CEA: Consumers To Spend More On Electronics, Services During Holiday Season


Consumers stand to buy fewer electronics this holiday season but likely will spend more on each purchase, with a growing amount of dollars going toward installation and integration services, according to the Consumer Electronics Association (CEA).

"Through our research, we're seeing a strong demand for value-added services, such as consultation, pre- and post-sales support, installation," Sean Wargo, senior industry analyst for the CEA, said Wednesday night at the Consumer Electronic Show preview in New York.

About 40 percent of consumers are interested in spending on some type of integration or installation service, Wargo estimated. The exact number, however, is difficult to gauge since most consumers are unfamiliar with the types of services available, he added.

Marc Gatti, owner of ResiMedia, a home integrator in Chevy Chase, Md., said he typically encounters two types of consumers: those in search of installation services for home theater or home networking gear. Both are willing to pay a fair rate for optimized solutions.

"There are people who come out of the gate saying, 'I'm too busy to do this. I don't have time to deal with technology. You make it happen because I trust you,' " Gatti said. "Then there are those who buy from a big-box retailer, try to cobble it together and find they just can't do it. Then I become their patron saint of botched installs. I come in to save the day."

This year, the CEA projects holiday gift spending on consumer electronics to hit about $22 billion, a 27 percent increase over last year, which translates to about $185 per household. Overall, spending on consumer electronics throughout 2006 is up by 15 percent over last year. Video cameras, portable MP3 players, gaming consoles, cell phones, notebook PCs and high-definition televisions are at the top of consumers' holiday wish lists.

"People are buying fewer products, but they're spending more," Wargo said. "What they're buying has a higher value."

CEA research typically focuses on consumers who buy mainstream electronics products at retail, as opposed to the higher-priced, more sophisticated home networking and entertainment systems installed by digital integrators. Still, CEA research gives a good picture of mainstream consumer spending intentions, which digital integrators can use to gauge what potential customers are interested in and the problems they face in optimizing product performance to get the most out of a digital home experience.

For example, overall TV sales -- driven by lower-cost, big-screen flat-panel sets and new technologies such as high-definition -- will jump about 16 percent this year to about $20 billion in total sales. The analog TV cut-off date, which will transition broadcast signals to digital in February 2009, will also increase sales of updated sets, industry experts say.

New TVs have provided digital integrators with strong services opportunities, including installation, hiding the wires, calibration and integration with the home network. TVs are often considered the gateway or entry point to the digital home and offer upsell opportunities, including multimedia PCs, gaming consoles, surround-sound audio systems, and digital video recording or DVD recording units.
In its recent Home Theater Opportunities report, CEA noted that more than half of the home theaters in U.S. households are more than three years old, making them ripe for upgrades and add-ons.

About 25 percent of those consumers are considered "level 2" players, meaning they spent between $3,500 and $25,000 on their home theater, with an unknown amount "potentially" going toward installation or integration services. About 20 percent of all home theater consumers polled said they bought their system from independent dealers, who are increasingly adding more services with the product sale.

What causes the most consumer dissatisfaction with new home-theater systems are the same problems that integrators typically solve: dealing with a confusing amount of wires, consolidating and configuring remotes, improving sound and image quality, and PC integration, according to the report.

"Everyone can start somewhere in developing a digital home, and that somewhere can be with a TV," Mike Seamons, director of sales and marketing for Exceptional Innovation, developer of the Life|ware home control and automation system, said during the CES preview event. "You can build on that foundation with more components. And new products like Life|ware are retrofit and affordable, so they fit into almost any home."

Integrators and dealers should take a similar bundling and upsell approach to other hot-selling holiday products, such as digital cameras. Gary Shapiro, president and CEO of the CEA, said the digital imaging sale usually ends with the camera, leaving sales of optimized flat-panel displays, new printers, and storage and sharing devices on the table.

"A lot of people are buying cameras but nothing more with it," Shapiro said.

To introduce consumers to new products and solutions, the 2007 CES expo -- which will be held Jan. 8 to 11 at the Las Vegas Convention Center, Sands Expo and Convention Center, Venetian and Las Vegas Hilton -- will add gaming, IPTV, podcasting and anytime/anywhere technologies to its 20 other TechZone feature pavilions. Bill Gates, Michael Dell, Motorola's Ed Zander, Disney's Robert Iger, and Cisco Systems' John Chambers are featured keynote speakers.

Chambers will use the stump to talk about Cisco's new position as the umbrella company driving easier-to-use, more compatible and better-pconnected products through its Linksys, Kiss and Scientific-Atlanta divisions. Cisco also is expected to roll out a channel program to support the new strategy in the next six to 12 months.