By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Sales of digital photo frames are expected to taper off from the scorching pace of 2007 and 2008, but there is still enough headroom to assure steady growth for the foreseeable future.
"Photo frame penetration is low compared to other devices," said Harry Wang, research director, Parks Associates. "About 18 percent of the broadband population has a frame, compared to over 70 percent who own a digital camera. There's still good upside potential."
The category grew briskly just prior to the holidays, up 72 percent in units and 24 percent in dollars vs. the same period last year, according to The NPD Group's retail tracking service.
Upside notwithstanding, most analysts expected a weaker fourth quarter as consumers retrenched. Analysts surveying the market have been forced to revise their existing forecasts for 2009 and beyond in light of the economic downturn. Offsetting these negatives, falling component prices have lowered average selling prices.
Earlier in the year, iSuppli estimated that global frame shipments will crest over 70 million in 2011. The question is not whether, but how fast, the category will grow.
"Our expectations are moderating somewhat," said Rey Roque, Westinghouse Digital marketing VP.
The market has "throttled back," seconded Jack Rieger, Kodak marketing manager. "We still see growth, it's just not as meteoric."
Frames have been helped by plummeting component costs in both LCD display panels and, to a lesser extent, flash memory, said Dean Finnegan, CEO, Pandigital. "Panel prices have fallen off a cliff. We've seen 50 percent price declines."
This, in turn, has been felt on digital frame ASPs particularly in the popular 7- and 8-inch screen sizes, Wang said.
"From our research, price is the number one factor when buying a frame," said Zdenek Kratky, customer marketing director, Philips.
More sophisticated features such as wireless have been slower to take off, he said.
Despite the profusion of wireless models on the market, they still represent only a fraction of frame sales – between 5 and 6 percent in 2008, according to Wang.
The NPD Group put wireless frame sales at just 3 percent of the market through the first three quarters of 2008.
Wireless frames have suffered from high price points, poor ease of use and a general lack of consumer awareness, Rieger said. "I do see wireless becoming more significant next year."
"As the category develops and evolves the growth of Wi-Fi will spur new functionality across the board," predicted Stefan Guelpen, Smartparts CEO. This functionality, he said "will, in time, turn this category from a seasonal, 'gifting' SKU into an everyday item for consumers."
Many vendors will be looking toward the user-interface — abandoning tactile buttons for touch screens — newer designs and pre-loaded content as a means to drive sales.
"We see personalization as being a major factor, as frames are a big gift category," Rieger said.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.