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.
Related Case Studies
In-Store Display Compliance Analysis: How The NPD Group and Mobee Identified a $40+ MM Revenue Opportunity for GoPro
GoPro, a leading consumer electronics brand and maker of world-class cameras, invests heavily in merchandising its products through specialized in-store displays across thousands of retailer locations. Unfortunately, broken and incomplete displays are a fact of life in retail. In order to generate buy-in from retail partners, GoPro needed a credible, trustworthy estimate of sales dollars lost as a result of incomplete compliance.
Manufacturers must convince retailers that their version of the hot, new thing should be on store shelves. See how our client proved tablet/laptop buyers spend twice as much on electronics overall compared to other buyers.
Store-Level Enabled Retail Tracking: How a Headphone Manufacturer Grew Sales by Expanding Distribution
Recently, a consumer electronics manufacturer approached us in its effort to grow its headphone business. It needed a retailer to carry its latest headphone model, but there was just one problem: the item’s overall sales and market share were lower than that of competing brands. Even so, our client knew it had a winner. This client asked us, “How can we convince the retailer to carry our headphones in its stores?”
While HP, Inc. has a strong track record of measuring marketing campaigns using existing modeling and analytics, they wanted to run a market test to quantify ROI on these campaigns and project returns on future campaigns at a national level.
Store-Level Enabled Retail Tracking: How BodyGuardz Proved its Growth Potential and Won More Distribution
With shelf space in a large wireless retailer and strong direct-to-consumer sales results, BodyGuardz set its sights on increasing in-store distribution to reach additional consumers and continue to grow brand awareness. To prepare for discussions with retailers, the company wanted a more in-depth view of the competitive cell phone accessories category and partnered with us to make its case.
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.
Store-Level Enabled Retail Tracking
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.
Account Level Reports
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.
NPD’s Analytic Solutions group includes senior leaders with extensive experience developing and delivering analytic solutions that help clients predict areas of risk and growth to improve marketing and product development. By combining NPD’s unique data assets and industry expertise with state-of-the-discipline research techniques and proprietary solutions, our Analytic Solutions team is able to answer clients’ most pressing business questions.
Checkout delivers the most comprehensive view of consumer purchase behavior for general merchandise categories, across all retailers over time, to help you understand how to adjust your marketing to fuel growth. Checkout E-commerce offers the most complete and accurate view of the online channel – including first and third-party sales for Amazon and other marketplaces, 400+ e-commerce retailers including direct-to-consumer, and an early read on emerging players.
Gain the insight, analysis, and data you need to master today’s revolutionary new connected marketplace. Our industry analysts cover the complete connectivity landscape including market conditions, consumer behaviors, emerging technology, and more. Discover the emergent marketplace with Connected Intelligence’s focused analysis on innovation, adoption, availability, and application.
Identify opportunities and threats, optimize distribution and enhance consumer communications, with a deeper understanding of women’s attitudes about skincare. Get in-depth information about brand awareness and perceptions, find out how women shop for skincare products and what influences purchases at the category and subcategory levels.
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.
U.S. Dollar Sales of Drones Increased 33 Percent in 2017, With Drones Priced $500 and Above Accounting for More Than Half of Dollar Sales
According to global information provider, The NPD Group, U.S. dollar sales of drones increased 33 percent in 2017, with dollar sales of drones priced $500 and above making up 69 percent of sales revenue. Over the past year, drones priced between $500- $999 saw the most significant sales growth compared to 2016, with dollar sales more than doubling (155 percent). This growth resulted in drones in this price range gaining 17 dollar share points during this timeframe.
The NPD Group, a leading global information company, announced today a series of executive leadership appointments being implemented to build upon the company’s strong growth in the U.S. Technology sector, enabling it to enhance its service to clients and retail partners.
– The NPD Group, a leading global information company, announced today the winners of this year’s Consumer Electronics Industry Performance Awards at their annual reception during the Consumer Electronics Show in Las Vegas.
Online Consumer Technology Sales Increased 19 Percent in the First Three Quarters of 2017, Reports Checkout
According to NPD’s Checkout, a receipt mining service, online consumer technology sales were up 19 percent in the first nine months of 2017 versus the same time period a year prior. Direct-to-consumer (DTC) sales saw the largest growth, increasing 34 percent, and representing 13 percent of all e-commerce sales, a one point volume increase.
NPD and gap intelligence Collaborate to Inform Price and Promotion Management in the Technology Industry
The NPD Group, a leading global information company, and gap intelligence, a values-led market intelligence firm, are combining NPD’s unique data assets with gap intelligence’s product-level price and promotion information to enable marketing and sales professionals to create winning product and channel strategies in the technology industry.
