The business of selling technology products into the commercial market is changing. Cloud services are displacing on-premises hardware and software. Employees are using their personal devices at work (BYOD). And there is more focus on services and less on ownership.
You can make sense of the shifts in this market using our commercial technology market research. It’s the industry’s authoritative resource for tracking and sales-out data in the total commercial channel. Tracking data from over 100 manufacturers, commercial resellers, and distributors makes us the only source for this information. Additionally, our monthly and weekly reports, available for key CE, BTO PC, storage, networking, and software categories, provide timely technology market research information and insights – including unmatched detail down to the item level.
Tap into the only source for total sales for the commercial channel. Monthly and weekly reports deliver timely information and analysis with unmatched, item-level detail. This aggregated sales data from the world’s leading IT distributors offers a precise view of distributor sales in all key CE, IT, and software categories. It includes information from members of the Global Technology Distribution Council (GTDC), with whom we have an exclusive North American partnership.
Explore the commercial purchasing of information technology products sold through national corporate resellers and direct marketers. This detailed, monthly market research information identifies the interests of corporate buyers and helps you understand and meet market needs. Our reseller point-of-sale data includes unmatched detail down to the item level.
VAR Service Invoice
There’s a new way to see exactly what’s happening in the VAR channel. It’s the VAR Invoice Service, and it provides new insights about the products and brands purchased together in the VAR channel. The service provides monthly POS reporting of commercial technology IT hardware subcategories within networking, computing, printing, storage hardware, and more. It tracks 1,400 brands and provides detail on sales for thousands of IT hardware items.
SMB Technology Monitor
Gain access to new B2B insights on anticipated purchase intentions and spending, brand perceptions, and services attached to PCs, networking equipment, storage systems, servers, software, mobile devices, and printers. You can use this information to understand small and medium business (SMB) buying behavior and make informed business decisions related to the commercial market. This quarterly report is based on an online survey of SMB technology decision-makers
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 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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See how clients have used our solutions to solve their business challenges in our Solutions Case Study Library.
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.
Store-Level Enabled retail tracking delivers unmatched POS information to help manufacturers partner with retailers, identify growth opportunities.
What's Driving Consumer Behavior?
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.
Year-Over-Year Connected Digital Fitness Device Growth Continues with a 40 Percent Dollar Increase in the First Quarter of 2016, According to NPDPort Washington, NY, May 5, 2016 – According to global information provider, The NPD Group, the connected digital fitness device category has continued to see growth in the first quarter of 2016 (January – March) as dollar and unit sales of the devices grew 40 percent and 27 percent, respectivel According to global information provider, The NPD Group, the connected digital fitness device category has continued to see growth in the first quarter of 2016 (January – March) as dollar and unit sales of the devices grew 40 percent and 27 percent, respectively, versus Q1 2015*.
52 Percent of Millennial Smartphone Owners Use their Device for Video Calling, According to The NPD GroupPort Washington, NY, March 29, 2016 –As consumer preferences and habits for smartphone usage continue to shift, Millennials are driving the increased usage of video calling as a preferred application among smartphone users. In fact, according to The NPD Group’s Connected Intelligence Application As consumer preferences and habits for smartphone usage continue to shift, Millennials are driving the increased usage of video calling as a preferred application among smartphone users. In fact, according to The NPD Group’s Connected Intelligence Application and Convergence Report, more than half (52%) of smartphone users age 18-34 say they now use their smartphones to conduct video calls, representing an increase of 10 points year-over-year.
Smartphones and Voice Commands Vie for Control over the Rapidly Growing Smart Home Market, According to The NPD GroupHome Automation Sales Up 41 Percent Year-over-Year in 2015 Port Washington, NY, March 22, 2016 – As the desire to create intuitive home spaces continues to increase, so too do the opportunities for devices and technologies to gain share in the smart home market. According to The NPD Group Connecte As the desire to create intuitive home spaces continues to increase, so too do the opportunities for devices and technologies to gain share in the smart home market. According to The NPD Group Connected Intelligence Connected Home Automation Report, nearly two-thirds (64 percent) of smart home product owners used a smartphone to control or monitor their home automation devices. Additionally, 73 percent of smart home owners already use voice commands, with 61 percent of those consumers expressing an interest in wanting to use voice to control more products in their homes.
49 Million U.S. Internet Homes Now Own a Connected TV or Attached Content Device, According to The NPD GroupAs Streaming Video Content Surges, U.S. Connected TV Household Penetration Increases 14% Year-Over-Year Port Washington, NY, March 7, 2016 – More than half (52%) of all U.S. Internet homes have at least one TV connected to the Internet, representing an increase of six million homes over the past ye More than half (52%) of all U.S. Internet homes have at least one TV connected to the Internet, representing an increase of six million homes over the past year, according to The NPD Group Connected Intelligence Connected Home Entertainment Report.
U.S. B2B Commercial Channel Grows for Fourth Consecutive Year, Driven by Sales of PCs and ComponentsB2B Commercial Channel Helps to Ease Market Fragmentation Challenges of SMB Market Port Washington, NY, February 1, 2016. – For the fourth consecutive year, U.S. business-to-business (B2B) commercial channel revenue increased. Sales in 2015 grew 2.1 percent to more than $72 billion, according to Th For the fourth consecutive year, U.S. business-to-business (B2B) commercial channel revenue increased. Sales in 2015 grew 2.1 percent to more than $72 billion, according to The NPD Group’s Distributor and Reseller Tracking Services. From 2012 to 2015, the U.S. B2B commercial channel market increased at a 4.4% compound annual growth rate, adding $8.7 billion in revenue over that period.
In this edition of Tech Talks, our Market Intelligence team focuses on Bluetooth headphones. With Apple’s next iPhone announcement approaching, rumors are swirling around the future of the 3.5mm headphone jack.
Where is consumers’ affinity strong? Where are your most promising opportunities?
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.
E-commerce is growing in the fashion and beauty world. Last year, 23 percent of footwear sales, 20 percent of accessory sales, 16 percent of apparel sales, and 11 percent of U.S. beauty sales took place online. And these rates have continued on an upward trajectory.
With that said, online retailers still have a long way to go in converting brick-and-mortar consumers to full-time Web shoppers.
To mitigate the risk of online shopping and win over naysayers, a handful of companies have developed advanced technologies that make shopping online more informative and lifelike. Armed with virtual mirrors, 3D body scanners, haptic devices, and 3D headsets, these retail visionaries are doing a pretty remarkable job of emulating the in-person experience so that shoppers can virtually see, feel, and try on products.
But who needs all those fancy bells and whistles when you’ve got people?
Some companies have passed up virtual avatars and simulators in favor of social networking solutions that work off the collective power of many users.
Enter social shopping.
You wouldn’t buy a skirt without asking your friends . . .
Online community-based e-commerce sites have taken the concept of asking a friend where she got that great skirt to the Web. Now you can use social media channels like Pinterest and Instagram to follow the activity of brands, designers, and friends whose style you identify with. By following only the profiles you care about, you can curate your own personalized feed and easily click to purchase.
