In home, the car, and the office – consumer electronics are used everywhere, all the time. The devices consumers use are changing rapidly, as are consumers’ preferences. The features they want are converging. And it’s all happening in the midst of some of the highest device-ownership levels we’ve ever seen. To top it off, this is occurring in a mature market.
How do you make sense of it all and drive growth for your business? NPD has been tracking and analyzing trends in the consumer electronics market for more than 25 years, offering both retail and consumer information for all channels, including the Web. You can use this information to understand the rapidly-evolving product landscape and consumer electronics trends at the national and local market levels.
Beyond market measurement, we combine our robust data assets and industry expertise -- including your own data or third-party data, as needed -- to address specific issues at each phase of your business cycle from opportunity identification to marketing evaluation and pricing optimization.
The Retail Tracking Service monitors retail sales of consumer technology products. Data provided by our participating channel partners delivers a detailed picture of product movement down to the item level. National information is available weekly and monthly; local market information is available monthly.
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Store-Level Enabled Retail Tracking complements our national Retail Tracking Service– it can help you determine whether sales are distribution-driven or whether certain parts of the country are contributing more to national share or driving growth. The velocity measure set that is part of Store-Level Enabled Retail Tracking takes into consideration sales volume (Annualized Industry Volume or AIV) rather than considering store count alone, for a more meaningful read on where products are selling and how they are performing.
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These reports enable retailers who choose this option to share their information with approved vendors, allowing vendors to analyze business performance at specific retailers down to the item level in many instances. By making this report available to their vendors, retailers can work together with them to optimize performance. These reports may only be made available with the express permission of the retailer.
Explore comprehensive market research on consumer behavior and attitudes across a wide array of industry sectors. This service provides a total market view, encompassing activity at all retailers including Walmart. It delivers critical insights into market trends, demographics, and customer satisfaction to help companies address the challenges of market sizing, competitive analysis and response, new product development, product positioning, and more.
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Get access to insights on shopping, browsing, and buying visits across all channels, retailers, categories, and demographics. View conversion rate and average spend measures and see how they vary by retailer, season, and demographic. Gain an understanding of where else your customer is shopping and buying.
Checkout Tracking℠ provides information on consumer buying behavior at the market basket level, based on receipts for brick-and-mortar retail purchases. You get precise, item-level purchase detail that is linked to buyers and their demographics. Data comes from large-scale longitudinal panels, making it possible to study the same consumers over time, analyze competitive market baskets, and identify purchase patterns.
You have opportunities. You face threats. What you need are smart, quantifiable methods of distinguishing one from the other and maximizing your chances of success. NPD’s Analytic Solutions Group includes a team of senior leaders with extensive experience developing and delivering analytic solutions that address strategic marketing, sales, and planning issues.
We combine NPD POS and consumer information, industry expertise, and custom survey research – then add state-of-the-discipline research techniques and methodologies to explain the "why behind the buy.” Through advanced modeling and analytic services, we offer insight into what will happen in the future, not just what has happened in the past, answering your most pressing business questions:
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The tablet market is beginning to mature after explosive growth following the device’s introduction. The tablet is now an integral part of the typical American household’s electronics inventory. Our new Tablet Accessory Inventory Report evaluates tablet accessory purchasing and ownership, providing fresh insights straight from consumers and our industry analysts.
Kids and Consumer Electronics, 2014 Edition delivers new insight on the significant role consumer electronics products play in children’s lives — and how it’s changing, with trended insights back to 2011. Looking at ownership and usage among kids ages 4 to 14, the report covers of a host of consumer electronics products — from smartphones and tablets to gaming consoles and TVs. Discover the frequency with which kids use these devices, the average age they begin using them, and more.
What's Driving Consumer Behavior? Our new consumer technology reports explore the products and market trends that matter to your business right now. These timely reports can help you navigate the fast-moving CE and IT landscape.
The VAR channel represents significant business potential. Now you can get a picture of this elusive technology market! Our VAR Tracking Service delivers detailed monthly sales information with views at the category, brand, item, and feature levels.