Users on limited data plans rely on Wi-Fi more than unlimited users, according to NPD Connected Intelligence
Whether treating yourself or gifting to someone else, increased spending has resulted in stereo headphones historically ranking among top tech sales performers during the holiday season (Oct. – Dec.). Dollar sales last holiday were 15 percent higher than the 2015 holiday season, and 2017 sales are off to a strong start with Cyber Monday week sales up 55 percent vs. the same week last year1, according to The NPD Group, a leading global information company.
Viewing is shifting from live TV to subscription services, as more streaming content is made available
Industry revenue has turned the corner – 2017 will see the best holiday performance in years, as hot new categories and a stable market deliver positive revenue growth in consumer electronics.
According to global information provider, The NPD Group, 57 percent of all U.S. smartphone users access video content via an app at least once a month, with iOS users more likely than Android users to access video content, 66 percent versus 49 percent, respectively. Streaming video is the number one driver of cellular and Wi-Fi data consumption on mobile and fixed networks, accounting for 78 percent of the total data used by smartphone owners, with streaming video apps like YouTube and Netflix driving the greatest data demands.
In 2017, the U.S. B2B indirect hardware market grew 4% compared to 2016, from $55 billion to $57 billion. The increase outpaced annual U.S. GDP growth and shows the hardware market's strength in the B2B channel, driven by segments such as PCs and networking devices.
See highlights from NPD’s annual cocktail reception at CES 2018 with insights from Technology President Ian Hamilton, Industry Advisor Stephen Baker, and Industry Analyst Benjamin Arnold.
Manufacturers must convince retailers that their version of the hot, new thing should be on store shelves. See how our client proved tablet/laptop buyers spend twice as much on electronics overall compared to other buyers.
Digital storefronts provide centralized services to support digital game downloading and purchasing. Until now, it has been hard to see this market up close and make data-driven decisions about digital selling platforms and how best to use them.
The back-to-school season now includes more options for the consumer than ever before. We took a look at how U.S. consumers shopped for back-to-school products in 2017 to help you plan for the 2018 season.
The back-to-school season isn't about one-stop shopping anymore. Find out what it is about these days.
The U.S. consumer electronics market faces significant shifts and challenges. To stay ahead of the game, you’ll need a clear understanding of what lies ahead through the eyes of the people who will be buying your products, including digital assistants.
Our tech analysts expect fewer than half of U.S. consumers will account for more than three-quarters of tech industry spending through 2018. That means it’s becoming increasingly important to understand the consumer landscape—you’ve got to really know those consumers. We’ve identified 6 consumer segments that are worth watching. Here’s a look at their potential tech industry value through next year.
The consumer electronics market faces significant shifts and challenges. To stay ahead of the game, you’ll need a clear understanding of what lies ahead through the eyes of the people who will be buying your products, including headphones, through 2018.
Insights and Opinions from our Analysts and Experts
Apart from 2017 when the Note 7’s battery issues forced the company to run excessive quality checks and delay the debut of the Galaxy S8, Samsung always commands attention at Mobile World Congress, and this year was no exception.
The new Samsung Galaxy S9 and S9+ models boast impressive upgrades to their predecessors, though almost all of these advances are under the hood, as Samsung did not make any radical changes to the form factor. Some of the noteworthy interior upgrades include a much faster processor (Qualcomm’s Snapdragon 845), impressive camera hardware, and software updates, such as dual aperture lenses and super slow-motion video capturing mode at 960 frames per second.
But none of these advancements created as much buzz on the show floor as the animated self-emoji feature, which allows users to create their own emojis via the AR-powered app using the front facing camera. This was probably the most exciting feature of the new S9 models, as attendees were desperately trying to get their hands on a test device to create their self-emojis. I should mention that I was no exception…
Samsung’s animated self-emoji feature is a great example of how OEMs are utilizing their enhanced camera hardware with AR/AI algorithms on top to enhance user experiences. Most flagship models debuted at MWC 2018 offered foretastes of these capabilities in various formats, such as the LG V30s’ Vision AI feature that scans and recognizes objects in the surrounding area and adjusts shooting parameters accordingly, or ZTE Zenfone 5’s AI-powered scene detection technology that configures the camera settings for optimum picture quality. These AR/AI enhancements undoubtedly provide a richer user experience, but they hardly offer any differentiation for consumers to select one OEM over the other.
Browsing through OEM booths at MWC eventually begins to feel like a perpetual déjà vu. You hold many 5.8-6.0 inch no-bezel flagship smartphones running on Android Oreo and Snapdragon 845, boasting a dual-lens camera powered by AR/AI, resulting in high competition for smartphone consumers in this space. While Apple experiences an upgrade conversion rate of over 90 percent, meaning nine out of 10 iPhone users buy another iPhone when it’s time upgrade, that’s not the case for Android-based OEMs, according to the NPD Connected Intelligence Mobile Connectivity report (1H 2017). In the same timeframe Samsung enjoyed a 56 percent upgrade conversion rate, which is quite high compared to other Android OEMs. With soft touches such as animated emojis in combination with aggressive trade-up campaigns, this figure is poised to go up in the upcoming months.