This powered-by-people concept applies to shopping on most retailer sites these days. Whether on Amazon, Zappos, Anthropologie, or any modern retail site, you can use the product comments section to gauge how an item might fit you. See some posts by men who also wear a size 9 complaining that a dress shoe model runs large, and you might opt for a half size down. See a flurry of posts about a sweater pilling after a few wears, and you’ll probably pass. And even if you don’t personally know any of these anonymous posters scattered around the globe, there’s something reassuring about seeing past customers rave about an expensive dress. I guess you just have to have it, then—public opinion supports the decision.
If the shoe fits
Customer comments and trend setters are cool and all, but it still takes time to sift through shoppers’ comments. And it can be a real downer to follow a fashion icon whose body type is so unlike yours that you can’t even begin to imagine pulling off the romper she professionally shot on her Instagram feed. But take the social network concept one step further by adding big data—and now you’re talking!
Tech startup Fitbay connects shoppers of similar body shapes to help share fitted styles, marketed as “a fun way to see what real people like you are wearing.” When you create an account, you enter your general body measurements (height, weight, long vs. short torso, etc.) and the website matches you with real-life "body doubles" who share your figure characteristics. You can follow their posted photos and comments on how specific items fit their bodies to discover the stores, brands, and clothes that are right for your body. So not only can you track the styles you like—but the styles that work for your body doubles.
In a similar vein, retail software company True Fit aims to help consumers buy more and return less by showing them how clothes and shoes viewed on screen will fit in real life. The technology firm collects brand, consumer, and retailer data on apparel and footwear. Users share favorite styles, rate previous purchases, and update their profiles; this activity generates billions of data points on how brands and styles fit shoppers of different body types. True Fit then makes fit and size recommendations for each individual shopper. The company explains that, “the more you shop using True Fit, the smarter it gets at fitting you.” With a network of 2,000+ retail partners like Kate Spade, Macy’s, Uniqlo, and Footlocker, you can record how one pair of shoes fits you and immediately get recommendations of other brand models that promise to fit like a glove.
Power to the people
People-powered social networks are making online shopping better and easier for consumers. It’s much more efficient to browse apparel styles and brands that work for your body type rather than sifting through high-fashion glamor shots of models donning threads that only a fraction of the population can actually pull off.
Social shopping networks help retailers and brands, too, by providing data that enables more informed merchandising and marketing decisions. And they offer an advantage over 3D scanners and virtual dressing rooms by mitigating the barrier to entry for retail companies. (It’s easier to opt into an app than it is to install body scanners at storefront locations or develop content for 3D goggles.)
Interested in how other innovators are changing the retail landscape with back-to-the-future-like technologies?
Check out this in-depth review of how smart mirrors, VR headsets and other technology are altering retail.
How smart mirrors, VR headsets, and other tech will alter retail
Pretty soon the lines between physical and digital reality will be blurred.
You’ll be able to sit in your living room, put on some 3D goggles, and shop for a pair of jeans in a virtual store — that does not physically exist.
Or, if that’s too Matrix for your style, you can use your mobile device to see how a pair of jeans fits your virtual “avatar” and even feel the texture of the jeans through the vibrations of your phone.
What if you have some time to (or better yet, what if you want to) stop by an actual store in person? Then you’ll simply peruse a rack of jeans as information on pricing, deals, and customer reviews appears before your eyes on an optical head-mounted display.
The fashion and beauty landscape is evolving as retailers of all types look for creative ways to offer consumers more efficient, reliable, personalized, and enjoyable shopping experiences. What do these Back-to-the-Future-like solutions mean for the retail industry?
Which technologies truly add value to the store experience, whether online or offline?
Which retailers get it?
Digital gets physical
E-commerce boasts a two-decade tenure of advancing the shopping experience by enabling consumers to browse, research, and compare products from anywhere, any time.
And consumers are into it.
The proof is in the data. Both the number of online buying visits and dollar sales have climbed steadily since 2012. In the 12 months ending in March 2015, U.S. consumers made nearly 5.2 billion online buying visits. They collectively spent $358 billion, shown by The NPD Group’s Shopping Activity Services. And this trend is poised to continue on the same track.
U.S. Brick & Mortar visits are on decline while online visits are on rise
The total U.S. market is up 2% for the 12 months ending March 2015, driven by double digit increases in online sales.
For softline products specifically, penetration in the U.S. online market has been on a steady ascent since 2011. Last year, 23 percent of footwear sales, 20 percent of accessory sales, 16 percent of apparel sales, and 11 percent of beauty sales took place online.
Online retailing, however, is not without its limitations.
E-commerce penetration rates have generally been lower for softlines than for hardlines. And this isn’t surprising, since beauty and fashion are emotive.
In this space reaching a purchase decision is not only about how something looks on a screen, but rather, how it looks on each of our unique bodies, and how it makes us feel.
Sure, you can browse product photos and study customer reviews to reach an informed decision — but what about the tangible components? How can we know in advance if a pair of pants will fit well around the waist, but gather awkwardly around the hips? Or if a dress that is knee length on a six-foot model will fall well below the knees on our shorter frames? Or if for some inexplicable reason something just doesn’t work?
Enter augmented reality — and a little bit of virtual reality.
Augmented reality links the real and virtual, enhancing our world view by providing a different perspective with the help of digital technology, usually some type of screen or lens. It is partly immersive, allowing users to see through or around it. (Think Google Glass.)
Virtual reality technologies take it one step further — creating a completely immersive experience through computer generation, transporting users to “closed” virtual universes. (Think 3D goggles that shut out the physical world around you.)
Magic mirror on the wall
On the augmented reality front, footwear and accessory retailers Warby Parker, Converse, and the like have rolled out digital tools that allow users to virtually try on merchandise. In Warby Parker’s “Virtual Try-On” tool, it works like this: you select a pair of glasses from the site, upload your headshot, and the tool overlays an image of the frames over your photo, providing a general idea of how the glasses might look on your real face.
Likewise, Converse launched its Converse Sampler iPhone App a few years ago. You scroll through photos of sneakers within the app, virtually position them over your feet with your phone camera, assess how they look, and order a pair directly through the app.
Makeup manufacturers have joined the virtual bandwagon, too. With YOY U.S. sales growth of $262 million in 2014, makeup is enjoying healthy gains, and brands are rolling out solutions to test makeup away from the store. Avon, Mary Kay, and L’Oréal USA, for example, provide virtual makeover tools on their websites, allowing visitors to try out different face, eye, lip, and nail products virtually. While Avon and Mary Kay use simple photo upload tools to layer on makeup to headshots, L’Oréal USA’s Makeup Genius smartphone app creates a real-time mirror experience: you scan your face with a smartphone camera and try out “looks” while the camera is live, providing immediate feedback as you tilt and turn your face.
NPD Senior Makeup Industry Analyst Kissura Mondesir says we’re in the “age of the selfie”— with photo uploads, effects and filters all parts of everyday life. These “try before you buy” virtual makeup tools are a natural extension of our creative expression, and they are sure to be a big hit with Millennials.
