Smartphones Alone to Outsell Computer Category in 2012, CEA’s DuBravac Says

"Skittish” consumers and a tough environment have put CE inventory levels at close to historic lows in retail channels heading into the back half of the year, Shaun DuBravac, director of research at CEA, said during a keynote mid-year update at CE Week on Wednesday. Retailers are poised to boost late-season orders if early promotions in late October indicate a strong holiday sales season to come, he said, a pattern that played out last year and sent retailers scrambling to fill demand for TVs.

Smartphones and tablets continue to buoy an otherwise sluggish CE market, according to DuBravac, who noted that the revenues would have been down 3 percent overall last year if it weren’t for those two categories. Tablets and smartphones outsold all computing categories in 2010 and 2011, and this year smartphones alone will outsell all computing categories, he said. Smartphones sales are expected to grow 20 percent this year in the U.S. and tablets are forecast to reach 120 million in sales this year worldwide, he said.

Tablets are starting to eat into the smaller end of the TV market, DuBravac said. LCD volume and pricing have moved to an average screen size of 36-37 inches, from an average 22 inches in 1997, he said, and that average is forecast to rise more, he said, citing a “fundamental shift in the type of TVs consumers own.” Over-50-inch TVs are a bigger part of the mix today, which has put pressure on screen sizes under 24 inches. Tablets are now being used in secondary rooms such as kitchens and bedrooms where a small TV might have gone in the past, he said.

Overall video volume continues to drop, with unit volume down 13.7 percent so far this year, following a 14 percent drop in 2011, DuBravac said. He cited declines in legacy DVD players that aren’t being made up for by Blu-ray players, he said. But larger screen sizes are helping to minimize the decline in dollar sales, he said, as dollar revenue has slipped 7.6 percent this year compared with a drop of 14 percent in 2011.

LCD TV sales are tracking slightly above January estimates, DuBravac said, with flat panel unit sales running flat year to date, compared with a slip of 2.3 percent for 2011. LCD unit sales are up about 2 percent year to date, he said, driven by larger screen sizes. Plasma unit sales are down about 30 percent, he said, but there’s been “no decay” in wholesale pricing in plasmas. After 4 years of a decline in the average selling price of TVs, that trend has taken a turn, DuBravac said, from an average of $515 last year to about $540 year to date.

Internet TV sales have done well through the first half of 2012, DuBravac said, having moved from 10 percent of unit volume in 2010 to 18 percent last year and forecast to reach 23 percent of TV sales by the end of the year. The next upgrade cycle for TVs, which will run from 2013-2015, will be led by OLED TV prices moving mass market and 4K TVs.

Unit sales of audio products, which plummeted 26 percent in 2011, are down 6.6 percent year to date largely on a slowdown in sales of “maturing categories,” including standalone MP3 players, DuBravac said.

The impact on digital camera sales by improving performance by smartphone cameras, predicted for the past 3 years by industry analysts, is finally being felt this year, DuBravac said, citing “significant pressure on overall unit volume.” There’s been positive momentum on individual segments within the category, though, including higher priced digital SLRs and mirrorless models, which are up close to 7 percent in units and 17 percent in revenue, he said.

The video game cycle will be important to watch as the industry moves to the second half of 2012, as the category shifts away from its typical five-year refresh pattern, DuBravac said. Nintendo is following the pattern, bringing a new console to market this year, but “those dynamics aren’t in place” for Xbox or PlayStation platforms that are “widening out to 6-7 years,” he said. Microsoft’s SmartGlass concept to provide a second screen experience next to the Xbox for tablets and smartphones “is changing the hardware story from what it was,” he said.

Black Friday 2012 will be “bigger than ever,” DuBravac said, noting that early openings were successful last year, despite some consumer pushback. Midnight sales starting at the stroke of Black Friday “are here to stay,” DuBravac said. Sears’ 10 p.m. Thanksgiving opening didn’t draw as many customers as hoped, though, and retailers will continue to experiment with store opening times, he said. Toys R Us, which opened at midnight last year, could move to 8 p.m. Thanksgiving night this year, he said, “to capture early traffic.” Black Friday is expected to become more of an event in Europe this year as what’s become a “national holiday” in the U.S. “spills over heavily into other markets,” he said.