As expected, the new Galaxy S9 models were heavily discounted by U.S. carriers right off the bat. All major carriers alongside their prepaid arms (such as AT&T’s Cricket and T-Mobile’s MetroPCS) launched various buy-one-get-one and trade-in campaigns to entice upgraders. It’s refreshing to see carriers charging full throttle with the S9 campaigns at launch, as while the predecessor Galaxy S8 variants were also heavily promoted at launch, the rigid eligibility requirements adversely impacted volumes during the first couple months of availability. It wasn’t until late Q2/early Q3 2017 that carriers loosened the requirements and enjoyed high volumes.
Of the top four nationwide carriers, T-Mobile offers the most competitive pricing on the S9 models. This is a brilliant move on T-Mobile’s part, as the Galaxy S9 franchise is the perfect remedy to the carrier’s network-related deficiencies. The Galaxy S9 supports T-Mobile’s 600 MHz low-band frequency network that provides extended coverage in rural areas as well as superior indoor coverage. NPD’s Connected Intelligence findings reveal that T-Mobile over-indexes in satisfaction levels for almost all tracked attributes (service value, pricing, hidden fees), except network related areas (network coverage, dropped calls, network speed). A wide adoption of the S9 models among existing and new T-Mobile customers should help the carrier immensely in boosting its network image and perception. T-Mobile’s desire in pushing the S9 is also tremendously important for Samsung, which trails behind Apple in volume share at every carrier except T-Mobile. Apple enjoys 50 percent or more market share at the other three carriers, and its market share at T-Mobile has also been on the rise (up from 26 percent at yearend 2016 to 40 percent at yearend 2017). The heavy promotional push on the S9 variants by all carriers, coupled with Apple’s steep price tag on the iPhone X, will create the ideal landscape for Samsung to strengthen its foothold in the U.S. market.
Source: NPD Connected Intelligence Mobile Connectivity Report
This year’s Mobile World Congress is wrapping up and soon everyone will be heading to the airport. While the show was, as expected, heavily focused on smartphones (coming in the next blog), there was plenty of other things to see too…
Amazon’s Alexa may be a strong presence at shows such as CES, but when it comes to Mobile World Congress, Google Assistant rules the roost. Large OEMs such as LG and Huawei made plenty of room for the assistant, featuring it both as part of the phone ecosystem, as well as within the home. LG, for example, demonstrated Google Assistant in the kitchen environment, making sure the oven was on, the clothes were washing, and plenty more. But one suggestion for Google’s next show: stay inside. The company’s tent at CES was flooded out, and the company’s MWC “village” outside enjoyed snow. So, torrential rain in Vegas and snow in Barcelona, remind me to avoid their next outside exhibit.
While firmly a device and infrastructure show, there was still plenty of room for discussions about “the cloud,” particularly as the faster speeds and lower latency of 5G will allow for more processing to take place in the cloud, rather than at the edge device. What that means is we could see much smaller VR devices (yes, they were there) with the headset acting more as the simple “glass” for the computations in the cloud. Not only does that help justify 5G investments (cue a sigh of relief from carriers around the world), it could also lead to a very big leap in innovation in consumer electronics over time. Speaking of clouds and VR, kudos to HTC for the best VR demo, which allowed participants to float above the desert in a hot air balloon they control.
The car of the future is fast becoming a “must have” feature of any self-respecting show and MWC is no exception. Daimler Benz, in particular, came to show the latest in car connectivity, not to mention the smart car of the future. All of which, of course, need a low-latency, high-speed network (cue a second sigh of relief from carriers). It takes quite something to overshadow the combination of Mercedes and Smart… but having Formula One (F1) exhibiting at the show took things to the next level. Why was F1 racing there, you may ask? They announced the launch of F1 TV, an over-the-top streaming channel. While details were limited, one would hope that this will include 360-degree cameras in the cars, streamed live to VR headsets at home. Although, of course, we may need to wait for 5G networks to actually launch before we see that (cue groans from F1 enthusiasts across the world).
Huawei may be struggling to crack the U.S. market, but the company was out to show its market strength with an impressive booth. With top of the line phones, tablets, and laptops, the presence felt second only to Samsung… just like its place in the Android worldwide device market. The laptop was particularly nifty, with the camera popping out of keyboard (the middle of the function key row), meaning you can “disable” the camera at the press of a button. The move may leave some people in the U.S. government scratching their collective heads… it does rather go against the argument that Huawei is always trying to spy on us...
