CEA 2014 Holiday Outlook and Trends to Watch

transcript

CEA’s 21st Annual Holiday Outlook

Shawn DuBravac, Ph.D., CFA Chief Economist & Sr. Director of Research

shawnd@CE.org @twoopinions

Scoring Our 2013 Holiday Forecast

Source: CEA estimates from shipment data, consumer holiday surveys and macroeconomic data

2013 Holiday Forecast Assessment

Category 4Q2013 Holiday Forecast

4Q2013 Holiday Actual

Expected Holiday

Growth Rate Actual Holiday Growth Rate

Tablets 40.1M 37.1M 21% 12%

Flat panel TV 13.2M 12.0M 4% -5%

Ultra HD TV 25.8K 45.6K NA NA

Blu-Ray 5.2M 5.3M 6% 8%

Camcorders 456K 557K -45% -33%

Soundbar 1.3M 1.07M 42% 17%

MP3 10.6M 10.5M 1% 0%

2013 Holiday Forecast Summary

Series Projected 2013 Holiday Growth

Actual 2013 Holiday Growth

Overall Retail Sales 4.0% 4.2%

GAFO Retail Sales 2.7% 0.9%

Electronics Retailers 0.0% -1.3%

Online Sales 18.7% 15.7%

Mobile Sales 35.5% 20%

Consumer Spending on Tech

2.6% 0.9%

Looking Ahead to Holiday 2014

Key Holiday 2014 Themes

1. Improving Environment Supports Spending

Growth in Holiday 2014

2. Spending Growth Driven by Narrowly Defined

Demographics

3. Perennial Tech Devices Still Defining Holiday

Tech Gifts

4. Online Retail Broadens and Deepens, Mobile

Reshaping Commerce

5. Shop Early, Stop Early

Gift Giving Intentions Strong

% of consumers planning to spend money on holiday gifts

Base: random national sample of 1,019 U.S. adults

Q:B20: Please tell me what percent of your total holiday budget will be for each of the following types of holiday spending: food...gifts...travel...home

CE is the Gift to Give

2012 2009

% of gift buyers planning to buy CE as holiday gifts *

* Excludes CE Accessories

Q: B21: What % of your holiday gift spending will be on consumer electronics? Base: random national sample of 1,019 U.S. adults

% of U.S. Adults Buying Technology Gifts

50% 52%

46% 48% 49% 49%

58% 62% 64% 63%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Lower Spenders: Earning More; But Not Enough?

Reasons to Adjust Holiday Expenditures Lower

2010 2011 2012 2013 2014 Don't have the money 49% 71% 62% 66% 53% Concerns with the economy 68% 77% 66% 68% 46% Increased cost of living 47% 59% 56% 64% 50%

Earning less money 41% 52% 52% 49% 37%

Lost Job / Unemployed 32% 37% 34% 34% 18% Have What You Need 51% 55% 57% 67% 47%

QB18: You indicated you plan to spend less this year than last. Which of the following, if any, are reasons why you plan to spend less on gifts this year?

CEA Sentiment Tracking Steadily Higher

2007 2008 2009 2010 2011 2012 2013 2014

CEA Index of Consumer Expectations (Left)

CEA Index of Consumer Technology Expectations (Right)

Consumer Credit Accelerates

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Revolving Credit (Y/Y % Change)

Holiday 2014 Spending Plans & Forecast

CEA Forecast: Holiday Tech Spending up 2.5%

Consumer HolidaySpending on Tech

Forecast

10-yr Average (4.7%)

20-yr Average (6.7%)

2014 Holiday Forecast Summary

Series 2013 Holiday Growth Projected 2014 Holiday Growth

Overall Retail Sales 4.2% 4.5%

GAFO Retail Sales 0.9% 1.1%

Electronics Retailers -1.3% 1.0%

Online Sales 15.7% 14.9%

Mobile Sales 20% 19%

Consumer Spending on Tech

0.9% 2.5%

Holiday Gift Spending Trend

$844 $772 $756

$793 $766 $767 $785

$162 $189 $200 $222 $222 $245 $251 $258 $248 $286

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Gifts

Total Tech

Allocation of Gift Spending on CE

2007 2008 2009 2010 2011 2012 2013 2014

% of gift spending

on CE 22% 28% 29% 32% 32% 30% 33% 32%

Amount $200 $222 $222 $245 $251 $258 $248 $286

Spend More: 19%; $408

Spend Less: 25%; $188

2014 Average CE Gift Spending:

Q: B21: What percent of you gift budget will be spent on CE this holiday?

Shifts in Holiday Gift Spending Plans

22% 20%

22% 23%

18% 20% 21% 20% 19% 18% 19%

48% 48%

46% 48%

44% 47%

28% 27%

34% 32% 32%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Spend More

Spend Same

Spend Less

Spending Growth Driven by Narrow Demographics

The Biggest Spenders: Demographics

35-54 Year Olds

$364 ($278)

Early Tech Adopters

$420 ($291)

HHs with Children

$319 ($287)

HH Income $100k+

$562 ($406)

2014 (2013)

Early Adopters: Spending Big This Holiday

Early2014

Who’s Driving Spending Higher?