Growing Consumer Interest in 4K UHD TVs and 4K UHD Streaming Media Players Indicates an Impending Shift from Early Adopter to Mass Market AudienceWith awareness and interest on the rise, this holiday season could mark the shift in the 4K Ultra-High Definition (UHD) TV consumer base from early adopter to mass market audience. According to The NPD Group Connected Intelligence Home Entertainment Report, 2016 has seen steadily growing consumer interest regarding 4K. In fact, 38 percent of those surveyed said they are very, or somewhat, likely to use a 4K TV in the future, an increase of five percentage points since Q1 of this year.
The Internet Surpasses Print and Broadcast Advertising as Preferred Source of Makeup Product Information, According to NPDDefining many of the most popular, growth-driving trends in makeup today from contouring to draping, the internet went from the least-frequented source of product information four years ago, to the fastest-growing in 2016, swaying both styles and sales, according to global information company The NPD Group’s Makeup In-Depth Consumer Report 2016. More women today are looking to the internet for information on makeup products and brands, up 11 percentage points versus 2014, or more than any other information source.
Warranties Are Selling With Notebooks at a Consistent Rate Year-Over-Year Despite Growing Chromebook Sales, According to NPDAccording to The NPD Group’s VAR Invoice Tracking Service, warranties remain a critical part of the notebook sales purchase. Twenty percent of all notebooks sold with a warranty attached during the 12 months ending April 2016. Year-over-year this has remained consistent despite lower priced products like Chromebooks capturing more notebook sales. In the 12 months ending April 2016, notebook average sales prices (on invoices that included a warranty) fell 22 percent versus the prior year, driven by the strong growth of Chromebooks.
Safety and Security Are Lead Drivers in Smart Home Technology Interest, According to NPD Connected IntelligenceAccording to The NPD Group Connected Intelligence Connected Home Automation Report, security and safety top the list of reasons driving consumer interest in building a smarter home. Four-in-ten consumers who are at least somewhat interested in a smart home ranked making their home more secure and safe as the top reason driving their interest. As such, network connected cameras1 generated nearly two-thirds, 61 percent, of all U.S. home automation industry revenues in the 12 months ending June 20162.
This time, our Market Intelligence team focuses on Bluetooth headsets. Where is consumers’ affinity strong? Where are your most promising opportunities?
The newly formed Technology Market Intelligence team is committed to providing actionable intelligence that helps you understand what's driving shifts and trends in your key categories. Through email communications called Tech Talks and Technology Topline, now we'll provide added insights in the categories that matter most to you. The Market Intelligence team will complement our current industry analyst program by focusing on more tactical strategies that are being deployed effectively in the U.S. channel.
Check out the first edition of Tech Talks, our new communication highlighting the latest insights about what is driving the shifts and trends in the industry.
Every journalist and student in America knows the so-called five Ws: who, what, when, where, and why. It turns out the same five Ws are also the most basic forms of consumer segmentation.
But relationships among the five Ws of shopping are a bit more complex than they are among the five Ws of writing. And the tales they tell are illuminating.
We shared online and brick-and-mortar, receipt-based data from our Checkout TrackingSM service with researchers from the Wharton School of The University of Pennsylvania. The study revealed the what and the why of consumer purchases are linked to the when of consumers’ lifestyles. In other words, when people have babies, they buy baby things. But the how and where of purchases are tied to who a consumer is by generation.
Even when the other four Ws are the same, it’s who we are – Boomer, Gen X, or Millennial – that makes all the difference.
Insights and Opinions from our Analysts and Experts
Last year in our Black Friday blog we noted that it appeared most retailers had the holiday figured out. When to open on Thanksgiving, how focused to be on online shopping vs in-store, when to promote and how to do it. Sadly, I think we were a bit premature in declaring a victory (or least an armistice) in the holiday shopping wars. This year many electronics brick-and-mortar retailers succumbed to the reality that opening on Thanksgiving was only for the biggest traffic aggregators, like the malls, and pushed their promotions to Friday morning. Unfortunately, what they missed is that Black Friday, as an event and a shopping experience, has ceased to exist. There were few if any lines at 6:00 a.m. on Black Friday, as that traffic long ago migrated to Thanksgiving Eve or online, yet many retailers continue to chase it. While I am sure that there will be plenty of volume on Friday afternoon and over the weekend, the need to open early and promotionally on Friday morning seems to have passed. It’s now truly the Thanksgiving weekend that kicks off the holiday season. And the imperative is now to be truly successful over both Thanksgiving week and Cyber Week. That will be what makes, or breaks, the season for retail. We have seen Thanksgiving week share of holiday sales increase by about 2.5 points over the past 10 years. When combined with Cyber Week, those two weeks are approximately one-third of the nine week holiday season results, up about 5 points overall from results posted in the last 2000’s.