A Small Throwback
Two niche products came together at the show in the form of Sailfish (a version of Linux from ex-Nokia folk) and the Gemini Computer, a refresh of the old Psion from the early 1990s. In fairness, the Gemini will be a dual-boot device, allowing you to have both Android and Sailfish (or some other Linux version) running happily together. We’ve talked about the Gemini before, having first spotted it last year at CTIA, but Planet Computing, the company responsible for the Gemini, is now shipping the first of them to the early Indiegogo fans. With 4G and the ability to connect to external screens, the Gemini could become a useful “real keyboard” device to throw in a pocket for future trade shows rather than a laptop.
Same As It Always Was
Remember the years when mobile shows were full of talk about mobile payments, such as those vending machines where you could by a soda using your phone? Yup… that hasn’t happened, at least not at the very show where you would expect it. Instead, the machines we came across looked the same as they always have, with slots for coins and bank notes. And yet, we came across no vendors showing off the vending machine of the future. Did the dream die? While they may not need the low-latency OR the high-speeds of 5G, the vending machine is still a great IoT implementation, which is another promised use for 5G. And, not to pile on (too much), perhaps every self-respecting smart city (that’s you Barcelona) should be expected to adopt smart payments too. Perhaps next year Barcelona...
Earlier this month, HomePod pre-orders began shipping, and as of February 9, excited new owners began receiving their speakers. HomePod has been one of 2018’s most anticipated products in what has proven to be one of the industry’s most intriguing product categories, and early demand for the speaker did not disappoint. In fact, in the U.S., day one pre-orders of HomePod were higher than all other smart speaker first day pre-orders, except Amazon’s Echo Dot, according to NPD’s Checkout service1. With Siri, Apple Music, and HomeKit, Apple has all the necessary integrations to be a success in the smart speaker market.
HomePod also represents Apple’s entry into the premium audio hardware market. Apple has made it a point to emphasize the audio fidelity of HomePod, in addition to its smart capabilities; and while the device will surely compete with other premium voice-activated speakers, like Sonos’ One, and Google Home Max, it will also jostle for share with audio heritage brands like Bose, Harman Kardon, and Sony. Apple’s success in audio was on display throughout much of 2017 as AirPods became the top-selling headphone product by year’s end (based on dollars and units2). Further, if taken together, Beats and Apple were the top-selling headphone brand of 2017, accounting for 44 percent of all dollar sales (not just wireless).
The audio market continues to deliver industry growth as well – another reason for Apple’s interest. According to NPD’s forthcoming Future of Tech report, sales of Bluetooth headphones and wireless speakers are each expected to see double-digit growth by the end of 2018. And as more brands add music services and voice app marketplaces, audio hardware will become a way to strengthen those ecosystem ties. Smart speaker users are encouraged to use the music service that ties in most closely with their device. Proprietary components in hardware (like Apple’s W1 chip or the real-time translation feature in Google’s Pixel Buds available only through the Pixel 2 and Pixel 2XL smartphones) offer unique benefits and can further incentivize users to invest in branded devices. Apple’s success selling iOS, Apple Watch, and Mac devices, as well as all their content offerings, seem tailor made for integration into HomePod.
While Apple’s interest in additional audio categories remains unclear, their rapid ascent in headphones demonstrates the brand’s appeal in markets like audio, where it has largely been untested. Much of AirPods’ success has hinged on the device’s ability to unite different parts of Apple’s ecosystem (in particular Siri and iOS). While HomePod will fill a similar role in Apple households, the new focus on sound quality means Apple is not merely looking to impact smart speakers, but has its sights set on a larger disruption in connected audio.
1Source: The NPD Group, Inc. / Checkout E-Commerce Tracking
2Source: The NPD Group, Inc. / Retail Tracking Service
I gave my daughter, Charlotte, her first phone when she was just five years old. It was hardly an appropriate age, but what’s the point of having kids if you cannot use them in the occasional social experiment. And besides, it was a cool little phone - a Firefly - that had mom and dad call buttons. The phone gave us peace of mind when Charlotte was on play dates, but she very rarely hit the call button.
Several phones later (she requested a “real phone” quickly), Charlotte’s mobile life finally took off in fifth grade when all of her friends started getting phones, too. Suddenly, her world became a lot more private, leaving us - and our fellow parents - muttering about the similarities between Pandora’s box and mobile phones. And there was an obvious lesson for me: my kids don’t need a phone to call home, or perhaps don’t want to call home; ouch!
The choice of a Firefly phone ages me (and my daughter, who is now in college), and I’ve lost count of how many phones she has gone through by this point. But it appears that apart from some serious advances in phone technology in the past 12 years, the age-appropriateness remains quite similar. Indeed, in many respects, advances in technology may be a limiting factor: I recall the Firefly phone costing less than $100; but today, everyone needs a smartphone, which means shelling out $500 or more to connect your children.
At what age did you give your child their first phone?