Gender Male 39%

Female 61%

18-34 9%

35-54 74%

55+ 17%

Children in HH

Yes 26%

No 74%

Tech Adoption

Early 57% Mid 23%

Late 19%

HH income

< $25K -3%

$25K to < $50K

$50K to < $75K

$75K to < $100K

$100K or more

2. Perennial Tech Devices Still Defining Holiday Tech Gifts

Most Requested

2014 Holiday CE Gift Wish List - Adults

Q: B34: If you could receive one technology gift this holiday what would it be?

Smartphone, 7%

Blu-ray Player, 2%

e-Reader, 2%

TV, 8% Tablet, 13%

Desktop PC, 1% Digital Camera, 2%

MP3 Player, 2%

VG console, 7%

Notebook, 11%

Consumer Tech Big Five

$17.1 $14.3

Smartphones Tablets LCD TV Laptops GameConsoles

Source: CEA

64% 45% 72% 66% 51% % HH

Owning

2014 Estimated Shipment Dollars (Billions)

2014 Growth Revenue = 1.9%

2015 Growth Revenue = 0.7%

Holiday 2014 Gift Purchase Intent

Mobile Devices Continues to Grow Holiday Gift Mix

Video Game

System

Laptop PC

Portable MP3

Digital Camera

Smart Phone

eReader

Tablet

Smartwatch

Purchase Intent – Yes/Maybe

Holiday CE Gifts: Computers and Comm. Devices

eReader, 15%

Notebook 25%

Tablet, 26%

External Storage

Computing 51%

Comm. Devices

Smartphone 23%

Cellphone 6% (9%)

Hotspot Device 9%

2014 % (2013 %)

Holiday CE Gifts: Video and Imaging Devices

Video 39%

Digital Imaging

TV, 24% (19%) Digital Media Player

16% (13%)

Blu-ray or DVD Player, 14% (22%)

Action Camera 11% (6%)

Camcorder 8% Point-n-Shoot

8% (11%)

D-SLR 7%

2014 % (2013 %)

Purchase Intent for TV Tech

TV Sizes / Features 2011 2012 2013 2014

Screen <40 inches 54% 48% 42% 42%

Screen 40+ inches 65% 72% 80% 82%

Screen 40-59 inches 69% 73%

Screen 60+ inches 36% 36%

Internet connected 51% 63% 61% 63%

2014 4K UHD TV Shipment Volumes

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

512,000

288,000

U.S. Market

Actual

Forecast

Source: CEA, CE MarketMetrics

= 800,000

Estimated Share of 2014 UHD Unit Volume

50-59 60-69 70-79 80+

Screen Size in Inches

Today’s TV Deals

Samsung UN55HU7250 Curved 55-Inch 4K Ultra HD 120Hz Smart LED TV

$2,399 >>> $1,799

VIZIO P552ui-B2 55-Inch 4K Ultra HD Smart LED HDTV

$1,399

LG Electronics 55LB6300 55-Inch 1080p 120Hz Smart LED TV = $899

Sony KDL55W800B 55-Inch 1080p 120Hz 3D Smart LED TV = $1,000 1080p

Holiday CE Gifts: Audio and Gaming

Audio 50%

AVR, 9%

Portable Wireless Speakers 21%

MP3 Player, 16% (20%)

Soundbar 9%

Gaming 26%

Portable Game

Console 12% (9%)

Game Console 22% (19%)

2014 % (2013 %)

Headphones, 26%

Holiday CE Gifts: Automotive and Accessories

Portable GPS, 11%

Automotive 21% (26%)

Hands-Free Kit 11%

Emerging Tech 19%

Smartwatch, 8%

Fitness Device, 10%

2014 % (2013 %)

Smart Thermostat, 3%

3D Printer, 4%

Arithmetic of Growth 2013 2014 2015

connected thermostats $77 $171 $254

smartwatches $158 $1,725 $3,630

health and fitness tech $854 $1,078 $1,285

3D printers $53 $76 $107

UHD $310 $1,913 $5,022

TOTAL Revenue $1,452 $4,963 $10,299

Growth 242% 108%

Total Industry Revenue $206,928 $211,001 $213,355

Emerging Categories

(1,452)

(4,963)

(10,299)

Total Industry Revenue

Without Emerging Categories $205,476 $206,038 $203,056

0.3% -1.4%

Building Out the Basket: Attachments

Streaming STB (37%) DVD player (35%) Blu-Ray player (32%) AVR (24%) Soundbar (20%)

Headphones (49%) App gift card (42%) Memory Card (39%) Case (37%) Smartwatch (20%)

Video Games (59%) VG Accessories (48%)

Headphones (51%) Earbuds (45%) Case (41%) Bluetooth headset (30%) Smartwatch (18%)

23% 26% 26% 24%

Holiday Season Dynamics

Online, Mobile Gain Momentum

Bricks vs. Clicks

% Very or Somewhat Likely to Purchase CE from …

Base: random national sample of 1,000 U.S. adults Q: B36: Where do you expect to shop for CE gifts this holiday?

