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Consumer Technology Spending Increases, But Slows

Spending on Consumer Technology Products Increased in 2006 but at a Slower Rate, According to The NPD Group

U.S. consumers spent more money on consumer technology products in 2006, but just as we saw during the holiday, they did so at a slower pace. According to The NPD Group’s consumer tracking service, U.S. consumer technology sales* increased 3.6 percent to $111 billion, down from the 7.2 percent growth experienced in 2005.

More consumers shopped in the stores than online in 2006, with brick and mortar revenue increasing by 4.6 percent to $85.8 billion, while e-commerce experienced only 0.5 percent growth to $25.2 billion.

Household income was a major contributing factor to the rise in 2006 consumer technology sales. Sales to high-income consumers, those with incomes over $75,000, increased 5.7 percent and accounted for 43 percent of consumer technology revenue in 2006.

Sales of all TVs in retail stores increased 15.7 percent to $18.2 billion while unit sales remained flat. E-commerce sales jumped 40 percent both in units and dollars to two million and $1.8 billion, respectively. However, online revenue only accounted for 8.7 percent of total TV sales, and units were only 6.4 percent of all TVs sold.

“While we saw good growth in online TV purchases, the e-commerce channel is just too small to have a material impact on the market right now, but that is likely to change,” said Stephen Baker, vice president of industry analysis, The NPD Group. “As large screen TV prices become more affordable we expect to see online TV sales grow.”

Retail sales were the principal driver for the PC market. Two-thirds of the $54 billion in IT product revenue came from retail, making it the third straight year that retail sales have outpaced e-commerce. Dell’s well publicized challenges have resulted in a major slowdown in consumer purchasing of PCs online.

“E-commerce is growing, but slower than retail,” said Baker. “As some of these structural changes evolve we expect to see online sales increase, however, for now, consumers continue to prefer the retail experience when they purchase technology.”

MP3 player retail sales were a big contributor in 2006. Sales of MP3 players increased 23 percent to over $6 billion. Nearly 78 percent of both unit and dollar volume came from retail sales, an increase of five percentage points from 2005.

* Consumer technology sales include IT, imaging, audio, video, and consumables.

About The NPD Group, Inc.
The NPD Group is the leading provider of reliable and comprehensive consumer and retail information for a wide range of industries. Today, more than 1,600 manufacturers, retailers, and service companies rely on NPD to help them drive critical business decisions at the global, national, and local market levels. NPD helps our clients to identify new business opportunities and guide product development, marketing, sales, merchandising, and other functions. Information is available for the following industry sectors: automotive, beauty, commercial technology, consumer technology, entertainment, fashion, food and beverage, foodservice, home, office supplies, software, sports, toys, and wireless. For more information, visit http://www.npd.com/.

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