Jan 26, 2009 12:00 PM,

The economy's CE victims

By Sarah Reedy

Revenue growth in the consumer electronics industry is unlikely this year, according to Gary Shapiro, president and CEO of the Consumer Electronics Association, who said the CEA is projecting a 0.6% drop in revenue compared to 2008. While the Consumer Electronics Show had vendors discussing ways to stave off the downturn, Forrester Research released a survey indicating that the services connected to these devices could be their saving grace.

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Consumers might not be willing to purchase a new device this year, but they will stick with a service that maintains the usefulness of a device they already own. Mobile phone and Internet service especially will remain steady in 2009, Forrester found, while new products such as personal navigation devices, satellite radios, PCs and digital cameras will slow.

Shapiro pointed out that the CE industry has enjoyed seven years of uninterrupted growth and has only experienced revenue declines in four years of the last four decades. Despite the anticipated decline, the CEA expects consumers in the U.S. will buy more than 1 billion consumer products in 2009. While unit volume sales may grow, lower prices are driving the revenue down. Consumers are getting very good deals, he said.

Forrester and Shapiro both agreed that focusing on the home is the best bet. As more consumer take “staycations,” they will look for entertainment options. Consumers are twice as likely to reduce spending outside the home as they are inside, and 16% of Forrester's respondents said they would actually spend more in-home.

The objective for service providers should be to give consumers a reason to stick with their current plans by emphasizing new services that tie existing services together, such as caller ID on the TV. For CE manufacturers to thrive in the recession, they must make the link unbreakable between saving money by staying home and CE products.

“In all this turmoil, our industry remains a bright light,” Shapiro said. “We do not seek a government handout or bailout. Instead, we seek opportunity.”