We noted on Twitter the strong lines on Thanksgiving evening, but most of those were at the largest retailers. Best Buy’s success on Thanksgiving, as a more specialty retailer, seems more and more like an aberration, a function of the strength of electronics as a draw for promotionally focused early holiday shoppers (as we would once again note that many of Thanksgiving night’s retailers, even those with only a tangential relationship to CE, such as Kohl’s and Dick’s, led with or focused on CE products as traffic drivers and interest builders).
On the product side, my colleague Ben Arnold has done an admirable job of calling out the new sales opportunities for consumer electronics in 2016, including Smart Home, VR, Drones and Smart Hubs. However, the real focus of holiday 2016 has been big screen and 4K/UHD TV with record low pricing and seemingly endless demand over the last two days (check out my Twitter timeline for some comments on that) propelling what promises to be a record end, to a record year in TV sales. Among the other traditional categories, PCs, tablets and mobile phones remain heavily promoted, but the broad appeal of TV, especially the newer technology and bigger screens, has been the prime catalyst for retail interest. Alongside TVs, an increased emphasis on mounts, cables and soundbars, all of which are exceptionally well positioned add-ons to big screen TVs, and benefit from the cleaner sales floor environment (less pile-it-high, pallet stack outs for 60 inch TVs than 32 inch TVs in the past) allowing retailers to fulfill demand for accessories that can add revenue and profit to the challenging Thanksgiving week TV pricing environment.
Despite the positive sprouts we have seen during Thanksgiving week, we would be remiss if we did not note the lackluster results for the first two weeks of November for CE and the weaker start to Q4 for CE. While these results can be explained by looking at the difficult comparisons to strong launch events in 2015 (iPad Pro and SP4/Surface Book), they do not account for the entire story. Sales in 2015 never capitalized on that strong beginning and left CE with poor results. Those weak comparisons give us reason for hope for this year’s performance. While the final judgment of the holiday, as always, awaits a complete accounting of sales for the entire nine week holiday season (which we will provide in our CES Research Summit wrap up) the CE business has faced challenges around pricing and demand throughout 2016 and despite the easy comparisons, success is not guaranteed.
This year my family spent Thanksgiving in Manhattan, making for a memorable post-dinner technology shopping tour in the city. Among the handful of stores I visited Thursday night, a trip to Best Buy on the Upper East Side really stood out. This wasn’t the big store I’m used to in Virginia; this smaller, city-sized Best Buy boasted a club-like atmosphere. It was packed at 10:00 p.m., long after the opening rush at 5:00 p.m., and an in-store Sonos system played Rihanna and Future throughout the building. A Beats mini-store on the lower level featured several headphones to demo. It felt more like a technology shopping party than a post-Thanksgiving bargain hunt.
The vibe in this Best Buy was well timed. According to NPD’s 2016 Holiday Purchase Intentions Study, more than a third (36 percent) of shoppers expect to buy technology products this holiday and shoppers even expect their spending on technology to increase (+5 percent this season). The growth in premium feature segments like television, imaging and tablets are certainly contributing to this, but the growing selection of products in emerging categories are also driving interest in CE around the holiday. In fact, this Black Friday, ample promotions around products like drones, voice-enabled speakers, and virtual reality headsets are helping drive shoppers to the stores.
Most of these new product categories offer a diverse range of price points. For those looking to try VR, products like the Oculus Rift and PlayStation VR are available, as well as Google’s Daydream ($79) and Zeiss VR One ($99). The idea of a voice-controlled speaker was nearly unimaginable for most consumers just two years ago, but Google Home is on sale this weekend for just $99, and Amazon’s Echo Dot can be bought for as little as $39. So far, drone promotions have ranged from $59 to $999. In somewhat of an unusual occurrence, this wide array of pricing has made these new technology products more accessible to shoppers this holiday.
