The consumer technology market in Western Europe has grown for the third quarter in a row (year-on-year figures) according to a recent report from GfK TEMAX. Growth is being driven by increasingly demanding consumers who are seeking more innovation, connectivity and mobility, which is leading to a blurring of market categories.

The same GfK TEMAX report showed that Q2 2010 saw a +3.6% increase in comparison to the same period last year. Particularly strong this quarter were the Consumer Electronics (+8.9%) and Information Technology (+4.6%) sectors. And this isn’t surprising, given the rapid pace of innovation and thus the enormous growth in breadth and depth of product range for both sectors.

Despite smartphones and mobiles with open operating systems (making up a quarter of the mobile market in Western Europe) having a volume growth of 62%, the Telecommunications market actually declined in year-on-year figures (-0.2%). It’s an extremely positive sign that the consumer technology market appears to be back on track, particularly after the year which was dubbed the “year of crisis”.

Consumer Electronics (CE)
The CE market did particularly well this quarter, which is down to new innovative and attractive product features, built-in HDTV tuners, LED-backlight TVs and televisions with internet connectivity. In fact, TV sales accounted for more than half of the turnover generated in the CE sector, with LCD TVs accounting for 90% of all TVs sold[1] . The success of LCD TV sales is partly down to the World Cup (there was a 77% year-on-year increase in flat-screen TV sales in the first week of the World Cup[2]) and also the digital switchover. These drivers of TV sales are seasonal and short-term so will growth slow in the future?

Well, the digital switchover is yet to be completed in six Western European countries (Austria in 2010, France and Greece in 2011, and Portugal, UK and Italy in 2012), which will influence TV sales positively over the next few years. 3DTVs are now the hot topic in the CE industry (iSupply are expecting 4.2million 3D TV sets to be sold globally this year[3]), not to mention the impact that 3D projectors, 3D Blu-Ray players and 3D Blu-Ray home cinema systems will have on the CE market.

Whilst 3D opens up many opportunities for growth, consumers are not yet fully convinced as to the benefits of upgrading their TVs. Much like the chicken and egg, many in the industry argue over what has to come first – quality 3D content or a wide enough audience? At the moment, we have neither, which leaves the 3D market relatively stagnant. However, sports fans are interested (more than half high-level sports fans are early technology adopters[4]), and we saw the impact that the World Cup and its fans had on LCD TV sales. With the digital switchover continuing into 2012, the rise of IPTV and other innovative products, and some early success for 3DTV, prospects look good positive for the CE market.

Information Technology (IT) and Telecommunications (TC)
A current trend that is likely to become more pronounced in the future is the overlapping of IT and TC markets, if not with CE as well. E-readers (an example of this overlap) have done surprisingly well, despite only really appealing to two markets: enthusiastic readers and business commuters. In August, sales grew at rates in excess of 150% over the previous 10 months[5] . However, e-readers now face tough competition from an ever-growing range of tablet PCs. So now e-readers come with 3G and wi-fi, whereas iPad has an iBookstore app for those keen readers. So are we now in a time when we see a see-saw effect within the IT market? When tablets become more advanced, will netbooks, laptops and e-reader sales decline, and vice versa? 60% of iPhone users interested in iPads said they would replace all tasks of their home PC or laptop[6].

And what does this mean for the TC market? Surely smartphone providers and laptop and tablet PC manufacturers will begin to compete as well. The new Samsung Galaxy Tablet is an Android 2.2 based tablet PC, has a 7-inch screen, video calling, full web browsing and augmented reality applications, effectively providing plenty of stiff competition for the smartphone market. Pretty impressive. If it has GPS and navigation applications, it would affect the CE in-car electronics market too.

Which brings us on to the influence of smartphones and the IT market on the CE market. More and more TV content is available online, which could mean the beginning of the “cutting the cable cord” phase. Research by GfK NOP[7] suggests that four-fifths of the internet population watch IPTV (in the UK), 54% do so through a laptop and 45% through a desktop. 13% watch IPTV through their mobile handset, and this is set to increase. The trend towards TV and internet interconnectivity works the other way too. 15% of LCD TVs sold in June 2010 were internet capable[8].

The key words for these trends are “mobility” and “connectivity”, but also “interconnectivity”. We want technology anywhere, anytime and on whatever device we have to hand. And this isn’t just to make personal life easier and more convenient, but to make home experiences better, and businesses faster. The technology market seems back on track, with more people willing to spend more on better, more innovative products; at the recent IFA there were 8% more attendants than 2009, and 3.5 billion euros worth of sales (9% more than last year)[9]. Businesses seem intrigued as well, looking to spend more too; 48% of companies plan making enterprise applications mobile, with an interest in line-of-business software[10].

Consumer demand for increasingly connected and mobile products will drive growth of the technology sector in the future. What remains to be seen is the effect of this on TC, CE and IT sectors becoming more and more overlapping. Will it soon be time to rethink how to organise the technical consumer goods market? Because one thing is for certain: things will only get more connected.

SOURCES
For more information of GfK TEMAX data which also covers other technology goods such as office equipment and consumables (declined -3.3%), Photography (increased 3.4%), Major Domestic Appliances (increased 2.5%) and Small Domestic Appliances markets (increased 1.3%) click here http://www.gfkrt.com/gfktemax

[1] GfK TEMAX Western Europe, Retail and Technology http://www.gfkrt.com/gfktemax/fusion_report/index.en.html
[2] GfK Retail and Technology, Consumer Electronics http://www.gfkrt.com/news_events/market_news/single_sites/006091/index.en.html
[3] http://consumerelectronicsnet.com/articles/viewarticle.jspid=1195040
[4] http://www.nytimes.com/2010/09/12/weekinreview/12brustein.html?_r=1
[5] GfK Retail and Technology, Information and Technology http://www.gfkrt.com/news_events/market_news/single_sites/006292/index.en.html
[6] Based on 1000 online interviews conducted by GfK NOP among a UK representative sample of internet users.
[7] Based on 1000 online interviews among a UK representative sample of internet users.
[8] Findings from GfK Retail and Technology http://hiddenwires.co.uk/resourcesnews2010/news20100909-04.html
[9] http://www.ibtimes.com/articles/60639/20100908/world-s-biggest-consumer-electronics-show-ifa-concluded-strongly.htm
[10] Enterprise and SMB Networks and Telecommunications Survey, North America and Europe, Forrester Research, Inc. http://www.zdnet.com/blog/btl/tech-execs-betting-on-enterprise-mobility-apples-ios-android-ride-along/38978

Pictures courtesy of Rutger Blom

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Tags: 3DTV, Connectivity, Consumer Electronics, Digital switchover, eBook Readers, GfK TEMAX, Information Technology, Innovation, Internet Capable, iPad, IPTV, LCD TVs, Mobility, Smartphones, Telecommunications, World Cup