Seven Consumer Trends Impacting The Consumer Electronics Business

When you live in Silicon Valley like I do, you can’t help but be amazed how quickly what you hear as a rumor turns into a consumer reality for sale at your local retailer or online. This is especially true for consumer electronics that are currently undergoing an unprecedented explosion of innovation and change. I wanted to reflect on seven consumer trends I believe will drive continued growth and change in this multi-billion dollar category:

1.) Consumer Electronic Device Usage Is Converging - Consumer electronics (which I’ll refer to as “CE” for the balance of this blog) devices are increasingly being used on a 24/7 basis. If you’re like most workers and consumers, you don’t want to have to carry around separate devices for your work and personal life. While IT departments are always rightly concerned about security of corporate data as their top priority, they are increasingly recognizing workers want the same utility at work from CE devices they can get from their favorite consumer devices (such as an iPhone or iPad). This has led to the rapid adaption of such CE devices as tablets and smart phones for use in restaurants, hospitals and offices. This trend will accelerate in the next 5 years as more IT teams figure out a way to allow this to happen without compromising their corporate data integrity.

2.) Consumer Expectations for CE Are Increasing – Remember the 2002 Steven Spielberg film “Minority Report” that featured Tom Cruise waving his hands in the air to move his computer data around? We’re getting closer to this reality every day. There’s an increasing variety of new ways consumers interact with CE devices, including:

• Voice commands
• Touch screen
• Facial recognition
• Projectable keypads
• Body movement (such as Kinect)

While there are some innovations featured in “Minority Report” I hope stay in the realm of science fiction (such as insect robots and crime prediction software), I’m looking forward to what I’m sure is going to be a continuing wave of new creative ways to interact with our devices and data.

3.) Apps Are A Key Growth Driver for CE Devices– “There’s an app for that” is more than an advertising slogan...it’s the truth. There will be an estimated 70 billion downloads of apps on an annual basis by 2014 – that’s an average of 10 apps per person on the planet. This exponential growth of apps is driving the popularity of tablets and smart phones. I think the biggest advantage of apps is they can be used at the “moment of truth” (i.e. when and where they are needed by a consumer). The biggest downside risk many of us have already experienced is to become overwhelmed with too many app choices. Becoming the next “must have” app will remain a dream for legions of developers but consumers will continue to benefit from their hard work.

4.) Ongoing Sales From Selling Premium Content Will Be Critical To Long-Term Profits In CE - Creating and maintaining premium prices for CE devices (i.e. Bang & Olufsen) is almost impossible today. Selling premium content and getting a piece of every sale is going to increasingly be where the real market battle takes place. King Gillette discovered over a century ago it’s more profitable to sell razor blades than the device that holds the razor. What Steve Jobs did by creating iTunes and what Jeff Bezos is doing with Kindle Fire is a key to long-term financial viability in the CE category. That’s going to be true for all the major CE players as well in the 21st century where the term “Blade Runner” is going to take on a whole new financial meaning.

5.) Aging Boomers Will Be An Increasingly Important Influence On Future CE Devices – A newly minted 50 year old now occurs in the U.S. on average every 7 seconds (I've been one for 5 years now). Among all age groups, this 50-54 year old segment was the fastest growing during the past decade, increasing by 55%. This “over 50 year old” demographic is already the fastest growing social media user segment. This demographic target should be a top priority for CE manufactures and marketers since they have more discretionary time and money compared to younger consumers. I believe CE design and ease of use aimed specifically at an older demographic group is going to become more important in the next decade. You can already see it happening with some recent CE product launches:

• Wireless scales that measure your weight and alerts family members wirelessly if your weight has gone up or down by a certain amount.
  • Motion detectors with sensors that track whether a family member has fallen, opened a pill bottle, used the bathroom excessively at night, wandered out of the home, hasn’t stirred for hours, or forgot to turn off a burner on a stove.
  • Mobile phones with a hidden keypad with very large buttons, an amplified earpiece, and a panic button on the back that automatically dials five preprogrammed numbers when triggered.

We all like to make fun of the TV commercials featuring The Clapper (“Clap on! Clap off!”), but I believe as the average American gets older, as a country we are going to need to be all kinds of innovative CE devices that can do a heck of a lot more for us than just turn off the lights.

6.) Consumers Want Integrated CE Home Solutions – While no one I know is looking to install a version of HAL (the computer from “2001” that had self-image and control issues) in their homes, I think we will see a lot more innovation in the next 10 years in how our homes become integrated into a “whole house” solution that features:

– Wireless controls

– Energy efficiency

– Manage communications and security

– User friendly (voice commands or smart phone enabled)

– Easy to maintain and update

7.) How Consumers Buy CE Matters A LOT More Than Where They Buy – My sympathy goes out to the “Big Box” retailers in the U.S. today. They are under increasing pressure to make their economics work. It won’t be easy. They are getting increased competition and continue to lose market share to e-commerce and emerging “mobile commerce” players. In addition, there are more and more consumers who go to their local stores to shop in person, whip out the price scanner on their smart phone to comparison shop, then buy online based on best price (often with free shipping). This is leading some of these retailers (such as Best Buy) to consider sub-leasing some of the existing retail space they’ve got to help bring down their overhead. That will help some but won’t be nearly enough to ensure their survival.

The real winner in all of this for now will be the consumer since they now have at their finger tips the information needed to make a well-informed CE purchase decision as well as continuously lower prices on what they buy. The long-term question is whether this retail environment can last since if enough “brick and mortar” places can’t make their economics work, consumers won’t have the luxury anymore of checking it out the latest CE device in person at their local store before they make a purchase decision.

What's Next? - Despite the on-going economic doldrums we’ve all been in for the last several years, consumers still remain very passionate about their favorite CE devices. The past 5 years have seen an explosion of innovation and strong global growth in various CE categories, which I don’t think is going to slow down anytime soon. The winners in this space are going to be the ones who do the best job staying on top of and effectively responding to the rapidly changing consumer trends I’ve discussed in this blog.

What do you think? What consumer trends will be key drivers for consumer electronics in the next 5 years?