/GMRS units should be available from the company in late spring of next year. He said, while size consideration is important when adding a feature such as MP3, the market could use the boost. “With a flattening out in sales, we feel [MP3] is the sort of thing that will attract a younger audience.”

Other suppliers, however, are taking the reverse approach, such as Uniden, which is stripping “multifunction” features like AM/FM radios and digital compasses from its lineup.

Midland is also taking a “less is more” approach. Noted VP marketing Charlie Speights, “We've seen a lot of integration in the past, even with GPS, and what you end up doing is overpricing the product for what the primary use is. In radios, the first thing they are looking for is range. The other stuff is nice, but it's not what they are looking for.”

Suppliers are also taking different stances on FRS/GMRS range, with some, including Cobra and Xact, racing to offer 12-mile capacity, and others looking to what they claim are more realistic 8-mile and 10-mile ratings.

“The current claims of 10 miles are to the point of being non-realistic,” Giant's Gray stated. “You'll see 3-mile, 6-mile and 8-mile radios from us. We do a lot of testing, and our requirement is that you can actually hear someone clearly on the other end of the line, on flat terrain, in a realistic setting. Not from a mountain where one party is looking down on the other.”

Cobra says it is working on a 12-mile unit that might be ready for CES. The company said it is able to achieve the extended range by technology improvements such as better antenna matching. Midland is also working on a 12-mile unit, according to Speights.

While they differ in their market forecasting and strategies, nearly all suppliers agree that features are dropping to lower price points. Basic twin packs have sunk to a current low of about $12. Next year, suppliers said to expect 8-mile units selling for what 6-mile models sold for this year, at a low of $29. Currently 8-mile models carry $39 to $49 price tags.

RadioShack said the combination of lower prices and mass market proliferation is causing a decline in the category. Other stores, such as Crutchfield, are deliberately shrinking their selection because it no longer fits with the traditional car or home audio buying profile.

But Best Buy said it “continues to see two-way radios as an attractive product” and said the features it looks for include “rechargeable bundle packs, as well as higher ranges (8-mile to 10-mile), more power and integrated MP3 capabilities.”

Cobra contends it is still possible to make 30 points to 35 points on FRS/GMRS radios at the high end with battery recharger kits.

Suppliers also claim they are benefiting from a healthy increase in consumer upgrading.

“We have a lot of folks out there that are using older radios and have made the decision to upgrade as the new models are smaller and lighter and more cost efficient,” said Gray.

Cobra's senior director of consumer product management, Sally Washlow, noted, “Consumers are coming back who maybe bought a 14-channel radio a couple of years ago and now they can get a 6-, 8- or 10-mile radio with 22 channels and privacy codes at a low price.”

But others say the commoditization of FRS/GMRS is too great. “Two-way radios are in a downfall,” a RadioShack spokesman said. “It is more of a commodity item for us now and is not really considered a growth category. Average selling prices are going down … it's an item sold anywhere, rather than in the past, where it sold mainly in consumer electronics stores.”

Crutchfield said it has deliberately de-emphasized the category. “It's just not a good correlation with our clientele. It's not a margin issue, so much as it doesn't match our customer base,” said Dan Hodgson, senior VP of business development.