These tools provide a better alternative to simply “winging it” online, and they’re certainly helpful (and not to mention — fun!) in narrowing down beauty and fashion items that don’t work for you. But let’s be honest. Do they really provide a revolutionary perspective that you can’t get from a little imagination? And they unfortunately cannot assess how an item fits or feels on you. Many online retailers like Amazon and Zappos have mitigated this risk with liberal return policies that make returns or exchanges free — but this isn’t always a price performer from the retailer’s perspective.
Karen Grant, NPD’s global beauty industry analyst, knows the space better than anyone else. She says the online space is the most dynamic in terms of prestige beauty product growth. But she prefaces this by saying that beauty is still a category where consumers thrive on touching and experimenting, so there remains a need for an in-store element and/or advisor.
What’s the best alternative to trying on clothes in person?
Trying them on your virtual avatar.
Using virtual body doubles for online shopping could one day become a mainstream reality, thanks to 3D scanners that create highly accurate models of the human body. These expensive scanners can exist in offline stores in the form of heavy-duty, advanced radio wave scanners, or
laser-based devices like Microsoft Kinect. Alternatively, consumers could enjoy direct scanner access via mobile device cameras or webcams, though these would produce less precise models.
Bloomingdales has experimented with Me-Ality technology, using body imaging machines to match consumers with their appropriate off-the-rack sizes. Men’s fashion brand Alton Lane takes it one step further by conducting in-person body scans at its showrooms and using these precise measurements to design and produce bespoke suits for its clientele. Armed with their virtual avatars, customers can then make future purchases on Alton Lane’s website and feel confident about fit.
Software company Styku is developing a platform that creates 3D models of both garments and shoppers, recommends sizing, and allows shoppers to see how clothing items would likely look on them (via their virtual avatars).
If retailers are willing to invest in and roll out this technology, body scanners will disrupt the apparel industry and open up the online market to risk-averse consumers otherwise skeptical of e-commerce.
Ya feel me?
In the long term, expect to see a cost-effective solution to e-commerce malaise in the form of haptic devices — technology that allows us to feel the texture of an online product through transmitted touch. Haptic devices recreate the sense of touch through tactile feedback by applying forces and vibrations to user devices. Imagine being able to swipe your finger across a tablet screen to feel smooth silk or coarse wool.
Many technology firms are developing systems they hope to one day roll out for commercial retail use—but in order to go mainstream, haptics need to spark device manufacturers’ interest. As of now they’ve garnered minimal interest due to a lack of compelling use cases, so consumers should not expect to see them on the market any time soon.
A rose by any other name . . .
We’ve discussed virtual sight, fi t, and feel—but what about virtual smell? Beauty and cosmetics brands are getting in on the virtual reality game, but are fragrance retailers also innovating in this space?
Tech companies have developed cell phone plugins that allow users to text the smells of “bacon” or “flowers” to friends for fun. If consumers are game for this, why wouldn’t they be interested in a similar application for fine fragrances? Imagine being able to shop online for perfume without a trip to the store, by sampling different trademarked scents through your mobile device? Or better yet, forgo your own perfume application, and just carry your phone around with you and let it emit the fragrance!
NPD Fragrance Industry Analyst Brenna Phelan warns that while consumers might be apt to embrace this virtual fragrance concept, the industry is not. Luxury fragrance brands succeed in part because of the high-quality ingredients and artistry of the perfumers — qualities that may not translate well through virtual smelling. The absence of this category on the virtual front is worth noting.
Beam me up, Scotty
As long as you’re trying clothes on your virtual avatar, you might as well extend the virtual reality and let your body double make a quick spin at the virtual store, too.
One firm at the forefront of developments in the virtual reality space is Oculus VR, acquired by Facebook for $2 billion in March 2014. The tech company is developing the Oculus Rift, a head-mounted 3D display for virtual reality. Though its primary application is for entertainment, film, and gaming, it also has relevance in retail. This technology would allow shoppers to benefit from any number of the fit technologies described above — except they would exist in a completely “closed” virtual world, through a 3D simulated environment. You could put on a headset in the comfort of your home and immerse yourself in an alternative shopping reality, browse and feel products, see how they look on your avatar, and make a direct purchase.
Though flashy and fun, this device won’t have real potential in the retail world until it is fully developed, and until software companies create the virtual worlds to live within it.
Physical gets digital
So just as e-commerce sites can use new technologies to become more human, traditional brick-and-mortar stores are trying to become more digital.
Retailers like Bloomingdales, Topshop, and Burberry have deployed augmented reality technology in their physical stores to allow shoppers to see how products look — without physically trying anything on. Bloomingdales and Topshop experimented with Microsoft Kinect to create 3D virtual dressing rooms; with the help of a motion-sensor, shoppers could wave their hands to scroll through different apparel items as the technology overlaid 3D clothing images over their real-time “reflections.”
On the beauty front, Burberry created a Digital Runway Nail Bar in one of its London stores, where customers can virtually test out new nail polish colors. By placing a nail polish bottle on the RFID-enabled platform, customers see the polish appear on the fingers of a virtual hand on a screen; they can then select a skin tone similar to their own to compare how different nail shades might look on their own fingers.
Panasonic recently debuted a “smart mirror” at the 2015 Consumer Electronics Show with the hopes of rolling it out to department stores. The mirror has an embedded camera that can scan and project an image of your face on top of your reflection, and enables you to try out different looks by applying digital makeup — and even facial hair!
Sounds similar to L’Oréal’s virtual makeover tool — except Panasonic’s mirror analyzes your face using high definition cameras, points out facial flaws (lines, age spots, etc.), and tells you which products can fix them.
The real deal?
Though certainly engaging and fun, these digital dressing rooms and mirrors don’t seem to provide greater insight than does holding up a real shirt against your real body, or applying actual makeup to your face. Though these technologies might be additive online, offline they seem a bit duplicative. And what’s more, they can’t really offer much insight into how something fits or feels. So while you may save time in the short term, you could wind up spending more time returning items later.
It might just be worth it to endure the dressing room queue.
And as for a smart mirror that points out your flaws? Would you want a computer to point out the bags under your eyes and project them onto a public screen?
Retailers from Walmart to Target are experimenting with 3D computer simulations and other technologies to enhance the real-world shopping experience. The ones who seem to get it are those who have found a way to extend the perks of online shopping to the physical store. Here are some examples of what’s working:
- Sephora and Pantone teamed up to create Color IQ, an in-store digital beauty device that scans the surface of your skin, assigns it a “Color IQ”, and then matches you with the right foundation color from over 1,500 product options.
- The software company Zugara has developed a technology that allows shoppers to try on one apparel item and digitally view what it looks like in different colors and styles.
- American Apparel rolled out an application that lets patrons scan items via mobile device to get more information on products, see floor items in different colors, and read reviews by other customers.
- Israeli mobile app Zikit pushes mobile coupons and offers from retailers to shoppers who walk into stores, providing retailers with behavioral insights on individual shoppers. This eventually allows stores to tailor personalized suggestions to these customers after repeated app use.
If the above technologies one day go mainstream, retailers could learn to know us and our shopping preferences, and never again will we become lost in a store!