Source: Civic Science, February 2018. Base: 633 parents who have children
So while roughly 11 percent of parents hand out a phone to the under tens, the biggest adoption bump remains between the ages of 9 and 11, exactly when Charlotte’s friend all started to get their first phones 12 years ago. And this makes sense as it is when our little babies have to grow up a bit, moving from relatively small elementary schools up to the “big league” of middle school. It’s a daunting time for the kids, and downright terrifying for many parents if it is the first child to make the leap.
It is also the point when kids need a phone as so much more of their day-to-day school life revolves around technology, from Google Classroom to Chromebooks. And when it turns out that there are too few Chromebooks for the number of kids in the class, being able to whip out your phone is essential.
So there are a few lessons here for phone OEMs and carriers. From a carrier perspective, marketing to parents of fifth graders is a strong move. The timing is a little tricky as it is too late to wait for the “back to school” period as these kids migrate to middle school, and targeting too soon, as part of the fourth to fifth year move seems premature. Which makes me think that we are in the appropriate time now, somewhere around the middle of the school year.
For the handset manufacturers, there is perhaps an opportunity to build products that are more relevant for the younger kids. There have been several attempts at this market over the years, ranging from the Firefly to wearables, but none of them have really hit the mark as being “sophisticated” yet durable and small. In many ways, I think I’m describing a good old flip phone, but one that has been dragged into the twenty-first century so that the kids still consider it a “real” phone. We’ll be scouring Mobile World Congress next week to see if we can find any good examples.
It’s nearly time for Mobile World Congress, a show that provides a chance to catch up on the latest mobile solutions, as well as feast on the best tapas and sangria Barcelona has to offer (along with 100,000 of our closest colleagues). But while it’s a show that highlights the latest and greatest in mobile technology, it sometimes starts with a whimper. The show was slow to migrate from a paper-based registration to a mobile pass, and while it made the transition a few years ago, the official app seems to get poor reviews, as the login process is still challenging and seemingly unrelated to the Web-based registration process. Anyway, moving on from this issue, and assuming the app will let us into the actual show, the below are a few highlights of what we expect to see.
It’s still a phone show at its heart
Mobile World Congress has expanded its scope over the past few years, but the headlines are usually still about new phone launches. Samsung will be launching the Galaxy S9, which is expected to be the big news in the handset market… but it will hardly be the only news. While LG may have delayed its next big launch, there are still expectations that it will announce a V30 enhancement. And a slew of other vendors, including Sony, Huawei (remember, the third largest handset OEM worldwide), and Alcatel will also be making noise. And let’s not forget Nokia, which had a surprise hit last year with the retro 3310 bar phone. This year, the OEM needs to up its game with some pretty slick smartphones if it hopes to make a comeback. But the show can also be somewhat unforgiving for some vendors, reminding us of how far some of them have fallen and scratching our heads as to why they are still trying to succeed in this space. This can sometimes mean a tiny little booth, compared to previous years, or worse, a large floor space with not much to show.
IoT takes over
While handsets provide the shiny new toys that attendees come to gawk at, the Internet of Things provides the chance to show off just how wide-reaching wireless can become. And when we say “wireless” we do, of course, mean the next generation of cellular, 5G. With some concerns about how to make the business model work in a smartphone-centric world (see blog: In Search of a 5G Business Need), vendors showing off the latest concepts for the Internet of (cellular) Things will have the carriers’ attention. We can expect to see a wide range of new concepts, promising far more than simply throwing a cellular modem into a video camera, or “redundancy/backup” justifications for that one time of the year when your broadband connection fails.
Adding more Smarts to the City
Somewhere down the road to the Internet of Things, you suddenly discover that you’ve entered a Smart City, and Mobile World Congress is no exception. For the past few years there has been a GSMA-managed Smart City demonstration highlighting everything from connected trashcans to the operational control infrastructure necessary to make all of this work. While Smart City is already become a rather worn and overhyped category, Barcelona is a city that can get away with the demonstration as it has long been a leading example of Smart City implementations.
The mobility part of “mobile” can be expected to make its presence known, and we can expect to see the occasional car, used to highlight, yes, you’ve guessed it, 5G implementations. To date, the big news in cars has been the move towards electric vehicles (EVs) and Connected Cars (the addition of connectivity into traditional vehicles), which have left us feeling a little underwhelmed. Hopefully this year, there will be better examples of how 5G can make the car a connected mobility space, rather than just trying to find a compromise between Internet connectivity, while still maintaining the car company’s core money makers such as antiquated mapping solutions (hint, car companies...give us access to Google Maps and Waze please!).
And a little bit of everything else
Virtual reality will be a highlight, powered (of course!) by 5G rather than a more mundane connectivity solution, but it will be the pockets of unusual products that we are mostly hoping to scope out. And of course, we should expect to see some voice assistants. These were the big news at CES (for the second year running) and while they are, in some ways, a direct competitor to the smartphone’s dominant position with the consumer, there will be many examples of how the two technologies can come back together in a cohesive singular solution.
We’ll be providing an update on what we see during the show – so stay tuned!
