First-Half 2017 Sales Better Than Expected Although the Consumer Technology Association (CTA) forecasted weak 2017 growth at the beginning of the year, performance has outpaced expectations during the first half of 2017. Total retail revenues were $321 billion, a 3.2% increase from 2016. Despite smartphone market saturation (91% of Internet users have one), 59% said they are planning to upgrade within the next year. Most of those planning to upgrade are adults 25–34 (64%), followed by adults 35–44, 62%, and adults 55+, 45%. Even mature categories performed better than expected, and factory-installed auto technology joined the top-five list for the first time, replacing desktops. The top-five maturing products accounted for 53% of industry revenue.

Emerging Tech Takes Center Stage Drones, OLED TVs and virtual-reality products are forecasted each to reach $1 billion in revenues for the first time during 2017, according to the CTA. During 2016, 22 million North American homes used more than 31 million smart home systems. Berg Insight forecasts that by 2021, 73 million North American homes (55%) will be smart homes. The interface will shift from apps to voice control/digital assistants. Sales of connected devices, many of which utilize the Internet of Things (IoT), are projected to total a record of 635 million units during 2017, a 6% increase from 2016.

Dynamic Retail Landscape Since 2016 revenues only increased 1.09%, CE retailers adjusted. GameStop bought two wireless communications chains and Phone Surgeons now provides mobile phone repair inside BrandsMarts. Others, like HHGregg, have dropped CE completely. In a survey of CE retailers, Dealerscope found that the percentage that underperformed their sales goals by 11% or more decreased from 23% during January to 19% during February and 15% during March 2017. Retailers were most optimistic about sales of smartphones (7.9), headphones (7.3), connected home (7.2) and audio (7.1) and least optimistic about digital imaging (6.0), drones (6.0), car tech (6.1) and emerging tech (6.0) (All on a scale of 0–9).

CE Warriors: Best Buy vs. Amazon Amazon’s 2016 sales of consumer electronics increased 25%, according to TWICE’s Top 100 CE Retailers Report, rapidly closing the gap with market leader Best Buy. Just more than half of consumers (51%) prefer to buy CE in-store compared to online. Best Buy, however, is seen as a winner over Amazon in taking CE business from bankrupt rivals HHGregg and RadioShack, and struggling Sears. Best Buy’s online sales increased 22.5%, and it may be increasing its lead; Amazon’s Q1 share of CE decreased to 46.7% from 48.9%, while Best Buy’s share increased from 7.8% to 8.9%. Reasons were price matching, better Website and added-value services.

CE Consumers Less than half (47%) of consumer electronics are bought by men, 34% by women and 19% of purchases are made as a couple. A little more than one-third (35%) earn less than $35K annually, 29% between $35K and $74K and 35% earn more than $75K. The biggest reasons consumers gave for buying at a particular retailer were competitive price, 62%; good selection of products, 27%; previous experience with store, 23%; and convenient location, 17%. The most popular consumer electronics brands during 2016 were Apple (14.6%), Samsung (13.5%), Sony (11.1%), Hewlett Packard (8.3%) and Dell (6.8%).

The Future Never Sleeps According to a report from Accenture, several factors have caused IoT adoption to be slow. These include lack of value perception (62% of consumers think IoT devices are too expensive) and privacy fears (47% are concerned about security and privacy). Voice-activated digital assistants from Amazon and Google are enabling a new class of compatible devices, which may trigger consumer demand. Smart-home items are a good bet, because they also enable retailers to sell installation services. Audio products are hot, especially individual headphones, driven by Apple’s elimination of the headphone jack and speakers. Retailers can also benefit from new electronic devices focused on beauty, an increasing category for Millennial shoppers.

Advertising Strategies For smart home and other IoT products, advertise individual products as well as bundles, including hardware, security software and installation to allay consumers’ fears and add convenience. Price matching or low prices are great motivators, combined with attentive, knowledgeable salespeople, who can help customers make the right choices, and in-home and in-store services. Offer same-day delivery to appeal to Millennials and Gen Z buyers and effectively compete with Amazon Prime’s service.

New Media Strategies To appeal to Gen Z consumers, use Snapchat and Instagram to give them a “sneak peek” at the latest, hottest tech gadgets. Make it easy to buy directly from the content, since they make many impulse purchases. Crowdsource content from buyers of smartphones with improved cameras, with holiday themes (Valentine’s Day, Mother’s Day, Christmas, etc.) or ideas (travel, fitness, friendship, etc.) and post on social media with links to the products on which they were recorded. Invite customers to post videos of them using their new voice-assisted device (Amazon Echo, Google Home, etc.) to order merchandise.