Two worlds at the same time
Some brands are putting shoppers into a completely immersive digital world, turning to virtual reality for branding endeavors.
Topshop, for example, gave its fans a seemingly front-row view of a fashion show during London Fashion Week: store visitors were virtually transported to the catwalk with a pair of goggles (while stationary).
North Face employed a similar virtual initiative to elevate its in-store experience and brand storytelling. The outdoor product company transported in-store customers to Yosemite National Park and Moab Desert via Google Cardboard in partnership with technology firm Jaunt. In between shopping at flagship store locations, customers could virtually rock climb and trek the landscapes with famous athletes.
The future is now
So here’s the thing: these new technologies offer competitive advantages of one type or another to everyone. In-store shopping could become more fun. Online shopping could become more real. Consumers who can’t find clothes that fit will find clothes that fit. Even the most tactile and sensory of shopping experiences could move online, and the most dramatic and dangerous of real-world experiences could be enjoyed in the safety of a virtual environment.
Brands like North Face and Topshop, Sephora and American Apparel, Panasonic, Bloomingdales, Burberry, and more are all investing in these new technologies because they know you don’t need a VR headset to see the future. You just have to face it.
There may not be a word in the English language that carries more subtext, more connotative and emotional weight, than “home.”
We fill the word with significance over the course of our lives. We have a “hometown” that defines us. We “head home for the holidays.” We practice “home improvement,” we work to have a “happy home” life. When we are lost or tired or afraid, every instinct in us yearns to “go home,” or to “phone home” or just to “stay home.”
Another word that is filled with meaning is “connect.” It wasn’t always so. “Connect” has taken on new significance in the modern world. No one seems to fall in love at first sight anymore. But we are filled with joy when we feel “an instant connection.” We describe our friendships as “sharing a connection.” We don’t introduce ourselves anymore. We reach out on social media and ask to “connect” with people.
So what happens when we combine those two words into a phrase -- “connected home” -- that describes an emerging industry of intelligent devices that live with us?
What do we seek in a “connected home”? What are our expectations? What are the emotional states, the human needs that such a phrase speaks to?
Filing for divorce
It seems that what people want in a “connected home” -- and what the industry is selling -- is an intuitive bond between people and the devices in their homes.
And it also seems that the “connected home” is falling short of creating that bond.
Kara Pernice is the managing director of the Nielsen Norman Group, arguably the most influential organization in the world of design and user experience.
In February Pernice published an article about how she had bought a Nest thermostat and experienced exactly such a bond. But over time her “pure love (for the device) morphed into abhorrence.”
Pernice wrote that “things went bad” when the semi-intelligent device let her down “emotionally.”
It’s a fascinating article. And one worth reading in its entirety.
The core of her argument is that rather than answering an emotional need, the device eventually created emotional distress. At issue was that it simply didn’t respond the way a member of a home would.
For example: Pernice lives in Boston. And that city has suffered from an extraordinarily harsh winter this year. The result of being subjected to such conditions is something that all humans understand, but that machines cannot: “... even on days when the thermometer says it’s not that cold, it looks and feels cold,” Pernice wrote. But the programmable thermostat doesn’t respond to subjective states. And turning up the heat with the programmable device is more complex than simple cranking up the heat on a traditional thermostat.
Eventually Pernice decided to get rid of her device. And it’s instructive that the word she used to describe this parting was “divorcing” -- a word generally used to describe the end of a marriage bond.
It’s easy to mock Pernice. A programmable thermostat is, after all, just a machine. It’s unreasonable to expect it be more.
But that’s the point. The promise of the “connected home” is that our lives will be filled with things that are more than machines.
There may not be anyone on earth who thinks more about the future of the “connected home” than Eddie Hold, vice president of The NPD Group’s Connected Intelligence practice. As such, Hold is central to NPD’s new home automation point- of-sale (POS) data and advisory service. That service comprises consumer panel-based reporting, qualitative reports, U.S. point-of-sale data, and unique analysis of the automated home market. Hold read Pernice’s article, and he thinks her reactions are worth noting.
“It’s an interesting concern as we move more into the automated home: these things are supposed to make life easier for us, but it’s very difficult to predict just what an individual may believe is ‘easier’” he said.
More importantly, when consumers feel unable to control a machine, it triggers a visceral contempt and a deep-seated fear. Anyone who has ever seen a Terminator movie knows that.
“It’s the start of machines taking over the world,” Hold joked. “We think they are working for us, but somewhere along the way, they decide they know what is better.”
This sense that either we control our machines completely or risk annihilation is perhaps the great fear of our era. Is there anyone who doesn’t get just a wee bit nervous when the elevator jolts to a stop and folks start making those “open the Pod bay door, Hal” jokes? Is anyone perfectly comfortable with drone war? with driverless trains?
When consumers grew outraged that their voice-activated televisions were actually listening to what people said in their homes, it felt both funny and true. Of course the machines listen! They’re voice-activated!
Interestingly, we have this level of concern even though we are still very, very far away from having machines that are smart enough to hurt us.
There are now more than a half-billion Internet-connected devices in U.S. homes, according to data from The NPD Group. But the overwhelming majority of those devices are PCs, tablets, smartphones, gaming consoles and the like. The technologies in our homes today, although they may evoke fears and inspire sci-fi movies, are not true Artificial Intelligence. They are just machines … albeit with some impressive capabilities. They are based on brute force computing power and sensors. They’re not intelligent. They’re neither sentient nor sapient.
They are machines. And they do not feel the cold. Nor are they capable, yet, of knowing that we feel the cold but wish not to.
And therein is the challenge of building the “connected home.”
Consumers want devices that bond with them on an emotional level. We want the machine to know how we feel and how we wish to feel.
We want, for example, that should we wake one day when we are old and not feel particularly well, that our fitness trackers and body sensors will scan our medical records, review what we ate the night before, and then speak to us through an interface. “Are you OK? Should we call your children? Do you want to go to the doctor? Or do you want to stay here, at home?”
Until then, until we have a connected home that understands the significance of words like “connected” and “home,” we will always be disappointed by the machines in our life.
And perhaps it’s just as well. Because someday soon it’s likely we will have machines with just such capability.
And then we will have to face the fear that a recalcitrant semi-intelligent thermostat only hints at: What will we do if the machines in our homes come to know how we feel, but don’t care?
Insights and Opinions from our Analysts and Experts
Although it is often best to take a skeptical view of the likely success of nascent technologies, virtual reality and augmented reality (VR/AR) are the exception to the rule. Government, military and entertainment verticals have been trying to harness the potential of VR/AR for years. Today the convergence of technology and demand are finally coming together to create a market for mainstream commercial and consumer adoption. Let’s look at where we see applications in the business-to-business market today and what we think that will look like in the future from a vertical market perspective.
Commercial applications, while not as widely talked about as consumer ones, are working to make themselves known. Currently, flight and military simulation are key applications but, undoubtedly, more are on the way.
In healthcare, we are seeing firms leveraging virtual reality to help patients deal with phobias such as fear of flying, claustrophobia and anticipatory anxiety via exposure-based cognitive-behavioral therapy. Another area where we are already seeing tremendous interest is in training simulations for situations that could arise in the ER, operating room or code blue emergencies.