A few months ago, I started thinking about buying a compact camera. My friends thought I was crazy; after all, my smartphone has a pretty good camera. But I wanted advanced features such as the ability to change the speed and aperture, features that often belong on a DSLR, rather than a compact camera, and especially not on a smartphone camera. Except, of course, I’m wrong, while my phone may not be able to change aperture, I can certainly play with the speed and get many of the effects that I’m looking for.
Misguided as I was in my desire to buy more tech gadgets, I did come to realize something about my smartphone: it’s really hard to find, and use, all of the features hidden below the surface. Of course, not all of the new features, especially on the camera side, are hidden away and it’s clear that the phone’s camera is still one of the biggest selling points for new devices. Indeed, we can expect that at Mobile World Congress later this month, camera functionality, especially combined with artificial intelligence, will be frequently cited as the next huge innovation by manufacturer after manufacturer.
But does it matter?
The history of smartphones is full of camera innovation that didn’t result in significant sales boosts for the OEM. Take, for example, one of my favorite smartphones of all time, the Nokia Lumia 1020 with its 41 megapixel camera. While other smartphones talked about pre-photo zoom capability, the Lumia allowed users to take photos first, and choose to zoom in later, cropping the picture however you wanted. And yet, it wasn’t enough to save Nokia… or even noticeably impact sales, frankly. Super slow-motion video is also likely to be talked about at this year’s MWC, with Samsung rumored to be adding that feature into the upcoming Galaxy S9. Super slow-motion is a cool feature, and will make Samsung the second OEM to launch it (Sony added that feature at last year’s MWC). And yet, Sony, with a year’s advantage, didn’t make a big impact in the U.S. market, which is a shame.
But despite the fact that smartphone cameras may have advanced as far as many consumers need, there are benefits to the ever-evolving technology. Most importantly, as visual recognition becomes more important for security, better cameras, and the underlying AI, make this a more usable service. But perhaps the real benefit is for marketing and promotional reasons, with most phones running the same OS (Android), and looking fairly similar, the camera provides a potential differentiator. That’s why many smartphone ads focus on beautiful landscape shots taken with the phone, demonstrating that the technology within can provide stunning photos for all to share.
And so, back to the upcoming Mobile World Congress, we can expect that the camera will once again be heavily featured by the OEMs. LG is expected to launch an updated version of its V30 device with an AI-based camera solution, while Samsung’s new S9 is rumored to have a slew of new camera enhancements. And these will just be the tip of the iceberg for the camera noise, which will all be received enthusiastically by the attending media. But will it make a significant impact on the consumer market in the longer term? Probably not.
Huawei is a giant among most smartphone players with an impressive presence in most parts of the world. In the European market, the handset manufacturer’s latest phones are well promoted by the carriers, both in store and through advertising; and, as a result, the OEM is enjoying consumer acceptance that other smartphone makers should be quite envious of. At Vodafone NL, for example, there are two Huawei devices (the P10 and P10 Lite) featured on the Top Ten table, which is where most consumers look first - the other devices are all Apple or Samsung. Not bad. So if there was one manufacturer poised the break the duopoly of Samsung and Apple, as most carriers would like, it is Huawei… except, of course, in the U.S.
At CES, Richard Yu, CEO of Huawei’s consumer division spoke his mind after his company was left standing at the metaphorical altar by AT&T, which backed out of selling Huawei’s Mate 10 at the very last minute. And this week the news appears to have gotten worse, with Verizon declaring that it has no plans to add Huawei’s Mate 10 - or any other Huawei device - to its portfolio in the foreseeable future. This is not good news for Huawei, obviously, and it’s not really great news for the carriers either, which are always looking for a third compelling smartphone brand in order to reduce their reliance on the Big Two smartphone companies. And matters will get worse with the advent of 5G networks, as the carriers desperately need 5G capable smartphones to make use of the new network; Huawei looked like a strong early option that is now off the table.
So why has Huawei faced so many challenges in the U.S. market, despite its popularity in Europe and other parts of the world? It appears that the Department of Justice has concerns that Chinese smartphone brands will act as a conduit for the Chinese Government, meaning that these devices could be used to spy on consumers, as well as feeding useful information about the wireless networks back to China.
Call me cynical, but I assume all devices ‘spy’ on me a little and the history of smartphones is chock full of examples… most of which are not from Chinese brands. But let’s not get bogged down in the theory of what could be done, nor why the European market, which in general takes consumer privacy far more seriously than the U.S., doesn’t seem to be concerned. Rather, let’s consider what this means for the U.S. mobile market.
As any smaller OEM will tell you, getting your device into a carrier’s portfolio is not easy, or inexpensive. And if the DoJ is truly pushing back on Chinese brands, then other manufacturers, such as ZTE and TCL (which owns the Alcatel brand), are also at risk of being removed from carrier portfolios. That’s terrible news for them, and great news for other (non-Chinese) manufacturers who may see an opportunity for their smartphones. But it’s not necessarily great news for consumers, as the Huawei smartphones are rather good Android devices, at a reasonable price point.
