As the holiday season fast approaches, the big question is what’s going to happen in the electronics market. There has been a lot of discussion about the strong product slate hitting the store shelves, the impact of mobile and ecommerce, showrooming, the robust marketing that is likely to occur due to the shortened selling season, and the iffy economic environment creating a volatile and maybe a little uncertain mix for this year’s sales opportunities. But most of that is noise.
Tech is a product business and the success, or failure, of the industry will hinge, as it almost always does, on the performance of the key products for 2013. And while we have one of the strongest product line-ups in years, there remains enough uncertainty around the impact of the decline of yesterday’s categories, the bounce from today’s categories, and the promise of tomorrow to make any reasonable market watcher cautious. With that in mind we continue to believe that industry revenue will grow 2 to 4 percent along with the observation that there is more upside opportunity than downside risk.
So let’s run through the outlook for a few categories and their impact on the market.
One ongoing positive in the market is the decreased impact of ageing categories to the overall market. Segments like digital cameras, camcorders, GPS, and others have typically dragged the market down significantly in the last three years. The POS sales dollars for these segments has fallen by about $900 million in each of the last two holiday season with their share of revenue declining to just 13 percent of sales in 2012 from 23 percent in 2010. The lessening impact of these categories reduces the drag on the rest of the market.
A core of high-growth categories is now poised to offset at least some of these headwinds. Segments like streaming media devices, wireless audio and soundbars, tablets, smartphone and tablet accessories now represent slightly more than 25 percent of volume, and saw dollars increase by over $2.2 billion in the last two years. The expectation for continued growth here is likely to more than offset the declining categories in 2013.
Finally the real pivot for the holiday will be, as it has been for many years, the performance of the PC and especially, the TV markets. Together they represented 36 percent of all sales in 2012, a decline of $600 million over 2011. However, we see much brighter opportunities in 2013 then we have in the past few years for these two bellwethers. TV revenue has continued to drop in 2013, mostly as a result of falling volumes and ASPs, however, ASP declines have recently started to stabilize, a welcome development and given the size of the holiday TV market, one that could have a meaningful impact to the overall holiday season. PCs as well have seen revenue falling as a result of declining unit volumes, not falling ASPs.
With apparently the worst of the consumer PC declines behind us, the market holiday revenues could be considerably better this year as stable ASPs and a more manageable unit trend combine to deliver better dollar results.
Putting all the elements together it is evident that across the CE market the anchors that have held down revenue growth; large category declines, falling units, or declining ASPs are poised to moderate this holiday season; leaving the industry in what ought to be a better place to restore itself to growth.
Stephen Baker is the VP of Industry Analysisfor The NPD Group.
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