Consumer electronics sales to reach $171B in 2008
Digital TV, gaming, and portable navigation are set to drive consumer electronics sales up 6.1% this year.
By Ann Steffora Mutschler, Senior Editor -- EDN, January 11, 2008
The consumer electronics (CE) industry is projected to increase revenue by 6.1% to $171 billion in 2008, exceeding expectations despite a challenging domestic economic situation, according to Consumer Electronics Association (CEA) president and CEO Gary Shapiro, who spoke earlier this week at the 2008 Consumer Electronics Show (CES).
“It’s clear that the spirit of innovation will continue to sustain and grow our industry. Indeed, we are seeing this innovation on display here at the 2008 International CES. This is especially healthy growth when compared to that of any other industry,” Shapiro said.
The CEA also estimates that shipment revenues for 2007 totaled $161 billion, up 8.2% over 2006, with the overall projection for 2008 growth slightly lower than 2007, but closer to the long-term historical average for the industry and still above expected 2008 growth levels for many other industry sectors, including housing and new vehicles.
TV displays represent approximately 16% of overall CE shipment dollars, continuing to be the largest contributor to the CE industry bottom line, while shipments of displays are expected to grow 13% to more than $29 billion and sales of next generation DVD players will take off in 2008, as prices decline and consumers continue to seek out high quality home theater products with unit shipments growing 173% to 2.8 million, the CEA forecasted.
Steve Koenig, CEA’s senior manager of industry analysis, pointed out that consumers remain focused on upgrading their home theater systems and already, digital televisions are present in more than 50% of US households with the robust growth to continue this year.
The gaming category continues to set records in terms of revenue, the CEA said, fueled by the availability of three next-generation consoles, propelling gaming hardware alone to have grown 50% to $6.6 billion in 2007. Riding the wave of several successful title launches, gaming software is expected to drive growth in 2008. CEA expects software sales to grow 26% to $11.5 billion this year.
In the mobile video and navigation category, total shipment revenues are expected to nearly double this year to more than $3.1 billion thanks to sky-rocketing sales of portable navigation devices. In particular, CEA expects rapid revenue growth of more than 74% for devices that include traffic and data functionality.
On the not-so-bright side of the CE industry, global management consulting, technology services, and outsourcing company Accenture has found through its research that in 2007, CE manufacturers, communication carriers, and electronics retailers will spend an estimated $13.8 billion in the US assessing, repairing, reboxing, restocking, and reselling returned merchandise – with the global number even larger.
In an industry where margins are thin, competition is brutal, and the customer experience is becoming a key differentiator, this is not only a financial problem, but also a threat to future growth, the company said.
However, this problem also represents an opportunity, according to Accenture, which stated that by taking active steps to prevent customer returns upfront and improve returns processing when they occur, companies can competitively differentiate themselves, deliver impressive gains to the bottom line and achieve high performance.
Accenture’s research also suggests that 68% of volume associated with returns can be characterized as “no trouble found" (NTF), meaning that the products did not meet the customer’s requirements or expectations, or the customer believed the product had a hardware or software failure, yet yielded no detectable fault or problem when tested by the retailer, carrier, or manufacturer.
To prevent such returns in the first place, strategies do exist and Accenture contended that businesses striving for high performance in the CE sector consider employing a number of educational, design-related, and service-based actions focused on ease of use throughout the product lifecycle, as well as to reduce customer returns and returns handling costs.
Similarly, the company says CE companies can cut costs by rethinking approaches to returns processing since businesses looking to achieve high performance have slashed operating costs by streamlining and optimizing their return/repair networks. Some have redesigned their processes to ensure returned products are treated differently depending on whether consumer demand for them is high or merely stable.
Accenture said its research suggests that with total landed costs for returns running about 5 to 6% of revenues for manufacturers and 2 to 3% of sales for retailers, the savings associated with these new approaches can be measured in the tens of millions for large enterprises.
Further, the company believes manufacturers, retailers, and communication carriers have an opportunity to transform the state of returns in the CE market, and through disciplined analysis of returns strategies, processes, and costs, they can identify the actions necessary to drive out costs and drive profitability to new levels.
A vast proportion of returns associated with CE devices are preventable, with NTF returns tied to functional, salable products that have not met the customer’s expectations. Given this trend, reducing preventable returns could make a significant impact on the bottom lines of manufacturers, carriers, and retailers. At the same time, smarter investment in return and repair optimization – calibrated to bring about the biggest returns by focusing on the quickest, least costly reboxing and repairs – represents another big potential win for companies in the field, the company argued.
To improve return and repair strategies, Accenture suggests focusing on creating favorable customer expectations that forestall returns; supporting the product before and after sales with effective, attractive alternatives to returns; implementing strategies for immediately identifying NTF merchandise and return it to inventory as soon as possible; eliciting customer feedback to determine causes of returns; and looking for opportunities to share the responsibilities for preventing returns and streamlining return/repair networks.