For real-estate, VR is a natural opportunity (just like drones) to enhance showing commercial and consumer properties. For example, sites such as Youvisit.com and Sotheby’s offer 360-degree view or VR tour options. In the future, we believe that not only will you be able to view the property in VR, but you’ll have the option to adjust what season or time of day you’re in when inspecting room-by-room to see how the light in the house or property changes (a key decision when buying a property). VR can easily add interactive neighborhood statistics and augment the home tour with a Google Earth-like experience to allow the buyer to see the entire neighborhood, not just the home.
In hospitality and tourism, similar to the real-estate industry, firms are starting to leverage VR to show properties via virtual walk-throughs. For example, if you’re planning a soiree such as a wedding or corporate event, this technology could help to accelerate the process. Vacation planning would be easier too, allowing you to explore the scene ahead of time to make the most of your trip or venture to spots that are frequently missed.
Publishing may not be as advanced as other verticals, but a little vision could open the door for new products and services. YouTube, showed the potential of sharing videos and how-to’s on repair issues, creating a whole new category of publishing. VR can take that a step further by delivering a virtual reality repair manual for your car that could not only show you where to locate the problem, but also overlays the proper tools coupled with where to buy any needed parts. VR could also have applications for students studying subjects such as physics, science and history, allowing the student to see cause and effect or walk through a historical site in real-time – a virtual reality textbook.
VR/AR has the potential to reinvent the processes that are at the core of many of today’s key B2B verticals. While many of the examples above are consumer oriented in usage, the experience is powered by commercial applications coupled with the underlying hardware infrastructure. As more industries become interested in VR/AR strategies, support will be delivered through a channel partner that is well versed in the underlying challenges of supporting VR/AR (e.g., storage, networking, infrastructure and application software, etc.). The potential for VR/AR to remake many of today’s vertical markets is immense and that reinvention doesn’t have to leave the channel outside the opportunity. As the trend gains ground, we expect the channel to leverage its vertical and technological expertise and help unlock the potential opportunities for VR/AR.
Interested in reading about the consumer applications of VR/AR technology?
To read about today’s hottest tech categories and the opportunities for selling to consumers vs. B2B markets, check out this post by Stephen Baker, The Business of Consumer Tech is Increasingly… Business
Last week I read an excellent post from our own Industry Analyst, Steve Baker, talking about the Computing market south of the border. He spoke of a changing Computing landscape, the decline of the Tablet market and how what we view as a Computing device is much different than many years ago. I couldn’t agree with him more as the Canadian market is experiencing a similar trend however as I read through his post I couldn’t help but compare some of the US trends to our own business and making note of some of the key differences.
Yes through the first four months of 2016 the combined Tablet and Notebook market is showing similar volume decline, around 16%, and just like the US market it is the Slate Tablet that is driving the majority of this decline. Traditional Notebooks, like in the US, are faring better with unit volume down 7% while at the same time generating more revenue this year than the previous year. After comparing those initial market comments I thought Canada and the US are following the same path however after reading further it became apparent that although at the highest level the markets seemed similar there are some key differences that make Canada distinct.
Steve talked about the sub $300 market in the US growing, now representing almost 40% of traditional Notebook sales, with low-cost Windows and Chromebook devices showing increase presence in the market. Here in Canada this is not the case as we are dealing with a market where the low-end market has diminished significantly in importance. Chromebooks within Canadian retail is a very small portion of the market overall, securing less than 2% of sales, while in general the “value” market represents less than 15% of Canadian sales and is in steep decline. So far in 2016 we see not only this “value” market in decline but expanding that view to Notebooks priced at less than $600 and we continue to see both unit and revenue declines in these lower priced markets. We know that higher prices being driven by a less than favorable exchange rate is impacting what consumers are being asked to spend however throughout the years I have always seen a Canadian market less dependent on lower price segments.
Similar to the US, here in Canada the Premium price market is showing tremendous growth, including the 2-in-1 market. While in the US there is mention of high-end PC’s beginning at the $700 level here in Canada at $700 we are still thinking about mid-priced devices. Our high-end or Premium market can be considered $1,000 plus for a device. Within the Notebook market this Premium market represents 40% of the volume and close to 60% of the revenue. Which means we are asking Canadian consumers to shell out more of their hard earned dollars to purchase a premium priced device. So far Canadians seem to have little issue opening up their wallets as this Premium market shows no sign of slowing down as they continue to purchase not only traditional Notebooks but also 2-in-1 devices at these high price levels.
So while on the surface it seems as if both regions are following the same path, as we look further into the Canadian market we discover some very unique nuances that can change how we market and sell our devices. In this example the price difference is evident across borders – furthermore the competitive brand set and those who are leading or following is different as well.
The news today is full of doom and gloom about the future of the PC. Undoubtedly, there are plenty of challenges ahead for the category, but there is also plenty of room for optimism. While we celebrate so many things in tech that have been reimagined or disrupted we have given short shrift to the reinvention of the PC; in fact, we have given little notice to it at all. The numbers tell a great story of redemption and reinvention, but like all great tales that have to do with data, it is all in how you organize and interpret the data.
The consumer PC market isn’t dead. It looks a little different than it did in 2007, but the world looks different, too. While the business was slow to adjust, it’s now fair to say that it has adjusted, at least in the U.S. consumer market, which is where we focus. Using a modern, updated definition of a PC (and calling it a large screen computing device instead of a PC), the numbers don’t look like what some have come to expect.
For the first four months of 2016, unit volume of computing devices (tablets and notebooks) in U.S. retail fell 11 percent from the prior year. A weak showing for sure, but one tempered by the fact that the decline came solely from slate form factor tablets. The tablet market dropped by more than 30 percent as consumers either decided they didn’t need a new device or, when in the market for something, chose to step-up to the new hybrid 2inOne market. That decline represented a drop of over 1.2 million units in sales in just a four month period.
Traditional notebook PCs fared slightly better during this period, but still struggled as sales volumes fell by 7 percent versus the prior year. In the first four months of 2016, clamshell notebooks actually outsold plain vanilla slate tablets by nearly 1 million units. Notebook sales growth came from two segments - both very interesting for their representation of what the new reality of personal mobile computing has become. The leader in the segment was the entry-level notebook PC. Basic Chromebooks and low-cost Windows notebooks have taken the market by storm over the last couple of years. Sales for notebooks under $300 jumped 12 percent and now represent almost 40 percent of the traditional PC notebook market. The other growth area in traditional computing is high-end PCs. Sales for Windows notebooks above $700 grew by 10 percent during the first four months over the same period in 2015 (and exceeded the growth in Mac OS based notebooks); and at the end of the period they accounted for 18 percent of all high-end notebook sales - a new high for Windows.
