Finding Opportunity in a Changing CE Environment Ben Arnold Executive Director, Industry Analyst Consumer Technology The NPD Group March 13, 2017 Prepared for ECRM

About The NPD Group Inc. The NPD Group is the leading provider of reliable and comprehensive consumer and retail business intelligence. Tracking sales of over $1 trillion ($USD) worldwide Wide industry sectors: automotive, beauty, commercial technology, consumer technology, entertainment, fashion, food and beverage, foodservice, home, office supplies, software, sports, toys, and wireless. www.npd.com @npdtech @npdgroup

What are the growth drivers in CE? Emerging technology categories (ex. VR, smart home, drones) are beginning to fuel total industry growth NPD forecasts 2% industry growth in 2017 Large tech categories have transitioned into maturity putting a focus on segments of opportunity New features like voice and wireless connectivity are providing growth to existing product categories Retailers continue to look for ways to optimize a shifting product landscape amid a changing shopper demographic More shoppers are looking for brand experiences from manufacturers and retailers

A slightly improved outlook for large volume categories 12 Month Ending December 2016 Dollar Growth Rates by Category – Total Retail Top Revenue Categories Top Growth Categories Deep Decline Categories Source: The NPD Group / Retail Tracking Service Categories $100M+ in Retail

Smaller declines in biggest categories continue to push towards growth The NPD Group, Inc./Retail Tracking Service, Positive = $50m+ and negative = -$100m+

Emerging Categories

Sales of Smart Home products grew 50% in 2016 Source: The NPD Group, Inc./Retail Tracking Service, Data doesn’t include Amazon Branded or Google Home, Home Improvement stores or Direct Service Provider sales

Smart home product purchased 1st IP Cameras are the primary entry device into the smart home Smart home product purchased 1st Base: Smart Home Owners Source: Connected Intelligence, Connected Home Automation Report, Q2 ‘16

Despite sales growth, adoption of smart home devices remains slow % of Internet HHs that own a smart home device Source: Connected Intelligence, Connected Home Automation Report, Q4 ‘16

360 degree cameras account for just 1% of total headset units VR/AR Headsets, 360 Degree Cameras Unit Volume, Monthly VR/AR Headsets 360 Degree Cameras Source: The NPD Group/ Retail Tracking Service

Mobile connected VR continues to scale Google Daydream Wayfair AR App

Instant print camera sales grew 129% in 2016 Instant Print Cameras, Film Dollar Volume by Brand; Growth Yearly Highly rated MILC has the potential to build on what was a successful 2014 Holiday. All DSLR makers should be watching out for Sony and other MILC manufacturers Source: The NPD Group / Retail Tracking Service

Sub $200 drones account for ¾ of total unit volume Dollar Volume, YOY Change 12ME Dec ‘16 Revenue Revenue Change The NPD Group / Retail Tracking Service Ending Dec 2016

Top selling drone accessories Dollar Volume by Type; 12ME Source: The NPD Group/Retail Tracking Service

New Features = New Product Segments

Emerging audio form factors are fueling digital assistant use Doppler Here One Sony MDR 1000x Google Home Amazon Echo Dot Bragi Dash

Holiday + iPhone 7 accelerated the transition into Bluetooth Stereo Headphones Dollar Share Bluetooth vs Wired; Monthly Source: The NPD Group / Retail Tracking Service

Unit Volume by Price Segment Unit demand is strongest in entry level and premium wireless headphones Bluetooth Headphones Unit Volume by Price Segment Source: The NPD Group, Inc./Retail Tracking Service

Google sold 660k units in Nov & Dec Wireless Speakers Dollar Share by Quarter Source: The NPD Group, Inc./Retail Tracking Service

Though audio remains a top application, the Echo use case is expanding Source: Connected Intelligence, Connected Home Automation Report, Q4 ‘16

US $1000+ point & shoot is up 33% YOY Digital Point and Shoot Dollar Volume by Price Segment, 12ME Highly rated MILC has the potential to build on what was a successful 2014 Holiday. All DSLR makers should be watching out for Sony and other MILC manufacturers Source: The NPD Group / Retail Tracking Service

Cameras vs Camera Devices Digital Imaging Dollar Volume by Year Source: The NPD Group/ Retail Tracking Service

Retail Continues to Shift

.com Share Continues to Grow eCommerce Dollar Share of Consumer Technology ($%) Source: The NPD Group / Consumer Tracking Service,

Retailers performing better online Source: The NPD Group / Consumer Tracking Service

Retail Stores=Brand Experiences

Technology Hardware Sales Dollar Share of Buyers by Age, Yearly 34 and under account for an increasing portion of total technology spending Technology Hardware Sales Dollar Share of Buyers by Age, Yearly Source: The NPD Group / Consumer Tracking Service,, No Consumables

Demographic + Technology + Brand = Disruption Spectacles

Thank You Ben Arnold Industry Analyst- Consumer Technology benjamin.arnold@npd.com @TechBarnold Nim Sharon Director, Business Development nim.sharon@npd.com Thank You