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CE Products That Defined A Quarter-Century

8/08/2011 12:01:00 AM Eastern
NEW YORK — HDTVs, cellphones/smartphones, and personal computing devices, including tablets, have influenced the fortunes of the consumer electronics industry more than any other CE products launched in the past 25 years.

That’s the consensus of CE retailers, executives and other industry participants surveyed via the web by TWICE in June.

These influential product categories have had a largely positive impact on retailers and CE suppliers, generating consumer excitement, driving traffic into stores and driving up dollar volume for some years.

But, of course, it could be argued that some of these products created a lot of collateral damage in their wake. The negative impact of music/ video-playing cellphones and smartphones on sales of stand-alone MP3/video players, for instance, comes immediately to mind. With cellular carriers accounting for a majority of cellphone sell-through, retailers have missed out on a lot of potential MP3/video-player business.

But I digress.

For our survey, respondents were asked to choose no more than three of 10 product categories, including “other,” as the categories they believe have been most important to the CE industry since TWICE’s founding in 1986.

HDTV/flat-panel TV was picked by 63 percent of respondents as one of their top-three choices, followed by 52 percent who cited smartphones/cellphones as one of their top three choices. Forty-six percent cited PCs/laptops/tablets. After that, the percentages dropped off dramatically, with DVD/Blu-ray players/ burners being the next most-often-cited technology at only 23 percent.

Almost half — or 46 percent — of the 424 respondents were retailers, while 17 percent were suppliers and 10 percent were distributors.

These respondents had an insiders’ view of the three technologies’ impact on their industry and bottom lines.

HDTV/flat-panel TVs: These insiders must recall the excitement that HDTV generated among consumers. With the 1998 launch of the first CRT-based projection HDTVs, the products almost sold themselves — at least to well-heeled consumers — once they were demonstrated. The excitement grew further when flat-panel HDTVs later entered the market. Consumers were able to make room for a big-screen TV without overwhelming their living rooms with a huge box.

The form factor of flat-panel HDTVs dazzled consumers almost as much as the picture quality, attracting consumers who might not otherwise have been interested in a new TV.

As a result, HDTV sales rose dramatically, and 13 years later, HDTVs were found in 72 percent of U.S. households as of January 2011, up from 26 percent in January 2007, Consumer Electronics Association (CEA) consumer surveys show.

Yet there is still plenty of potential in the HDTV business. In its 13th Annual Household CE Ownership survey released earlier this year, CEA found that a minority — or 40 percent — of TVs in U.S. households are HDTVs.

In addition, the influence of flat-panel HDTV has extended beyond the display industry. Flat-panel HDTVs created the potential for a high-definition successor to the DVD player. HDTVs also influenced the home audio industry, although not always in a good way.

Though they drove people back into stores, high-priced HDTVs sucked disposable income away from highperformance audio components (until flat-panel prices fell sharply). HDTV’s dazzling displays also blinded retailers for awhile to the potential for audio attachments.

With HDTV prices down, however, money is left on the table to purchase audio equipment to create a complete home theater experience. And with display margins down sharply, retailers are looking to attach higher margin audio products to an HDTV sale.

Those audio products include amplified soundbars, which represent a new category, developed in direct response to demand for high-quality sound in a package as appealing as a flatpanel display.

Cellular’s influence: What started in 1983 as a product installed in the car quickly moved into people’s pockets, launching a communications revolution that went mass market sooner than analysts expected.

By the end of 2010, the number of wireless voice and data subscriptions hit 302.9 million, for a penetration rate of 96 percent of the U.S. population, CTIA statistics show.

Smartphones, once a niche product, are now used by 38 percent of cellular users, according to a May survey by Nielsen. Fifty-five percent of consumers who purchased a new handset in the three months before the survey said they bought a smartphone, up from a year-ago 34 percent, the survey shows.

On the downside, smartphones threaten to do to handheld video games what they have done to portable MP3/video players and, to some extent, portable navigation devices (PNDs), whose declining sales can be blamed somewhat on smartphone apps — and Google’s free Android app — that deliver turn-by-turn driving instructions.

PC/tablet influence: Desktop PCs, laptops and netbooks created new CE categories, made the home office more productive, and turned into entertainment devices that compete with TVs and home audio equipment for the attention of younger consumers.

The products also drove the rise of home-networking technology, which would eventually be embedded in traditional CE products to give them the ability to stream content from a PC, from the Internet or wirelessly from smartphones.

PCs also had a profound impact on the music and home audio industries, turning PCs into home jukeboxes that eroded sales of traditional audio shelf systems and sparking the rapid decline of physical CD sales.

The tablet, popularized by the launch of the first iPad in 2010, is taking the portable computing experience to another level. Positioned mainly as an entertainment and media-consumption device, the iPad has energized a moribund tablet market, driving up sales sharply and attracting multiple new competitors. CEA forecasts that 2011 tablet shipments to U.S. dealers will grow 157 percent to more than 26.5 million units, generated factory-level sales of $14 billion.

Those are sales in a market that before 2010 largely didn’t exist.
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