This bodes well for the shopping season. In addition to the attractive promotions on 4K TVs, PCs and cameras that we have become accustomed to, shoppers are flocking to stores to buy these new technology categories – not just try them. To me, that will be the real story of Black Friday – the ability of new, interesting products to get tech shoppers to come out to the stores.
We find ourselves among a new generation, one that is redefining the technology that will shape their lives. Not the often publicized Millennials, but their successors, Generation Z. While no dates squarely define their age and few characteristics evoke imagery of who they will become, one thing cannot be argued: they were born into an always-on, always-connected world.
As in the generations before them, the undefined nature of youth is personified through the new technology that is beginning to surface. The breakthrough devices for Generation Z remain on the horizon, as the Commodore 64 and iPod once did for generations past. Yet, the intelligence that will power these devices is already taking shape. When you wake, do you see the world as it is today or imagine the virtual reality of the future?
I awoke the other day to my son dancing in the kitchen. Having told his new friend Alexa what tracks to play, it became a 6:00 a.m. dance party. Just as iPads trained children to expect every screen to be touch enabled, soon they’ll expect all devices to work simply by speaking to them. But the future is not about a migration to voice commands; rather, it’s a shift towards intelligent devices. Voice assistants such as Amazon’s Alexa are constantly learning our behaviors and interests. As this massive trove of data is processed, we will see a shift toward assistants anticipating and reacting to our needs as opposed to merely doing what they are told.
The groundwork is being laid through devices that already integrate elements of artificial intelligence. Devices, like the Nest learning thermostat, and the skills of Siri and Alexa are introducing this concept throughout our homes. While usage of voice commands is growing rapidly, it remains a basic interaction, such as telling Siri to call someone; but, technology is on the verge of enabling interaction with devices in a more human-like manner.
Will Generation Z grow up to see each day for its endless possibilities and refuse to accept the practical boundaries of the status quo?
AT&T announced its intent to purchase Time Warner this weekend in a move that is sure to raise a few eyebrows at the FCC and DOJ. In theory, it’s a “vertical” acquisition, meaning that there is (almost) no overlap between the AT&T and Time Warner assets, and, typically, vertical deals meet with regulatory approval. But there is vertical, and then there’s the layering of content on top of mobile and fixed networks to form a competitive advantage. And that is where the fear sets in.
The competitive advantage in mobile is becoming harder to find: network coverage is becoming close to parity, the range of devices available on each network are the same, and this means that pricing becomes the only lever. That’s clearly not a great strategy as a race to the bottom ultimately helps no one. And so, the carriers are all looking to differentiate through content, while rapidly turning data services into a commodity. To be clear, this isn’t a new strategy for the carriers, which have tried many variations over the years. But with broadband data speeds now more than capable of supporting video, it is a strategy that is now working.
T-Mobile’s approach has been Binge-On; offering data-free access to a very broad range of video sources that the carrier has partnered with. Verizon and AT&T are taking a more aggressive stance, with both looking to take a content ownership approach, rather than just content partnerships. To that end, Verizon is in the throes of purchasing Yahoo! (and the related assets), developing the Go90 mobile service, while also offering exclusive NFL content for mobile.
But what AT&T is doing is bigger and bolder. Just last year, AT&T acquired DirecTV, which firmly moved AT&T from being a mobile company (plus enterprise communication) to being an entertainment provider. The key goal here was to begin to merge the home and mobile services to provide ubiquitous access to entertainment content across multiple platforms. DirecTV meant that AT&T had the opportunity to provide home-based entertainment service on a national basis, matching its mobile footprint. And, of course, DirecTV already has the distribution rights for this content.
Adding Time Warner to the mix is an interesting expansion that does not necessarily bring the “benefits” that much of the initial media fears and concerns have focused on. There are concerns that AT&T will have too much power across the entertainment “stack,” meaning that AT&T customers could gain early access to content (ahead of other cable providers) or could even make some content unique. Imagine a world where HBO’s “Game of Thrones” is only available if you subscribe to AT&T, for example. Now, having imagined this scenario, disregard it: not only would such an approach simply not be permitted by the regulators, it has little long-term benefits for AT&T.