This brings us to the unlocked market, which accounts for roughly 13 percent of U.S smartphone ownership*. If OEMs such as Huawei are blocked from carrier retail, they need to focus their energies on alternative retailers, which will be good news for consumer electronics retailers looking for a unique device proposition that the carriers cannot offer. By throwing even more cash into marketing, and partnering with these retailers, Huawei could be exactly the catalyst that the unlocked market needs to break the carrier control of the smartphone market in the U.S. That is hardly good news for the carriers, and not what the DoJ is apparently hoping for, but it could be the best news yet for consumers looking for a broader range of smartphone choice. As the DoJ may discover, it’s hard to keep a strong product down.
*NPD Connected Intelligence, Unlocked Phone Demand Report 2.0
A few years ago a friend of mine was mugged in London. Two men waved knives at him and demanded his wallet, his smartphone... and then his other phone. This final demand threw him a little, as he only carried one phone, and it took a while (and a quick frisk) to convince the muggers that they would have to share a single smartphone. I’m sure they walked away muttering about their poor fortune as, apparently, the odds are quite high that someone wandering the streets of London will be toting a couple of devices. Indeed, the current penetration rate for mobile phones in the UK is roughly 120 percent of the population, so once you start stripping out the very young, or old, as well as those in more rural areas, the odds of a two phone score in the center of a city increase quite significantly.
If you think that’s impressive, consider the Netherlands, where smartphone penetration is roughly 140 percent of the population, according to various sources. Think about that for a minute: that means the average person carries nearly one and a half smartphones, which is why I shouldn’t have been surprised to discover that the group of Dutch people I was with last week all carried two smartphones. While the U.S. carriers focused on connecting us to secondary devices, primarily cellular-connected tablets – a strategy that worked well for a brief period of time at best – European carriers kept their main focus on the phone. That’s not to say that the tablet was not an important focus in Europe, but they continued to focus on the seemingly ridiculous idea that 100 percent penetration was just the beginning.
This is a lesson that the U.S. carriers need to reconsider. With overall penetration hovering around 100 percent (including feature-phone users) the U.S. battle ground has focused primarily on winning the churn battle, taking more from your competitor than you lose to others each quarter, as well as looking for new devices to connect. But historically, none of these other devices have had long term success.
Consider the history…
Netbooks were really the first “must-have” cellular add-on that had the carriers salivating. These underpowered quasi-laptops appealed to consumers because of the price: $50, as long as there was a two-year cellular contract. Of course, this means that the actual price of the device was ridiculously expensive over the two year period, $10+ per month for the connection, and while the devices sold quite well for a while, the lack of processing power meant that they were quickly abandoned post-purchase, leading to an ultimate boom and bust of subscribers.
Luckily the connected tablet came along just in time to maintain subscriber numbers and the carriers took a very similar approach, offering cheap tablets tied to a two year contract. And again, the consumers bought them in droves. In 2017, there were around 29 million active tablet connections for the top four carriers*. But as with Netbooks, we have entered a “bust” cycle where connections are being dropped far faster than activated.
Beyond the fairly compelling argument that many of these tablets were just not up to the task, as they were low-end devices, there is a greater truth for the carriers: many of the devices that they want to connect via cellular don't really need an always-on connection. Given the combination of Wi-Fi availability and an omnipresent smartphone that can be used for the occasional hotspot, many devices do not need their own cellular link.
Which brings us back to the European approach that has stood the test of time - the reason many Dutch consumers end up with two smartphones is because they like to differentiate between work and personal life, so many employees are presented with a business phone. While in many cases they can use these phones for personal use, they often choose not to. So perhaps the next big growth target for U.S. carriers requires us all to find a better work/life balance, or bigger pockets so we can more easily carry two smartphones.
*Source: NPD Connected Intelligence, Broadband Market Share & Forecast Report
Commoditization of Cellular Data has been a major theme discussed throughout the year as unlimited data plans have become the de facto offering in the U.S. mobile market. We have seen the same commoditization trend with voice and SMS in the past two decades, as mobile carriers first sold voice minutes and SMS in various size packages, but they were eventually thrown in for free when we started paying by the size of our cellular data bucket.
In the past year, every postpaid and prepaid carrier has jumped on the unlimited bandwagon, and even though more than half of the market is still on bucket plans, the unlimited data plan adoption keeps going up thanks to falling service prices. This is a troublesome scenario for mobile carriers, because cellular data is the main source of network monetization and offering unlimited data at discounted rates could result in continuously declining service revenues. Luckily, carriers seem to find an answer to this problem, and 2018 will show if this strategy has legs or not.
