Consumer Technology Spending Slowdown Forecast

A disappointing holiday season as well as economic concerns are taking a toll on consumer technology revenue growth, analysts with NPD Group said.
U.S. consumer technology sales hit a record $129 billion last year, but a troubling slowdown in the second half of the year is an indication that the industry has reached market saturation with some products and is likely to experience lower growth this year, a research firm said Wednesday.

Sales last year were a "healthy" 6.5% over 2006, but sales growth for the second half of 2007, which accounted for 54% of the year's revenue, was only 5%, the NPD Group said. U.S. retail sales during the holiday season from Nov. 18 to Dec. 29 fell nearly 2% to $9.6 billion.

"Such a disappointing holiday season, compounded by a lackluster back-to-school season, as well as economic concerns, took a toll on consumer technology revenue growth in the second half of 2007," NPD analyst Stephen Baker said in a statement.

But concerns over the state of the U.S. economy had less to do with the overall slowdown than market saturation in many of the highest volume categories, such as cameras and MP3 players, NPD said. In addition, manufacturers and retailers didn't cut prices, preferring a strategy of seeking higher profits per device in the face of declining demand.

"We expect to see a continued trend toward more stable pricing, and lower growth, in 2008," Baker said.

Almost half of consumer spending last year was concentrated on five categories: notebooks, LCD TVs, desktop computers, digital point-and-shoot cameras, and MP3 players, NPD said. That was up from 42% and 36% in 2006 and 2005, respectively.

The numbers for LCD TVs was a clear indication where that segment is heading. Revenue growth for the category was 74% higher than 2006 and 83% more in unit shipments. LCD TVs accounted for 60% of total TV sales. Nevertheless, overall TV unit volume dropped 9%.

During the holiday season, LCD TVs were the largest revenue-producing category, garnering $1.7 billion. Screens of 40 inches or more were the biggest draw. The fastest growing category among the top revenue producers during the holiday season was mobile navigation systems. Sales soared 170% to $388.6 million.

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