Holiday CE sales slower than last year, says report

Holiday sales of consumer electronic devices in the United States fell this year compared to last year, according to the NPD Group Inc. The sales of portable music players declined during the first three weeks of the holiday shopping season, as manufacturers attracted fewer first-time buyers, a market research firm said Wednesday.

Dollar sales of MP3 players between Nov. 18 and Dec. 9 were down 16 percent from the same period last year, while unit sales declined 9 percent, the NPD Group said in an update on consumer electronics sales. Also showing declines were plasma TVs and point-and-shoot digital cameras.

In the case of MP3 players, manufacturers and their retail partners faced a market in which there were fewer first-time buyers, and most sales were for upgrades and replacements. "The market is in a position where most of the people who want an MP3 player have one," NPD analyst Stephen Baker told InformationWeek.

Even sales of the market-leading Apple iPod were probably not what they used to be for the same reason. "The iPod is not exactly a blistering growth segment," Baker said. "It's a good segment, and you'll still make money on it, but it's not growing 75 percent a year."

NPD bases its findings on point-of-sale data from dozens of U.S. retailers, both brick-and-mortar and Web-based. The latest numbers for MP3 players did not include sales at Apple retail stores.

Revenues from MP3 players were dropping because people were choosing cheaper flash memory versions of the devices, rather than the more expensive hard-disk-drive versions with much larger storage capacities. Most people don't have enough music and video files to justify paying more for a device with 80-plus gigabytes of storage, Baker said.

With digital cameras, dollar sales dropped nearly 13 percent from a year ago, but unit sales were up nearly 1 percent, according to NPD. Like the MP3 player market, there were fewer first-time buyers, and people chose the less expensive models over the high-end versions. "We are seeing a big shift in the camera market to lower-priced products," Baker said.

The reason is manufacturers are offering better cameras for less money than they did a year ago, so people are finding that the cheaper models fit their needs, Baker said. In addition, people buying cameras for gifts or replacements are less likely to buy the most expensive models.

One product category exceeding expectations is personal navigation devices. Dollar sales of GPS devices were up more than 214 percent and unit sales soared 488 percent. "Without question, they've exceeded everybody's viewpoint of how well the category would do this year," said Baker, who attributed the success to lower prices, aggressive marketing, more interesting products, and wider distribution.

Not a surprise was the drop in plasma TV dollar and unit sales by 23 percent and 6 percent, respectively. The flat-panel high-definition televisions have been losing market share to LCD TVs for some time. Dollar sales of the latter category were up 64 percent, and unit sales increased 43 percent.

In other product categories, dollar sales of notebook computers were up 12 percent, and unit sales had increased 23 percent. Digital picture frames, a product that's starting to take off among consumers, saw a 204 percent jump in dollar sales and a 266 percent increase in unit sales.

- Antone Gonsalves
InformationWeek