In essence, mobile carriers have taken a page out of cable operators’ playbook and are modifying their service plans based on data speeds, necessary for a no-buffer streaming service, or compression, which impacts image resolution. Every carrier now offers tiered unlimited data, where consumers opting to pay a premium enjoy benefits such as high-resolution video streaming, larger throttle limits, and smartphone tethering. AT&T (and its prepaid arm Cricket) even offers tiers based on download speeds, just like cable operators’ broadband internet pricing schemes.
With over two-thirds* of smartphone users regularly streaming video on their devices, 80+ percent* of the data traffic (cellular and Wi-Fi combined) is generated by video apps. Furthermore, we are seeing a massive uptick in demand for phones boasting large displays (nearly half of the smartphones sold in the U.S. market in 2017 had a screen size of 5.5” and larger) and as the screen size increases, streaming/viewing quality will be adversely impacted when data is compressed. With entertainment (TV and video) becoming the centerpiece of mobile push, we expect carriers to heavily market the benefits of access to high-speed or non-compressed (1080p+) resolution available on premium unlimited data plans in 2018.
*Source – NPD Connected Intelligence SmartMeter – Q3 2017
The dust is settling, the power is back on, and presumably, Las Vegas is starting to dry out. As CES comes to an end, it’s time to review a few of the more quirky highlights. So settle in and enjoy our different perspective on CES.
AI, VR and other buzzwords
I entered the vast halls of CES prepared for a barrage of clichés and buzzwords. And they were there (AI in a toothbrush anyone?), but in much smaller amounts than I was expecting. The vendors all seemed to have resisted the obvious temptation to claim that their product was founded on artificial intelligence, and secured through blockchain. And, for that, I thank them all. I know, in Vegas of all places, it must have been truly difficult to take the high road…
CES 2017 was Alexa’s event and it was clear that Google was not going to allow that to happen again. Hey Google marketing blanketed many parts of the city for the week, reminding us all that Alexa is hardly the only voice in town. Indeed, far from it: while the buzzwords were avoided this year, many OEMs were keen to claim that they too had a voice assistant worthy of room in your house. But Google announced that it sold one Google Home per second since its October launch, so between Amazon and Google the market may not have much more space for the smaller guys. Not everything went Google’s way though, as the Tuesday storm flooded out the Google tent at CES which dampened (yes, we went there) some customer enthusiasm.
Huawei stole the show when Richard Yu, CEO of Huawei’s consumer division, came to the end of his teleprompter script, but clearly had much more to say. He had probably been hoping to use the CES event to announce a new handset partnership with AT&T, but that deal was killed at the eleventh hour. The rumor mill claims the deal was killed due to “security concerns.” As Mr. Yu pointed out, the rest of the world has moved on and, frankly, Huawei seems to be killing it in Europe. The net result is that the third largest handset vendor in the world still does not have a carrier foothold in the U.S., although there is the possibility that Verizon will step in where AT&T flinched. We hope so. Otherwise, expect Huawei to keep pushing, but through the unlocked market. Ignoring Huawei may be a risky strategy for the U.S. carriers, as the U.S. unlocked market grows, the marketing weight of a major player such as Huawei could help to tip the balance of power away from the carriers. AT&T may have just started the OEM revolution.
robot uprising has begun
LG unveiled its new consumer robot during a keynote, but all did not go according to plan. CLOi quickly decided that the questions being asked of “her” were not worth answering. Perhaps it was a technical glitch, or perhaps CLOi’s AI innards decided that questions such as “am I ready on my washer cycle” and “what’s for dinner tonight” did not sit well with her self-taught feminist beliefs. She even had the demeanor down, as she refused to even look at the presenter while the questions were asked. Vive la revolution CLOi.
all robots were feisty
My favorite robot of the show didn’t do very much at all. Rather than trying to take over the world, the sleep robot, made by Somnox, is designed to help you sleep at night. The pillow-sized device “breathes” as you hold it close, helping you to focus on relaxing and taking your mind off the day full of trouble you no-doubt just left behind. And if the breathing doesn’t work on its own, the robot can stream music or political speeches… whatever gets you drowsy.
for a new body?
Psychasec was showing off its ability to upload your consciousness into a new body (a “sleeve”), because, as their tagline said, “no body lasts forever.” The theory is that death is simply an inconvenience that can be overcome. Sound far-fetched? Well, it is, and kudos to Netflix for the booth, which was to promote the new Netflix original, Altered Carbon, due out in early February. This near-future science fiction story, based on the book by Richard K. Morgan, is a perfect fit for the CES audience. Or… maybe not, as many show-goers seemed a little freaked out by the concept, not realizing it was just a movie promo. Perhaps we’re not quite ready for the concept… but we’ll watch the movie anyway. The book was exceptional and it’s about time someone took up the movie option. So kudos to Netflix for picking it up, and for the outrageous marketing stunt.