At least some of the improvement in Windows can be attributed to the halo effect of the star segment in the personal mobile computing, which is the hybrid 2inOne. Sales in this segment, which includes products like the Yoga, Microsoft’s Surface products, and the iPad Pro, soared by 76 percent over the previous year and represented almost 20 percent of all mobile computing devices. This is the new face of personal computing: hybrid devices that are part tablet and part productivity tool. While the iPad Pro has been a runaway success, accounting for 18 percent of sales for the first four months of the year, it should be noted that the remainder of the market grew by more than 40 percent. That other segment was led by Microsoft’s Surface products, although they accounted for just 10 percent of hybrid sales with the remaining 70 percent made up of a mixture of traditional PC OEMs that now have an entree into a more compatible tablet like space that sits adjacent to the PC, and new low-cost providers like Nextbook.
Far from collapsing, a re-examination of the mobile computing market shows that while there are challenges, as there are for all consumer electronics devices in the highly-saturated U.S. CE marketplace, the mobile computing industry has successfully reinvented itself, propelled by a mixture of premium and entry-level traditional products, as well as a growing interest in the hybrid 2inOne space.
In the past, consumers had pretty simple requirements for buying headphones – the sound needed to be good, but not great. We dealt with wires, clunky designs and foam covered ear cups as we listened to music at home or on the go. Today’s buying criteria are much different. Shoppers place a larger emphasis on sound quality, mobility and of course design. Headphones have become more specialized, aligned with different listening occasions like travel, gym and office use. In fact, many consumers own multiple pairs- 2.1 on average, according to NPD’s Headphone Ownership and Application Study. Features like Bluetooth, in-line mics, volume controls and moisture resistant materials have come to the forefront, adding convenience as well as a new element to the user experience. All of these factors have contributed to continued growth in the headphone market, which, according to The NPD Group’s Retail Tracking Service, grew 7 percent (units) in the 12 months ending in February.
But just as new features are making headphone use more convenient, a new crop of products are looking to add another dimension to personal listening. Enter the hearable. While not a great term in my opinion (it doesn’t really describe anything) hearables, similar to wearables, is technology for your ears. Music listening is a component of the experience, but not the entirety of it. The idea revolves around adding features to personal listening devices like headphones that can change what’s being heard, provide audible data or feedback of some sort, or result in a biological response from the user.
Don’t we just want headphones that will reliably play What Does the Fox Say?when we queue up the song on Spotify? Sure we do. But just as sensors, apps and constant internet connectivity have transformed the way we use mobile phones, the same could occur in audio listening devices. One of the best examples of hearables is Doppler Labs’ ‘Here’ wireless ear buds. Described as an active listening system, Here’s ear buds have microphones built-in allowing the wearer to alter the sound of their surroundings. A companion smartphone app offers settings that control what is heard through the ear buds, giving the user the ability to tune out a crying baby on a cross-country flight or turn up the low talker at dinner. Here doesn’t currently play music stored on a smartphone, but it can alter how live music is heard, allowing for control of elements like bass, reverb and flange. To test Here I recently used a preset in the app to make the acoustics of live music in a concert hall sound like that of Carnegie Hall.
Here’s main use case is unique among the early field of hearable devices, but other products are looking to use their positioning on and around the ears to add unique features as well. Sony’s Smart B Trainer headphones add a personal trainer to workouts providing real-time audible feedback and encouragement in addition to tracking runs and selecting a playlist based on the user’s active heart rate. The Bragi Dash, like Here, is a wireless ear bud that tracks and provides feedback on workouts in addition to playing music via a 4GB hard drive built-in to the earphones. And rumors continue to swirl around new wireless headphone products that will streamline access to popular personal assistant apps like Google Now and Siri, aiming to make it easier to execute web queries and other commands on-the-go without pulling out a phone.
Aside from new offerings, companies have also begun studying the biological response to audio stimuli through technology. Last fall, Skullcandy announced theHuman Potential Lab, an initiative aimed at understanding how audio input impacts the body’s physiology and psychology. An effort like this has obvious applications for athletes, but could also benefit the everyday headphone user. For instance, NPD’s research shows a third of owners wear their headphones at the office and 41 percent listen to headphones while traveling. Can a better understanding of how the body responds to different types of audio make an office worker more productive or a skittish flier calmer on a plane?
New features and technologies are changing the way consumers use headphones, providing growth to this mature product category. Buyers are still looking for great sound and sleek designs, but developments in the hearables space have helped demonstrate that headphones are capable of even more. New sensors, Bluetooth and Wi-Fi connectivity, and companion smartphone apps are helping to create a more versatile future for the category- one that will become even more important as other personal technology products like drones and virtual reality demonstrate the need for unique audio experiences. The term hearables may not ultimately endure, but it’s clear headphones are quickly becoming a launching pad for innovation.
Two summers ago, my daughter Eleanor and I had a spirited back and forth about her favorite show, Peppa Pig. Basically, she wanted to watch the show through the Nick Jr mobile app, but our family iPad was already being used and our other devices didn’t have any power. I suggested we try and find it on the living room TV instead. Surprisingly, Eleanor agreed, walked over to our 55-inch TV and swiped her finger on the screen just as if she were unlocking an iPhone, thinking that would turn it on. Realizing what she had done, her sheepish grin said it all “Wait, how do you turn this thing on?”
Since this happened, we’ve cut the cord, coming to the realization that most of what we watch is from an online source and the programming we do watch on broadcast can typically be accessed online one way or another. But the devices we use to watch video also significantly impacted the decision. Like many families, we own several decommissioned iPhones, which have found new lives as video players, even becoming the preferred screen devices for my kids. According to NPD/Connected Intelligence’s Application & Convergence Report, TVs remain widely used but mobile devices figure prominently into the viewing equation among younger consumers. In fact, smartphone users 34 and under over-index for using smartphones to watch online video (31 percent compared to 20 percent overall) and tablets (41 percent compared to 30 percent).
The fact that younger viewers are more likely to turn to mobile devices to watch video is innocuous enough, but does it point to any challenges down the road for sales of TVs, Blu-ray players, or even soundbars? My cord cutting experience has taught me TV viewing habits are engrained in our psyches (I’m still adjusting to the new cord cutting era at my house) and by that reasoning, my kids are likely imprinting their habits on smartphones and tablets more so than the television, since they spend a majority of their viewing time on those devices. This is probably happening naturally in some homes that have cable but is even more pronounced in non-cable households like mine.
A few trends in hardware sales and usage may be pointing to a shift for young viewers. Even though tablet sales declined in 2015, NPD’s Consumer Tracking Service reports more tablets are being purchased for kids and teens – in both absolute terms and in unit share- which has increased from 13 percent in 2012 to 19 percent in 2015. Conversely, unit sales of smaller screen TVs (under 44 inches) intended for those under 18 have declined 50 percent since 2012 and now make up just 5 percent of all sales. And NPD’s recent Kids Share of Time and Wallet study, a national survey of moms about their children’s’ activities showed that while a majority (75 percent) report their kids 14 and under still watch traditional TV, 47 percent of kids also watch TV shows, movies, and videos on a mobile device during a typical week. Further, nearly a third added their children are spending more time watching video content on devices this year compared to last.
