Gary Shapiro on consumer electronics trends and the CEA

Gary Shapiro, president and CEO of the Consumer Electronics Association, CEA (www.ce.org) talks with VentureOutsource.com.

In this exclusive interview, read Mr. Shapiro’s responses to questions about consumer electronics industry trends and what’s in store for the future; the whims of finicky consumers, private-label consumer electronics, demographics of the fastest growing consumer electronics purchasing segment and what they’re buying, and more.

Transcripts from that discussion follow …

VentureOutsource.com: There is an ongoing trend for private-label consumer electronics products being built by retailers such as Wal-Mart and Best Buy. Some say the trend is shifting influence away from electronics products built by OEMs — to electronics manufacturing services (EMS) providers and original design manufacturing (ODM) companies — whereby these outsourcing providers then work directly with the retailers to develop private label electronics products. How fast does the CEA feel the private-label consumer electronics market is growing? Which end-market segments do you see experiencing the fastest growth, and why?

Shapiro: Private label brands are a cyclical phenomenon, but they present brand reputation risks and retailers also simply go for the lowest price product. We often see retailers get burnt by lower cost vendors who may not be paying patent royalties, complying with applicable laws or considering warranty obligations.

CEA market research forecasts some of the fastest growing consumer technology segments in 2008 to include LCD TVs, HDTVs (1080P) and high-definition DVD players (Blu-ray or HD DVD).

Gary Shapiro President & CEO Consumer Electronics Association CEA)

As the cut-off date for analog broadcast, February 17, 2009, quickly approaches and flat screen TVs become more affordable the HDTV market will continue to soar.

VentureOutsource.com: Which age range, or segment, of consumers who purchase electronics products (e.g. students, teens, adults, professionals) has CEA found to be the most active when it comes to buying the latest technology product? What types of consumer products is this group purchasing? What do you feel are two of the top drivers for this segment’s decision to purchase?

Shapiro: Early adopters, accounting for roughly 20 percent of consumer electronics buyers, are the most active purchasers of new technologies. The early adopter segment spans all demographic variables, although a higher concentration can be found in the 24 to 44 age segment. CEA’s market research forecasts the fastest growing categories in 2008, based on year-over-year shipment revenue growth include, but are not limited to the following:

In addition to the obvious drivers of feature set and price point, two factors that are increasingly driving consumer electronics sales are product design and aesthetics, and products that easily connect and interact with other devices.

VentureOutsource.com: Which two (2) pieces of Federal legislation, either pending passage or recently passed (besides environmental compliance and related legislation), does CEA feel will have significant impact on the way companies design and manufacture consumer electronics products? How is CEA helping electronics company executives address the challenges associated with these two pieces of legislation?

Shapiro: Free trade is vitally important to the growth of the global consumer technology industry. In fact, in 2006 U.S. high tech companies exported more than $220 billion of their products, accounting for one fifth of total U.S. exports, and making high-tech America’s largest export sector.

Without free trade innovation can be slowed, products can be priced out of reach, competition can be choked and services can be restricted. And Americans understand the importance of free trade to our economy. In fact, a new CEA study finds that 69 percent of Americans agree trading with other countries is good for the U.S. economy.

Earlier this month I, on behalf of CEA, along with Dan Glickman, chairman and CEO of the Motion Picture Association of America (MPAA) and Mitch Bainwol, chairman and CEO of the Recording Industry Association of America (RIAA), sent a letter to Congress expressing our gratitude for the passage of the Peru free trade agreement (FTA) and seeking additional actions to reduce foreign trade barriers.

Specifically, our organizations requested that Congress pass pending free trade agreements (FTA) with Colombia, Panama and the Republic of Korea, and create a pathway for the renewal of Trade Promotion Authority (TPA) that would allow the President to more easily negotiate additional trade agreements.

In addition, potential changes to the copyright laws will significantly affect the consumer technology industry. We support HR 1201 which would encourage innovation by removing devastating penalties for accidental infringement. We oppose all proposals which burden manufacturers, restrict technology and limit consumer choice.

VentureOutsource.com: Can you please discuss two (2) trends CEA sees taking shape in the way electronics executives market their consumer electronics products?

Shapiro: Consumer technology companies are beginning to micro-target to consumer segments. Internet-based marketing often provides the tools to reach niche consumer segments with targeted sales and marketing pitches. Based on the 2007 Q4 survey of the CE Advisory Panel, electronics industry executives say they are interested in exploring new ways to reach potential customers through social networking sites and online video sharing sites.

Consumer electronics industry executives continue to work toward selling the ‘experience’ rather than simply selling ‘product specs and a box’. This may take many forms, ranging from the store-within-a-store concept; life-style merchandising, product demos and in-store training sessions, personal shoppers, experience stores, company sponsored user forum, and more partnerships between device and content providers.

VentureOutsource.com: Most successful consumer electronics products attract copycat products from competing companies. This can lead to rapid price erosion in the market. To help mitigate this risk, consumer electronics OEMs are forced to continually enhance their products or change them to support the latest technology or software. This scenario ultimately leads to a significant reduction in the product life cycles for consumer electronics products. What can manufacturers of consumer electronics products do to stay ‘tuned-in’ to the needs and whims of finicky consumers? What, if anything, is the CEA doing to help consumer electronics OEMs build more ‘certainty’ into helping OEMs manage consumer electronics product supply chains more effectively?

Shapiro: Market research helps us understand consumer trends, and we routinely use it to understand the needs of electronics consumers and the industry.

Market research is the number one member benefit at CEA. Our market research department conducts more than 30 studies each year. Recent studies include International CE Ownership and Market Potential, which found that global consumer electronics industry revenues exceeded $600 billion in 2007; The State of CE Retail, which estimated that consumers spent a record-breaking $22 billion on consumer electronics gifts during the 2007 holiday season and The Electronic Toy Market, a study recently released by CEA and the Toy Industry Association (TIA), which found that 75 percent of consumers who purchased an electronic toy in 2007 did so for its educational value.

CEA also offers a semi-annual forecast that measures the size of the industry and illustrates which categories are driving industry growth. We also have economic analysis that helps our members understand how the macro economic environment affects their business.

VentureOutsource.com: If you could hold a long dinner conversation with any one individual either living, dead, or fictional, who would you choose and what would you want to discuss?

Shapiro: This is a variant to the question I often ask job applicants. I think I would like a transcribed conversation with some of our Constitution’s drafters, as many major court cases debate what they meant.

But, given this real power, I would prefer coming back and talking to someone who attends the 2108 International CES one hundred years from now. What a future we have – and I would love to see it!