2010 2011 2012 2013 2014

78% 77% 77% 75% 77%

46% 47% 46% 45% 54%

Brick and Mortar

Online

Consumers Shift Shopping Patterns for Holiday

26% Plan to Buy More

Holiday Gifts Online This Year

42% Tend to Shop at Different

Retailers Than They Normally Do During the Holiday Season

67% of consumers

buying CE will use a mobile device to help

them shop for CE.

2014 Holiday Mobile Channel Sales

Of Online Holiday Sales

$11.5 Billion

Mobile Holiday In-Store Shopping Activities

Check or compare product prices 84% Get product information 78% Search for or use coupons or discounts 74% Receive special offers or discounts from the retailer 73% Check product availability in a store 73% Read customer reviews for a product 71% Buy an electronics product from the retailer where you are shopping 66% Buy an electronics product from a different retailer than where you are shopping 59% Use location-based applications to check in to the retailer’s social media sites 35%

Among those planning to use a mobile device to shop for CE

Shop Early, Stop Early

Another Short Holiday Shopping Season

Are fewer shopping days pulling sales forward or emphasizing Black Friday?

Pulling Holiday Forward

Kmart – Merry Birthday Ad, Sept. 5, 2014

Consumers Intend to Shop Earlier, Not Later

2006 2007 2008 2009 2010 2011 2012 2013 2014

September or Earlier

22% 18% 17% 16% 17% 15% 16% 14% 18%

October 21% 19% 16% 19% 17% 16% 11% 11% 13%

November 29% 31% 36% 33% 32% 35% 39% 38% 38%

December 23% 26% 26% 25% 27% 28% 25% 30% 23%

Don’t Buy Gifts 3% 4% 5% 7% 7% 5% 7% 7% 8%

• Early promotional moves by industry/channel

• Omnipresence of deals – all season long

• Black Friday reigns supreme

Q: When do you typically start buying gifts?

Base: random national sample of 1,059 U.S. adults Q: B26: In which month do you typically start buying gifts?

When Consumers Expect to Buy Most Gifts

October or earlier (Net) 16%

September or earlier 9%

October 7% November or December (Net) 83%

November 49% In November before Thanksgiving 16% From Thanksgiving (incl. Black Friday) 33%

December 34%

Timing of Shopping, Deals Governs Spending

October or earlier In November beforeThanksgiving

In November,Thanksgiving through

end of month

December

Base: 1,000 U.S. adults Q: Thinking about your shopping patterns during the holiday season, when do you typically START buying gifts? Do you START buying gifts in . . .

Black Friday 2014

It’s All About the Deal

42% 50% Make an

Unplanned Purchase Based on

a Deal

Shop Specific In-Store Holiday

Sales Events

Walmart Black Friday Prep

Can Holiday Deals Get Any Better? Nope.

Deals Will Be … 2010 2011 2012 2013 2014 Not as good as last year 17% 19% 15% 14% 13% About the same as last year 53% 53% 62% 69% 68% Better than last year 26% 23% 17% 13% 14% Don't know 5% 5% 6% 4% 5%

Where Will Consumers Learn About Deals?

17% (+4%)

28% (+6%)

30% (+2%)

42% (+5%)

49% (+5%)

49% (-2%)

56% (-9%)

61% (-8%)

63% (-9%)

65% (-4%)

65% (-8%)

Text notification

Social media

Email notifications

Online advertisements

Retailer website

Newspaper advertisements

Internet Search

Signs and advertisements in a store

TV ads

Circulars or ads in the mail

Friends or family members 2014

(Change)

Retailers Must Meet Consumers Expectations

Product pricing 92% Deals

Ease of making a purchase 87% Online, Self-

Checkout

Return policy 87% Gift Receipts

Convenient to shop at 84% Location! Pop-Ups?

Past experiences with a retailer 82% Loyalty Programs Ability to get the product immediately 79%

Site-to-Store Shipping

Availability to get the latest products 72% Promote New Tech Variety of products sold, beyond electronics 49% More than Tech?

Shopping Criteria Retail Strategy %

Key Holiday 2014 Themes

1. Improving Environment Supports Spending

Growth in Holiday 2014

2. Spending Growth Driven by Narrowly Defined

Demographics

3. Perennial Tech Devices Still Defining Holiday

Tech Gifts

4. Online Retail Broadens and Deepens, Mobile

Reshaping Commerce

5. Shop Early, Stop Early

Questions?

Shawn DuBravac, Ph.D., CFA Chief Economist & Sr. Director of Research

shawnd@CE.org @twoopinions

Steve Koenig Director of Industry Analysis

skoenig@CE.org @koenigsteve