Consider instead, the fact that AT&T will now have immediate digital rights to leverage the Time Warner content across both fixed and mobile networks. That does give AT&T, potentially, a head start in launching a true mobile-first entertainment strategy. Additionally, AT&T probably has some very strong ideas about how to migrate the movie content to a digital future that stretches beyond Ultraviolet and the other electronic variations of today. As such, the competitive threat from this deal lies exactly where one would expect it to be: faced squarely at the other mobile operators.
LeEco unveiled most of its U.S strategy Wednesday, announcing four TVs, two smartphones, a VR headset, a connected bike and the concept car that it previewed at CES earlier this year. The overall hardware strategy is to focus on high-end products with mid-tier pricing - in addition to the $2 billion Vizio acquisition the company announced this summer. But don’t mistake LeEco for a hardware company, as it is much more.
Rather, LeEco has historically been a content provider, delivering original content, a vast library of movies and live event streaming. The hardware play is really about providing multiple windows into the company’s content and while the majority of the existing content has been focused on the Chinese market, there are plans afoot to build a similar portfolio for the U.S. market. This content will be in-part through an array of partners – ranging from Lionsgate to the History Channel and many more – in addition to original content and increased event streaming.
But even this portrayal is not really accurate; what LeEco truly wants to be is a unifying ecosystem that allows content to move seamlessly between various devices allowing, for example, content to be switched from the phone to the TV (or to the car). And herein lies the boiling the ocean issue. To create an ecosystem of this size and scope takes an awfully long time and has several rather large, well known competitors such as Apple, Google, Amazon and Facebook, to name but four. In other words, this is a very bold strategy with long odds against its success.
But it could work. The company appears to have very deep pockets and knows that this will not be an overnight success. And, with that in mind, probably the best way to think of LeEco right now is as a hardware company first and foremost.
For the next couple of years, consumers will buy LeEco devices because they are well priced, with top-of-the-line features. The content alone – at least initially – does not differentiate the company enough to sway a consumer’s purchase decision. A year or two from now, with more compelling content, the company can enter Phase Two of the strategy and become far more of a content company. This will then slowly lead to Phase Three, when the company becomes an ecosystem.
The key to LeEco’s hardware strategy will be its mobile phone strategy. LeEco’s core target is the millennial, who is a phone-first user; however, the challenge here (and actually with all the hardware focus) is getting the devices into the hands of the audience. The initial focus is to sell via LeEco’s online LeMall, but a brick-and-mortar strategy will also be needed to ensure that consumers see the LeEco devices along with the myriad of alternatives. Best Buy, Walmart, and ideally, carrier stores will drive far more sales than an online-only strategy, even for the millennial market.
But it would be wrong to discount LeEco… at all. Yes, the retail strategy may need to be expanded, but that’s likely to happen over time. The theory behind LeEco’s strategy is a strong one, even if the pieces do not yet combine together to get the company there. If there is a possibility that an ocean could boil, I suspect LeEco would build the product suite necessary to at least start it all bubbling.
In August, Sonos announced that its line of multiroom speakers and soundbars would be compatible with Amazon’s digital voice assistant, Alexa, allowing users to cue up music on their speakers and soundbars by voicing a command to any of Amazon’s Alexa-enabled-devices. From a user experience point of view, this type of integration makes perfect sense. Voice, whether in controlling your lighting or simply finding out the weather forecast, is an easy way to access information quickly, but is also surprisingly natural for controlling audio. A year into owning an Echo, I’ve found voicing a command to Alexa to play music is a lot easier than flipping through pages of apps and menus on my phone.
