SAN JOSE, Calif. – Holiday spending was up, but not in consumer electronics. The numbers aren't in yet, but they won't be pretty for a maturing sector increasingly focused on profits, not growth, said one leading analyst
"It was a good Christmas for retailers, but we think when all the numbers are in it will not have been a good Christmas for electronics," said Stephen Baker, vice president of industry analysis at NPD Group (Port Washington, NY). "People have a lot of electronics, and we've seen them move to other product categories such as food, clothes and travel," he said.
A tracking service sponsored by MasterCard reported U.S. holiday sales were up 5.5 percent this year over spending in last year's recession. It cited sales growth in clothes, jewelry and luxury goods.
Coming in to the season, market watchers at Parks Associates (Dallas) predicted flat sales of electronics. In a Parks survey only 38 percent of heads of broadband-equipped households in the U.S. said they intended to buy a CE product before January, down from 49 percent at the same time last year.
The news comes after at least two years of significant growth in holiday sales of electronics despite relatively sluggish retail sales overall. "You can't outgrow the marketplace forever," Baker said.
"Once you become a necessity, the purchasing trends change, and you can delay purchases if what you have is working well," he said, noting consumers have bought plenty of Windows 7 capable PCs in the past two years and don't need an upgrade.
The slowdown is not an anomaly, but a sign of a maturing industry, Baker said. "We have looked at 2010 as transition year, and we think the numbers will prove us out," he said.
Amazon.com did report the newest model of its Kindle e-book has become its best selling product ever. However, that's not surprising given it is the company's first branded electronics product, and the latest model sports its lowest price tag for an e-reader to date.
Baker expects cellphones and MP3 players to continue to be the top two product categories in CE holiday sales, followed by digital cameras, videogame consoles and computers. He expects PC sales will be flat, and camera sales will at least slow their growth while smartphones will take an increasing share of the Christmas pie.
In addition, "the high-end TV market has been a little weaker than we thought," Baker said. Coming into the holidays the Consumer Electronics Association projected 2010 sales of 1.6 million 3-D TVs down from earlier industry estimates of 2.1 million.
This year's new crop of stereo 3-D TVs represent a high-margin niche, Baker said.
"It was never going to be a huge category this year, just a feature in the highest end TVs which will never lead in volumes, but in dollars they have done well," he said.
Internet-connected TVs "have been around a bit longer" but are likewise features of the highest-end sets that made a broader but still nascent appearance in 2010, he added.
Similarly, smartphones are marching through a slow shift from being a high-end niche to a broader market.
"It still remains a product segment that hasn’t quite tipped over to the mainstream yet, said Baker."There are still a lot of people with messaging and standard phones," he added.