CTA Dials Down Tech Spending Growth Prediction for 2017 Holiday Season to 1%

Steve Koenig, senior director-market research, cited “long-tail innovation” in tech, spotlighting nascent categories of smart home products, digital assistants and drones that will see double-digit growth for the quarter, albeit at low volumes. Meanwhile, growth in more mature categories -- including TVs and wearables -- is slowing, with TVs expected to inch ahead 1 percent in the quarter to 14.3 million units. The 4K TV category is expected to jump 48 percent vs. 2016 to 6.7 million.

Estimates are for the whole season, not a year-to-year shopping day comparison, Koenig told us. The higher number of shopping days this season is "fertile ground for more shopping holidays beyond Black Friday and Cyber Monday -- thus the ‘Cyber November’ trend," he said. "More interesting is Christmas on Monday, which could mean we’ll see more last-minute shoppers than usual," he said. Retailers likely will put in place more shopping holidays this season to "forestall a crush of shoppers the weekend before Christmas," Koenig said.

On the comparison between CTA's modest growth projections vs. the National Retail Federation's holiday season projects of 3.6-4 percent, Koenig said, "Holiday 2017 will be good overall and also for tech. What makes robust tech spending growth challenging for 2017 is the comparison to a very solid 2016 season," he said. In the core categories -- TVs, smartphones, PCs and tablets -- unit volumes will be "mostly flat against a backdrop of lower prices," especially for TVs, he said. "This means there is greater pressure of other segments to make up the revenue difference." CTA is looking to emerging tech to make up some of the difference.

Smartwatches are forecast to plummet 26 percent in Q4 to 4 million units, while fitness trackers slip 5 percent to 11.9 million units. Koenig cited “reasonable expectations” for many mainstay CE categories, especially screen-based ones. “We’re even seeing on an annual basis, not just holiday, very moderating growth” in screen devices, he said. Moderating growth against a “backdrop, especially around holiday, of double-digit price declines, is going to make it difficult to make up that difference,” he said. Many of those products are at sub-$200 and sub-$100 price points, he said.

Among the up-and-coming categories, drones are expected to grow 31 percent to roughly 1.6 million units, Koenig said, with VR headsets jumping 283 percent to 2.7 million units, digital assistants climbing 22 percent to 4.4 million and smart thermostats growing 40 percent to 1.6 million, said Koenig.

Results of 1,008 U.S. adults surveyed Sept. 7-10 indicate store traffic will be lower this holiday season, said Lesley Rohrbaugh, senior manager-market research. She cited Deloitte projections that online sales will grow 18-21 percent, a “fading focus on Black Friday” will continue as retailers pull forward sales earlier to create “Black November” instead. In the survey, 43 percent of adults said they plan to start shopping in November (16 percent before Thanksgiving, 27 percent after) and 23 percent planned to start in December. Some 59 percent plan to make an online purchase.

Consumers will be looking for more shipping benefits, said Koenig. With free shipping now the norm, some retailers are moving to same-day delivery. Macy’s and Best Buy have announced same-day delivery, and 35 percent of tech shoppers plan to take advantage of the service, he said.

Data mining will play a more prominent role this holiday season, and consumers will find themselves at the center of more targeted marketing, said Koenig. Marketers have been working over the year to put “a face to behaviors” to learn when consumers want to shop and how much they want to spend using artificial intelligence and big data analysis. “They’re going to be meeting you wherever and whenever you are,” he said.

On average, U.S. adults are expecting to spend about $478 on tech gifts this season, said Rohrbaugh. In households with children, the average tech spend moves up to $559. Leading mainstream items are headphones and portable chargers, while drones moved into the top three items among early adopters, she said. Half of respondents plan to spend about the same on tech as last year, but fewer respondents plan to spend less than in 2016, she said. A quarter of respondents who plan to spend less said they already have what they need, she said, and a third said the political climate is affecting their holiday spending plans.

Return policies will come under shopper scrutiny more this holiday season, said Koenig, noting Walmart announced a revised return policy. Walmart shoppers can use their app to scan a product to log it into their system and then take the product back to the store where it’s scanned again, eliminating the need to stand in line waiting for a return. Returns are especially important especially post-holiday, he said.

Koenig highlighted the omni-shopping trend. “You’re going to be shopping 24/7 this holiday whether you realize it or not,” he said, referencing the “barrage” of push notifications and targeted deals that will lead to more impulse buys. Shopping by voice will come into play this holiday season, which Koenig called “the Alexa effect.”

On consumers’ holiday wish lists, the most requested gifts are smartphones (8 percent), TVs (9 percent), tablets (5 percent) and laptop PCs (9 percent). Other items were drones (2 percent), videogame consoles (3 percent), robotic vacuums (2 percent), smartwatches (3 percent), activity trackers (2 percent) and cameras (3 percent), such as 360-degree types, according to the survey. Koenig mentioned a “bookend effect” of items at the low end and high end of the price scale.

Some 128 million adult gift givers plan to buy communications devices including smartphones (27 percent) cases (33 percent), chargers (30 percent) and Bluetooth headsets (19 percent). Some 124 million plan to give computing devices: notebook (25 percent), tablet (23 percent), network device (14 percent), printer (14 percent), e-reader (13 percent), desktop PC (11 percent) and external storage (18 percent).

Among the 91 million video gift givers, 22 percent plan to give a digital media player, 14 percent a Blu-ray or DVD player, 8 percent an Ultra HD Blu-ray player, 20 percent a TV and of the 58 percent planning to give a 4K TV as a holiday gift, 37 percent plan to go OLED, said the survey.

With 131 million adults planning to give audio products, 38 plan to gift headphones, 27 percent Bluetooth speakers, 20 percent Wi-Fi-enabled speakers, 14 percent MP3 players, 15 percent sound bars and 8 percent high-res audio players, it said. Sixty-seven million adults plan to give wearables, with 17 percent choosing activity trackers, 9 percent a GPS sports watch and 16 percent a smartwatch.