The Sonos announcement is yet another sign that voice control, and by extension digital voice assistants, are quickly impacting how we use technology hardware. According to a recent NPD Omnibus study, 38 percent of consumers have used a digital voice assistant like Alexa or Siri. Most have become familiar with digital assistants via their phone, and in fact, 86 percent of those polled said they have used a digital assistant on their smartphone. The phone is a great device for voice assistant applications, but the use case for these applications differs depending on the devices they run on and where they’re located. So far, Amazon’s Echo speakers have focused on interoperability with smart home products in addition to the skills or voice apps they add each week. With this in mind, Alexa is most helpful at home if she can be accessed in multiple rooms. This is precisely why Amazon revamped their Dot speaker and dropped the price to $50. The goal for Amazon here is not necessarily to sell speakers, but to sell consumers on Alexa everywhere.
Interestingly, a symbiotic relationship exists between voice assistant applications and the smart home market. For wider adoption, digital assistants need to demonstrate they are useful for things other than setting timers and connected home products need to show they add real value to the home – not just connectivity for connectivity’s sake. Pairing the two together creates a scenario where consumers can experience the best aspects of both.
In the short time since the Echo went mass market, we’ve seen other devices integrate voice. In September, GE announced that its connected Monogram and GE-branded appliances would be controllable via Alexa, while camera and drone maker GoPro also added voice control to its new Hero 5 cameras. These products join Google’s forthcoming Home speaker and Jam Audio’s Jam Voice in a quickly growing field of voice enabled CE devices. Over the next 12 to 18 months, expect voice to become the newest ‘gotta have’ feature in consumer technology with TVs, cameras, and even A/V receivers potentially adding the feature. This is in addition to the numerous PCs, mobile devices, and smartwatches that already offer voice control. Whether the feature is built-in or arrives in the form of a connecting device like the Dot, voice control and digital assistants are poised to change the way consumers interact with technology products.
Yesterday Apple introduced the iPhone 7, which now lacks a 3.5mm headphone jack, ending several months of speculation that Apple would remove the port from the phone. There are likely several reasons for this design change. Eliminating the headphone jack would make room for a slightly larger battery and taking a port out of the phone helps protect the phone against water and dust damage. Additionally, Apple and Beats each announced their own Bluetooth products yesterday, and while eliminating the headphone jack from the iPhone will likely boost demand for Bluetooth headphones of any brand, Beats and Apple will certainly benefit.
Stereo headphone sales have been migrating towards Bluetooth for the past few years, so the removal of the headphone jack isn’t quite as sudden as it seems. In fact, for the 12 months ending in July, Bluetooth accounted for 45 percent of all headphone revenues and 13 percent of units, up from 31 and nine percent, respectively the year prior. In June and July of this year, Bluetooth sales even surpassed that of wired headphones, accounting for 52 percent of sales during those two months. The growth in Bluetooth is the result of increased affordability (today a third of Bluetooth units are priced $50 or under), the growth of the fitness headphone segment and an overall realization that Bluetooth provides a decent level of audio quality along with the convenience of eliminating wires.
Despite the make-up of the stereo headphone market naturally trending towards more Bluetooth, the iPhone 7 launch is likely to drive increased demand for Bluetooth headphones. A recent NPD study, fielded in the days leading up to the iPhone 7 announcement, found 60 percent of likely iPhone 7 purchasers (who expect to buy the phone within the next six months) already intend to buy a pair of Bluetooth headphones within that time frame. When these iPhone 7 buyers were then presented with a visual concept and explanation that the headphone jack on the phone would be removed (replaced with a pair of Lightning connector headphones and an adapter at purchase), their purchase intent for Bluetooth headphones rose to 78 percent- more than three times the purchase intent exhibited by smartphone owners (irrespective of their smartphone buying intentions or favored brand). According to these findings, most who expect to purchase the iPhone 7 consider buying Bluetooth headphones a near certainty.
As we’ve seen with the change from the 30 pin to Lightning connector on iPhones and iPods (which helped to launch the nearly $2 billion wireless speaker market), as well as the decline in USB ports and optical drives on Macs, Apple is not one to maintain the status quo when it comes to ports on devices. While yesterday's announcement seems extreme given the legacy of the 3.5mm input, smartphone design has always pushed boundaries. With Bluetooth now accounting for a majority of headphone sales, the elimination of the headphone jack in the iPhone 7 is more of an adjustment to how consumers are listening to music rather than a true shock to the system.
