• by Aaron Baar , July 21, 2009

Sales of consumer electronics will decline nearly 8% this year to $165 billion, thanks to the recession and dropping prices on some of the most popular products, according to the Consumer Electronics Association.

That's the bad news. The good news, according to the CEA, is that the sector is doing better than other areas of the economy -- like real estate and the auto industry -- and next year will see slight (as in less than 1%) growth.

"Consumer demand for electronics remains intact," Steve Koenig, the CEA's director of industry analysis, tells Marketing Daily. "But revenue growth is hard to come by."

The biggest revenue driver for the industry remains digital displays and televisions, comprising 15% of all industry sales. While shipments are expected to increase 8% in 2009, declining price and increased demand for smaller size will cause revenues to decline 6% during the year to $24 billion.

Such "trading down" is common across the industry, Koenig says. "Consumers are moving from national brands to private-label brands," he says. "They're buying fewer jumbo screen televisions and buying netbooks rather than notebooks."

According to the CEA, netbook shipments have risen 85% to eight-and-a-half million units. The product's lower price point is having resonance with consumers who are trying to cut spending during the recession, Koenig says.

There are other bright spots as well. According to the CEA, Blu-ray DVD player shipments have increased 112% this year to nearly six million. And even as prices drop, revenues from sales of those players are expected to top $1 billion, up 48% over last year. However, prices are dropping faster than expected for those players as well, which may lead to less revenue growth, Koenig says.

Smartphones also continue to grab consumers' attentions. According to the CEA, one of every four handsets sold this year will be a smartphone, and shipments are projected to increase 3% for this year.

Overall, however, the fact that consumers are continuing to buy consumer electronics in the current economic climate indicates that the perception is that consumer electronics are more a necessity than a luxury, Koenig says. "Technology is woven into the fabric of our society," he says. "Even in this challenging economy, consumers are going to keep buying, though they may fine-tune that a bit."