Tech Toys May Take A Beating This Holiday Season

by Karl Greenberg, Nov 28, 2008, 5:00 AM

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If consultancy NPD Group is right, consumers may be backing off of tech toys and devices this holiday season.

The Port Washington, N.Y.-based firm's "Consumer Technology Holiday Snapshot Report"--which measures purchase intent for things like flat-panel TVs, desktop and notebook PCs, MP3 players, digital cameras, GPS devices, and digital picture frames--says consumers are either considering not buying such products or are looking for cheaper versions.

The firm culled data from 800 respondents to the October NPD Online Consumer Panel.

One-third of the 23% of consumers who had been considering buying a flat-panel TV over 40 inches wide said that because of the economy, they definitely are not going to buy one. About 12% of respondents said digital SLR cameras were on their shopping lists, but a quarter of them said they would not buy the high-end cameras.

Ross Rubin, director of industry analysis at NPD, says consumers may opt for products like a flip digital camcorder, which now can be had with high definition. "That should be a nice companion to HD TVs," he notes, adding that although the flat-screen market may not see the kind of growth it has experienced in the past few seasons, "we will see LCTVs do well compared to a lot of categories, especially in mid-sized versions where prices have come down a lot."

The firm says that those who are going ahead with purchases will likely opt for a less expensive brand or less expensive model from their manufacturer of choice.

For digital SLR cameras, however, brand loyalty matters, per respondents who reported that they will be looking for a less expensive model from the same brand. Not so for digital picture frames or MP3 players, where price is the driving factor.

Rubin says the results suggest that lower sales are in store across the board for device makers. "There was a significant percentage who said they will definitely not purchase products that they said they would--and even among those who said they would still shop in a specific category, there were many who said they would cut back on features or get less expensive products from the same brands or cheaper brands," Rubin says. "Many say they will cut back on accessories as well. When you are done with all those variables, there's a relatively low percentage who still plan to follow through with purchases."

"Apple has dominant share in MP3s, historically, but we have seen that share dip in the fourth quarter as retailers promote less expensive brands, and as consumers buy them. But nonetheless, we have seen slower sales for MP3 players in the U.S. this year," Rubin added.

He says NPD's household-penetration study earlier this year showed that MP3 player penetration was at about 50% of all households. "So it's maturing, and we have seen gains by less expensive products sold at outlets like Walmart at the sub-$100 category."

Another growth category is less expensive alternatives to products like notebooks. "We are seeing a number of manufacturers coming out with ultra-portable 'netbooks,' and this is the first holiday where consumers have had access to less expensive ultra-portable devices optimized for note-taking and Internet access, so there should be untapped market potential for such products that tend to be a little less expensive than the average notebook," he says.

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