Over the past few years I’ve tried my fair share of smartwatches in various shapes and sizes, but none lasted on my wrist for more than a few days. The use case wasn’t compelling enough to justify the wrist space, particularly as each and every one of the devices felt like a compromise between tech and style. Ugly may be too strong a word, but certainly – for me at least – they did not look elegant or classy.
Instead, the smartwatch opened my eyes to the world of watches and I found myself dreaming of Rotary’s, Rolex’s and many other timepieces that I couldn’t possibly afford. If I was going to wear a watch beauty and elegance would take priority over functionality that may or may not even be of use to me.
And I’m clearly not alone. The watch industry is cautiously reaching for the champagne now that the smartwatch has failed to take over their world. While the smartwatch certainly impacted the $200-$500 watch business, many of the declines in the broader watch business are now, in hindsight, being blamed on economic and related issues, not the brash smartwatch upstart.
In the end, I embraced neither the classic watch, nor the smartwatch. Rather, my inner-nerd found a compromise and I chose a runner’s watch replete with GPS, notifications, waterproofing and (of course) step counting. But IFA 2016 has made me reconsider the smartwatch for a couple of reasons. Firstly, I may actually need a little more functionality than a sports watch can provide. I’m directionally challenged making running in new locations without Google Maps a recipe for disaster; and since I don’t run with a phone, the watch becomes a far more important tool.
But the second reason is more significant to the broader industry: the smartwatch is morphing into a device of beauty. At Samsung’s Gear S3 launch, there was far more emphasis placed on the exterior design of the device than on its innards. And it was justified - the device is a beauty. Samsung is not alone in this shift as more tech companies are taking the watch industry approach, recognizing that they need to build an elegant device first, and work on the technology second.
In that respect, it is surprising that it has taken the mobile industry a while to truly embrace this focus. After all, the mobile phone was always the eye candy that drove the mobile purchase. Few people wanted to carry an ugly phone, as Motorola proved when they launched the original Razr at the (then) ridiculous price of $500, and watched it sell out almost immediately because the device was so darn cool.
Mobile’s “cool” has now been transposed to “elegant” for the smartwatch market, and we can expect to see many more smartwatch launches that focus on the designer’s thought process, not the functionality of the product. As such, it may be a little too soon for the watch business to write off the smartwatch threat just yet.
Back in December 2013, a few brave NPDers ventured out into New York City’s chilly Times Square to find out what people thought about the newly launched smartwatch. Would the men and women of New York have any interest in this new-fangled device, or was it really just the domain of the tech-evangelist? The feedback was interesting with women in particular professing a desire to buy such a device. The people we asked saw the device as a time-saver, since it would save them from pulling their phone out of their bag to check the time. Yes, it’s true; the “killer app” for the smartwatch was tracking time, itself.
Of course, we knew such research was, at best, anecdotal and that it would take more than basic watch functions to drive the market forward. But it made for a funny story, especially as we were in Times Square with a plethora of dubious characters offering watches for couple of bucks on every street corner. Interestingly enough, to an extent, the feedback has so far proven itself to be directionally correct. While not the only function that consumers use their smartwatch for, checking time is still the most popular function; over 55 percent of users track the time on a very regular basis, compared to 41 percent tracking, for example, their steps.
Of course, the real need is about more than simply tracking the time, but rather the broader goal of tracking notifications. When we asked early smartwatch adopters about why they continued to wear the device, they would quickly confess that while they liked to talk about the cool apps, the real use case was that the watch vibrated when their phone rang, or when they got a text message. Forget reading the message; they knew something important had occurred and so they would reach for the phone to examine the event in more detail.
As the technology has improved, and the app world has expanded, so too has the range of use cases. Activity tracking has clearly become far more important, but notifications and the time remain front and center -- and these use cases have helped to evolve the customer base. Smartwatch adoption skews younger and lower income in many cases and while the natural inclination is to simply label this group as “early tech adopters,” the reality is a little different.
It appears that a successful target sector for the watch is the service industry, ranging from valets to bar staff and waiters. These are users that cannot stay glued to their phones while they are working, but still want access to “glanceable” information such as messaging notifications, alarms and (of course) how long they have left on any given shift. The ability to remain in contact without reaching for the phone is still the killer app.
