Lagging Economy Could Boost Consumer Electronics - InformationWeek

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10/29/2008
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Lagging Economy Could Boost Consumer Electronics

A study suggests consumers may spend less on pricey vacations and more on relatively inexpensive gadgets.

A new report indicates that home entertainment and consumer electronics sales could rise through a recession as people spend more time at home and take a "staycation".

"Sharp rises in unemployment, falling house prices, low wage growth and faltering business confidence are all the hallmarks of a stumbling global economy, though in times of economic hardship we've seen consumer electronics and in-home entertainment weather the storm," said Sarah Carroll, strategy director at Futuresource Consulting. "Indeed, expenditure in these segments can even increase."

"Rather than going on vacation or dining out by candlelight, consumers see the purchase of hot new 'must have'' electronics items like Blu-ray players, flat panel TVs or smart phones as a far better value-for-money option," she said. "The tangible benefits of these products can be enjoyed for a long time to come and are seen by many as essential items once consumers begin the retreat into their living rooms."

During the economic slowdown of 2001, digital cameras and DVD players sold well, and sales of VCRs in the United Kingdom grew by 440% between 1980 and 1983. Futuresource released a forecast this week indicating that the markets for flat panel HDTVs and Blu-ray disc players will grow in Europe and the United States this year, as consumers upgrade to more expensive and advanced products.

The report states that the U.S. flat panel market would likely near 30 million shipments this year. LCD screens are expected to grow by 40% compared to last year. Still, many U.S. consumers shop for smaller screen sizes (32 inches and 42 inches.) That means U.S. growth for 50-inch screens and larger sets is likely to slow.

Futuresource expects 6% growth in the western European TV market this year. Price cuts up to 25% are fueling consumer interest in 42-inch screens and larger models, according to the report, and many Europeans want to upgrade their bedroom or kitchen CRT sets to small LCD display screens.

"Flat panel growth is expected to continue into 2009 and beyond, with panel suppliers expanding production and opening next generation plants, which will ultimately help to drive average prices down further and boost demand," the report stated.

Blu-ray disc player shipments are expected to triple in Europe's top five markets and exceed 1.8 million in 2009.

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