Obviously, these data points alone don’t say definitively that young people are turning away from TV in a manner that will impact sales. However, the data does reflect a preference for small, personal screen devices for video consumption. New generations of consumers are important to any industry but are particularly vital to technology since they are on the cusp of entering life stages like homeownership and parenthood where their need for new technology products is heightened. Today’s Millennial and younger generations are entering a favorable technology market where many products including big-screen TVs are more affordable than they’ve ever been. The question isn’t if they will ever buy a TV, because they probably will. Rather, the issue is when will they decide to buy one, how much will they pay, and how quickly will they buy another – all things that a heavy reliance on mobile devices could potentially disrupt. Bigger screens still provide a better viewing experience, but in Eleanor’s case, complete control over what, when, and where to watch is the biggest draw to watching video on an iPhone. And as the saying goes, old habits are hard to break.
2015 has been another banner year for the audio market. While sales of stereo headphones and soundbars have grown 18 percent and 13 percent, respectively, according to The NPD Group’s Retail Tracking Service, so too have wireless speakers. In fact, the wireless speaker market figures to eclipse $1.5 billion in volume by the end of this year as an array of pricepoints, features, and form factors offer consumers plenty of choice in the market. There are also options for consumers when it comes to how their speaker connects with an audio source. Bluetooth speakers, which access content from a Bluetooth-enabled device like a smartphone, tablet or PC, accounted for 84 percent of sales this year. Network speakers, on the other hand, which have the ability to stream music over a home Wi-Fi connection, accounted for 16 percent of sales. The advantages of these Wi-Fi connected speakers are most notably better sound quality and the ability to conveniently access content wherever it is saved- whether on a network connected device in the home or directly from a cloud music service.
The direct connection to the cloud points to the potential for network speakers to do more than just stream music and podcasts. Amazon’s Echo, a network speaker which offers access to several music streaming services, also features Amazon’s personal assistant, Alexa, and a microphone. It’s possible to ask Alexa to cue up a song, but you can also ask her what time The Force Awakens is playing at your local theater, read aloud the ingredients to your favorite recipe, or tell you a joke. According to Connected Intelligence’s Connected Home Automation Report, 42 percent of smart phone owners have used a personal assistant app like Siri or Cortana on their smartphone, but a speaker (or a couple of speakers) inside the home that can both play music and search for information on the web is a different user experience altogether. The Echo is a good sounding speaker, but music playback is hardly the lone use case for the device.
The Echo is the first in what proves to be a wider field of “smart” network speakers that can access services and information directly from the web. I’ve owned an Echo for about a week, and for me the most useful features so far have been setting timers (“Alexa, set a timer for 10 minutes”), getting the weather report, and being able to ask random questions such as “Alexa, how many millimeters tall is the Washington Monument?” (It’s 169,164 millimeters, by the way). Sonos also recently took steps towards smartening their line of speakers, updating the PLAY:5 by adding an accelerometer and a microphone. Both of these new components are officially aimed at tuning the speaker to match the acoustics of the room it’s in, though I expect the microphone on the PLAY:5 will soon be able to connect to a set of web services via a personal assistant, similar to the Echo. In a multi-room system, this capability could be powerful, allowing users to access the functionality anywhere there is a speaker in the home.
An even bigger opportunity exists when network speakers can control other connected products inside the home. The aforementioned Echo is compatible with several smart home platforms including Philips Hue, WeMo, SmartThings, and others. As the smart home market matures and users add more devices to their homes, control and monitoring capabilities will likely need to migrate to other places. According to NPD/Connected Intelligence, control of smart home products is primarily done via smartphones (64 percent of smart home owners report this) and tablets (34 percent), but inevitably there will be times when a mobile device isn’t nearby or convenient to use. Being able to ask a bedroom speaker to turn on the hallway light in the middle of the night, if done correctly, could lessen our reliance on these handheld devices while inside the home and make the experience of using and controlling smart home products a little more natural.
While one can argue the term smart has become overused in today’s technology lexicon, network speakers have the potential to become pretty darn smart. But really, this connectivity powered by voice control could be incorporated into other consumer technology products. In addition to smartphones, we’ve seen a few TV manufacturers dabble in voice control and media streaming devices like Roku, Apple TV, and Amazon’s Fire TV products also support voice-enabled search. Consumers are getting used to using personal assistant applications like Siri and Google Now and as the applications become more refined and support a greater number of web-based services, expect them to become essential to how we interface with some connected products in our homes. On the surface, smart speakers seem like yet another technology product we’ve connected to the Internet, but with access to a diverse range of web services and content controllable via voice, they have the potential to be so much more.
After struggling through a very soft Back to School period where revenue results for the Technology market were down -7 per cent from the previous year, many were looking towards the next key buying period to help bolster the industry. Historically, Back to School has been a harbinger for Black Friday. This year, Black Friday has come and gone it appears that remains true. Despite the efforts of retailers and manufacturers alike, revenue results show the market to be off 12 per cent vs. an already disappointing 2014 which came in at -6 per cent. Much of this on the backs of sustained aggressive pricing tactics.
For those of you who have heard me speak on the subject of Black Friday you know I am not an advocate of this US based shopping holiday. Since 2012, when Black Friday first showed an increased presence in Canada, we have continued to see those weeks in-between Black Friday and Boxing Week diminish in importance. Last year alone those 3 weeks saw a decrease of over $70 million dollars for Technology products. At the same time we are not seeing overall holiday sales in general increase with the addition of Black Friday. Each year since this event came to Canada the size of the market has decreased. Maybe just maybe, Black Friday is working against Holiday sales for the industry instead of helping; it would seem the Technology market was much healthier before Black Friday showed up.
That said, there were some bright spots this year during Black Friday that included categories where revenue was stronger than last year. Included on this list are Monitors up +28 per cent, Networking Devices +8 per cent, Laser Multi-function printers +35 per cent and Keyboards +23 per cent. However, the 3 key categories that make up the lion’s share of overall revenues, Tablets, Notebooks and Desktops, all finished Black Friday in a revenue declining position. These categories represent 70 per cent of the revenue for the industry and when the largest revenue category during Black Friday – Tablets – is showing revenue growth of -29 per cent it is difficult for the entire industry to deliver strong results.
Fingers crossed that when we hit Boxing Week in a couple weeks we will experience consumers flocking to buy and drive a strong finish to the calendar year.
Of all our Baker’s Dozen Holiday predictions the one I am most confident in is that notebook sales will soar during the holiday, but those gains will come at a considerable cost in ASP. While we thought this scenario might play out as the holiday unfolded, our weekly data shows this price war has already begun, and the implications and challenges around a new level of Windows notebook pricing will reverberate around the industry.
During the last three weeks of October (October 5th -October 25th) we saw the lowest Windows pricing ever. All three weeks ASPs were below $430, with the week of October 5th showing an incredible $415 ASP for Windows notebooks. In contrast, the ASP last year at this time was around $480- a monumental change in pricing for a category that had seen stable pricing for the last few years. Yet, as is almost always the case, giving away your product has brought out the customers in droves. Unit growth during those first three weeks in October was 16 percent, 13 percent, and 1 percent, respectively; and during the last week of the month, despite just a 1 percent gain, Windows was the only OS to show unit growth over the prior year. All of this momentum is coming from PCs under $300.Growth in the under $300 segment during the first three weeks of October was 124 percent, 68 percent, and 88 percent respectively, over the prior year, continuing a streak of 15 consecutive weeks of double-digit Windows notebook growth for the entry-level under $300 segment. Black Friday pricing has clearly come very early to the Windows notebook market.