This all bodes well for the newer generation of smartwatches, which can connect via cellular rather than just Bluetooth. The freedom to completely un-tether from the smartphone could become the next logical “killer use” as it means you can go for a run without carrying that ever-larger smartphone with you, for example, or range further in the restaurant without worrying about Bluetooth. Of course, cellular connections come with a fee, and success will no doubt be related to the correct balance between service fees and how important the untethering aspect of these devices proves to be.
The smartphone has fundamentally changed our lives, and how we interact with each other. It allows us to stay in contact while out-and-about through more than just voice calls; and it enables us to ignore the people right in front of us when we choose. Sure, it’s a mixed bag of good and bad behaviors, but with 70 percent of U.S. consumers carrying a smartphone (and some carting more than one) we take for granted many conveniences that caused major headaches before the smartphone.
Take, for example, the art of navigation. I remember buying my first car, and immediately rushing to the bookstore to pick up a Thomas Guide. Thomas Guide was the pre-GPS, street-level map that we all tried to navigate across California with, flipping pages as you moved along the route, and trying to make sure that you really were where you thought you were. It was part art, part science (at least for me) and added a sense of adventure to the trip. There was no navigation system to tell you exactly where you were, or when you would arrive. “Are we nearly there?” from backseat passengers couldn’t be answered exactly, as you probably weren’t quite sure how much farther you had to travel or what upcoming traffic would be like. Nowadays, the Thomas Guide seems like a quaint throwback (although it is still available) and even the thought of going to a bookstore seems odd to the many e-book readers among us. Instead, at least from a navigation perspective, more than half of smartphone owners use a navigation application such as Google Maps or Apple Maps on a regular basis.
And as for the bookstore, and retail shopping in general, the smartphone has had just as significant an impact. On the positive side, with navigation systems in our pockets, we can at least find the nearest mall while on a road trip. But we’re probably less inclined to make the detour when we can just buy everything from our smartphones and receive deliveries the next day (or even within the hour in some locations).
Pre-smartphone, the purchase involved an adventure with a balance between store visits and online price checking, all done with a team of two (my wife stayed home to price check while I visited stores). Of course, those were the days when you could choose to buy from a wide array of electronics retailers including Best Buy, Circuit City, CompUSA, Fry’s and Good Guys. Having so many purchase options was invaluable for consumers; retailers were forced to price match against a large number of competitors, which meant aggressive discounts.
Fast forward to the present and many of the above retailers have disappeared. More importantly, the market has moved increasing online, and has become far more mobile. According to NPD Connected Intelligence’s SmartMeter, the percentage of U.S. smartphone owners using the Amazon app doubled from 21 percent in the first quarter of 2015 to 42 percent in the same quarter of 2016. And Amazon is not the only retailer to see a growth in app usage: Walmart sees 20 percent use, followed by eBay (15 percent) and Target (10 percent) apps. Further, there’s a significant base of users who jump to the retailer’s website via the smartphone, as they haven’t yet committed to downloading the app.
This is somewhat of a challenge for the retailers, as they want to remain top-of-mind to the smartphone-toting consumer, which means having the app firmly on the smartphone, not just hoping for the occasional website visit. With an app retailers can send notifications, and there is the potential to update consumers on flash sales and other would-be bargains. To do this, the app needs to be more than just a sales-front for the products. Take, for example, grocery store apps. Many of them don’t include the ability to create a shared shopping list. This makes some sense as shopping lists typically reduce impulse purchases, the very thing that grocery stores hope for. But at the same time, the lack of a logical family-oriented list means there’s less chance that consumers will use the app on a regular basis.
Looking back at how the navigation world changed with smartphones, another logical addition to most retail apps would be more detailed in-store maps, allowing the consumer to find the product they want without too much aimless wandering. But again, this means changing the focus from encouraging shopper “drifting” in the hopes of impulse purchases to a more focused in-and-buy approach.
This means that many retailers need to change their mindset in this increasingly mobile world if they want to remain successful. Many are currently trying to embrace mobile without fully embracing mobile - they still want to protect the older model and are not quite ready to put it all on the table. It’s a smart short-term approach… until suddenly it’s not, and someone else has changed the model that the game is based on.
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