Consumer Electronic Spending Slowed In 2006 - InformationWeek

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Consumer Electronic Spending Slowed In 2006

Spending on technology products hit $111 billion in 2006, or 3.6% more than the year before. But spending in 2005 rose by 7.2% over 2004, the NPD Group said.

U.S. consumer spending on electronics slowed last year to a growth rate that was half of 2005, a market research firm said.

Spending on technology products hit $111 billion last year, or 3.6% more than the year before, the NPD Group reported Wednesday. Spending in 2005, however, rose by 7.2% over 2004.

More consumers shopped in stores than online in 2006, spending $85.8 billion in brick-and-mortar outlets, or 4.6% more than in 2005, NPD said. Online technology sales inched up a mere half of a percent to $25.2 billion. Televisions, notebook computers, and MP3 players showed strong gains in the overall market but were offset by declining revenue from DVD players, home theater products, desktop computers, and printers.

Retail sales of computers outpaced online sales for the third straight year, NPD said. Two-thirds of the $54 billion in revenue came from stores. Dell's sales declines have caused a major slowdown in consumer purchasing of PCs online.

MP3 players were a big contributor to overall 2006 sales. Apple, which accounts for three-quarters of the market, drew many buyers to its own retail stores. Overall sales of MP3 players increased 23% to more than $6 billion. Nearly 78% of both unit and dollar volumes came from retail stores, an increase of 5% from 2005.

Retail stores saw a 15.7% increase in revenue from all TV sales to $18.2 billion, but unit sales remained flat, NPD said. Online sales jumped 40% both in units and dollars to 2 million and $1.8 billion, respectively. Online revenue, however, accounted for only 8.7% of total sales and only 6.4% of all TV sets sold.

Household income was a major factor in consumer technology sales last year. Sales to people with incomes of more than $75,000 a year rose 5.7% and accounted for 43% of total consumer technology revenue. The largest growth rate came from consumers making more than $150,000 a year. Sales to this high-income group increased 7.1% to $10.3 billion.

While overall consumer electronic sales slowed last year, technology was the big hit of the holiday season from the day after Thanksgiving to Christmas. Electronics accounted for 42% of overall holiday sales, NPD said in an earlier report. Nevertheless, the growth rate was 3.5% less than in 2005.

The hottest items were LCD TVs, followed by digital still cameras, notebook computers, MP3 players, and plasma TVs.

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