Tech Sales Boost in US Indicates Potential Growth for the Consumer Electronics Industry

2. Tech Sales Boost May Be Coming • According to the Consumer Technology Association’s (CTA) 2016 midyear forecast, the US industry will generate $286.6 billion in revenues, or a 1.3% increase from 2015, following just a 1.0% increase for 2015, but a 3.8% increase for 2014. • In what may be a good omen for the Christmas shopping season, the CTA Index of Consumer Technology Expectations, which indicates consumers’ willingness to buy tech products, increased 4.1 points for July to 91.6, the highest since November 2015. • Smartphones, tablets, LCD TVs, laptops and desktop computers will account for 51% of 2016 revenues, or $114 billion, with smartphones and TVs driving most of that growth.

3. From Maturing to Emerging Products • The CTA categorizes 5 CE products in the table on page 1 of the Profiler as maturing. With 2.5 persons in the average household, the density rates for smartphones, 2.4; LCD TVs, 2.3; laptops, 1.9; tablets, 1.8; and desktops, 1.5, suggest little room for growth. • 2016 appears to be the first year when the CE industry will transition from these products to the “next generation,” which includes 4K Ultra HD TVs, wearables, smart home devices, drones, virtual reality headsets, digital assistant devices and 3D printers. • Fitness active wearables are forecast to be the top seller in units during 2016, at 28 million while 4K Ultra HD TVs will be tops in revenue, at $12.9 billion. Virtual reality headsets will have the largest percent change, increasing 296% in units and $332% in revenues.

4. No Future for the Big CE Chains • With approximately 70% fewer consumer electronics storefronts since 2007, it’s no wonder that Best Buy represents what could be the last CE retail chain, especially since any market share gains are coming at the expense of Sears, Radio Shack and hhgregg. • Best Buy’s Q1 2016 online sales increased 24%; however, its online sales accounted for just 10.6% of its total 2015 revenues. The sales at its US stores were flat during Q1 2016, although the company was expecting a 2.0% decrease. • In an attempt to boost its brand, Best Buy launched its In-Home Advisors program during June 2016 in Atlanta, Austin and San Antonio. Advisors will provide in-home technology consultation for free to potential customers.

5. The Domination of Amazon • 2015 online sales of consumer electronics accounted for 27%, or $76.1 billion, of the total estimated sales of $282.9 billion – and Amazon not only had a 39.5% share of all online sales, but also was responsible for 90% of 2015 sales growth. • During Q2 2016, Amazon surpassed Walmart to become the second-largest consumer electronics retailer in the world, and is expected to replace Best Buy at the top. • According to Stackline, a retail analytics firm, Amazon sold almost $4.7 billion of consumer electronics during Q1 2016, compared to Best Buy’s $832 million, which is more than 5 times, although Best Buy’s online sales increased 24%.

6. Home Audio Is a Youth Market • As Millennials age and start careers and households, they are driving the home audio market. For the 12 months ending May 2016, they accounted for 47% of home audio spending, compared to 38% for the same period one year earlier. • Industry sources cite the increased affordability of 50-inch and larger TVs as the reason their unit sales have increased 60% during the past two years (ending May 2015 and May 2016). • Much of Millennials’ increasing share of the home audio market is also attributed to the CE industry integrating mobile devices with home audio equipment, including Bluetooth-enabled soundbars, smart speakers and voice-enabled devices, such as Amazon Echo.

7. Tech Advances for the Aging • Although the share of adults, 55+, purchasing home audio has declined, as per the table on page 3 of the Profiler, consumer technology is finding a significant market for apps and devices to improve seniors’ quality of life. • According to the CTA Market Report: Active Aging, this will be a $24.4 billion market during 2016, serving 85 million consumers, both seniors and their family caregivers. This market is forecast to increase to $42.7 billion by 2020. • The CTA report emphasizes the importance of tech companies offering a minimal number of products within a particular category, such as remote controls for too many devices and too many apps for too many purposes.

8. Advertising Strategies • Although many retail CE storefronts have closed, those that remain have many opportunities, such as offering an in-home advisors program like Best Buy’s, but touting highly experienced CE specialists compared to Best Buy’s young, inexperienced personnel. • Another opportunity that is perfect for TV advertising paired with direct mail is specializing in the active-aging market. Local CE retailers can offer seminars for caregivers and a free in-home assessment of which tech products can enhance seniors’ quality of life. • Attract Millennials with “An Evening in Our Living Room” promotion. Invite small groups of Millennials who are friends/neighbors to spend an evening in a store space decorated like a living room with the latest audio/video technology, with refreshments.

9. New Media Strategies • Local CE retailers can select a few “brand ambassadors,” especially Millennials, to try CE accessories for a week or two and share video reviews on their social media networks and for upload to the stores’ Website and social media pages. • An in-store live streaming event via Periscope, Meerkat or similar apps is an excellent method to promote the products and services of local CE retailers. Ask customers to share their shopping and customer service experience and the products they purchased. • CE consumers are always interested in the latest products, so stores should create videos featuring employees on camera showing and explaining how to use emerging technologies, such as drones, virtual reality headsets, digital assistant devices and 3D printers.