The implications of a much more price aggressive PC market are enormous, and while many of them are positive, many are not. Much of the impetus for the aggressive price reductions has been the Microsoft Bing program, a back-end subsidy for Windows PC OEMs designed to make entry-level Windows PCs more competitive with Chromebooks. To some extent this has worked. Last year at this time Chrome had captured a unit share in the high 20’s of the entry-level notebooks market, this year that share is now below 20 percent. Of course we would be remiss in not pointing out that while Chrome’s share has declined it has continued to post mostly double- digit unit increases.
This seeming success for Microsoft does not come without collateral damage. The Windows notebook PC segment above $300 has been decimated, with sales down 10 percent over the past three weeks. This has impacted the uptake of touch in the Windows market as well. Basic clamshell notebooks with touch only accounted for approximately 25 percent of the Windows market over the past few weeks, in contrast to points earlier in the year when it was above 30 percent. It has also impacted the 2inOne market which remains stalled at just 11 percent sales penetration. Finally, it is likely to change the tenor and composition of both the brands in the PC market and the retailers as well. This type of pricing war is likely to drive increasing amounts of volumes to the largest retailers, such as Best Buy and Walmart, and the largest brands such HP, who can withstand an extended period of such aggressive pricing activity.
With a Windows market delivering pricing at clearly unsustainable levels the real question is what does the Windows PC market look like when we come out of the holiday season, and what would a permanent decline in notebook ASPs do to the market ahead of the launch of Windows 10? I suspect the answer is a significantly weaker PC business, less able to support Windows 10, less able to compete with a surging Macbook market, and less able to clearly differentiate what makes a PC a compelling choice against a tablet or a smartphone.
It’s that time of year again, the time when I wait anxiously for the results of the first holiday season promotional event in the Consumer Electronics industry, which for the purposes of this discussion includes the Audio, Video, Digital Imaging and Telecommunications sectors (excluding mobile phones).For context, Black Friday has historically proven to be a strong sales week for the industry with revenue growth of +27% in 2013, and growing again in 2014, but to lesser degree of +5%. It never fails though, the anecdotal stories that I hear during the waiting period, those that range from gloom and doom to blockbuster traffic and sales. Well, I refuse to listen to the anecdotes. I need evidence – show me the data!
It’s no secret that the 2015 sales trend over the past 12 weeks leading into the holidays has been challenging across many of the key CE categories. The optimist in me hoped that consumers were waiting patiently for great Black Friday deals, something that the industry, for better or for worse, has trained them to do. And while the sales trend did improve for the week of Black Friday, the best I can say is that the declines were not quite as severe compared to the year thus far as total units for the Black Friday week declined by -9% and revenue declined by -5%.
Taking a deeper dive into the various CE key categories, televisions, by far the largest, declined by -7% on units, however the average selling price climbed by +5% as the market shifted away from 32” displays (-15%) and toward 55” displays (+14%), while 4K/UHD resolution TVs nearly doubled in size versus last year and accounted for 35% of the total category revenue. Streaming audio speakers were hot during Black Friday growing by +34% and the growth of the stereo headphone category continued unabated although to a somewhat lesser degree with units up +3%. Unfortunately, the Sound Bar category did see a sharp drop off for the week as units declined by -22%. Finally, the camera category saw double-digit unit contraction across all of the key formats: point & shoot, DSLR and mirror-less. Notably though, as the low-end of these markets continue to erode, the average selling prices across all three formats rose significantly.
While promotional noise is routine – and expected at this time of the year in an effort to drive traffic through the door – I personally did not see the need for deep discounting this Black Friday. Remember that the origins of this event in Canada were based on the objective of incenting consumers to stay north of the border. For many categories though, after factoring in exchange the better deals are to be had in Canada, without having to slash prices even further. And now, as the anxious waiting starts again for Cyber Monday and Boxing week sales results, here’s to a far more positive, and profitable, close to the year.
The signs are all around us. Back to School displays at retailers are firmly in place, coffee lovers have begun talking about the return of Pumpkin Spice Lattes to Starbucks and we’re down to a precious few pool days in the season. Yes, summer is coming to an end. But as much of the country prepares for fall and the (merciful) cool down of the weather, the stereo headphone market remains red hot.
Despite concerns that consumers have become saturated with headphones or that the trend in lifestyle focused premium headphones has run its course, the market continues to thrive. For the 12 months ending in July, headphone sales have grown 18 percent to $2.9 billion, making it CE’s sixth largest product category according to NPD’s Retail Tracking Service. In fact, to date, the headphone market is growing faster than it did last year. During this time, the market has faced some headwinds. Consumers are buying fewer tablets (tablet sales and adoption help fuel demand for headphones) though 13 percent growth in smartphone sales, according to NPD’s Mobile Phone Track, has likely offset that impact, and competition from low-cost brands entering the market have challenged more established brands competing in higher pricing segments. Fortunately for companies making and selling headphones, none of these things significantly affected sales.
Instead, consumers looked to add to their headphone collections this year. Sales of wireless Bluetooth headphones have more than doubled through July compared to last year, while water/sweat resistant fitness headphones grew by an astounding 88 percent. The growth stands out not so much because they represent new products on the market, but because they address new listening occasions and needs for users. For instance, buyers of Bluetooth headphones looking for the convenience of wireless cannot replicate that experience with another pair of wired headphones. Many over the ear, on the ear, or in-ear headphones are difficult to appropriate for working out. These new headphone segments have given consumers a reason to go out and buy a new pair of headphones- not simply to replace a lost or broken pair. Additionally, Bluetooth and fitness headphone average selling prices of $106 and $65 respectively, are both significantly higher than the rest of the market, providing a lift to overall ASPs.
Premium headphones ($100+) have maintained their momentum as well, growing 24 percent in the last 12 months. Leading the premium segment are Beats by Dre and Bose, which collectively command 81 percent of the premium segment. They have also become the two leading brands in the market overall, regardless of pricepoint, accounting for 44 percent of total headphone dollars- an increase from a year ago.
And there is still plenty of room for innovation ahead. 50 Cent’s SMS Audio has partnered with Intel on earbuds embedded with biometric sensors designed to measure heart rate, an effort to capitalize on the momentum in the digital fitness market. Skullcandy, seeing that female consumers now account for half of all headphone spending (from 45 percent 2 years ago) designed a line of headphones tuned and fitted especially for women. And upstart companies like Bragi are making their wireless earbuds, the Dash, a standalone device with fitness tracking capabilities and an embedded 4GB MP3 player- effectively liberating the headphones from the smartphone (key for fitness). These new features, which seek to both broaden the use case and appeal of the category, should help keep consumer demand for headphones high through the coming year. Sure the early signs of fall mean another summer is in the books, but it’s an endless summer for the headphone market.