IHS iSuppli recently projected sluggish growth for single-purpose consumer tech devices like MP3 players, PNDs, and digital cameras. At the same
time they expect multi-function devices like smartphones and tablets to enjoy strong double-digit growth over the same horizon The IHS iSuppli statement quotes, Jordan Selburn as saying,
The success of multipurpose electronic equipment, often coming at the expense of devices dedicated to a single task, is reshaping the landscape of the consumer electronics industry… In many cases, users can replace a slew of dedicated systems with just one multipurpose device, gaining functionality and portability while simultaneously saving money… The story of consumer electronics is an ongoing survival of the fittest, and multi-tasking systems such as media tablets will have a hand in turning yesterday’s hot consumer electronics gear into tomorrow’s fossils,
While their trends and predictions are all directionally accurate and something we’ve been pointing to and discussing with clients since early last year as we’ve tracked the monthly OEM data, I think IHS iSuppli and Selburn are overly strong on the causality of these declines.
What is primarily driving the decline in these categories are the individual structural issues these categories face directly. For example, according to CEA Research, digital cameras are owned by 79 percent of households and these households own on average 1.8 digital cameras. Eight-nine percent of self-identified early adopters own a digital camera and even 73 percent of self-identified late adopters own one. Fifty percent of the households who do not own a digital camera say they’ll never buy one – suggesting we are extremely close to full market saturation for this category. Digital cameras will never be owned by all households and this has nothing to do with the introduction of other devices. Very few products ever enjoy 90+ percent ownership rates. The primary decline in digital camera sales isn’t necessarily what is happening in other categories – it is a function of what is happening in the camera category itself.
PND growth slowed and then outright declined largely because the technology is increasingly integrated into vehicles. I suppose the argument could be made that this is the ultimate multi-function device. MP3 players are owned by half of US households. We know MP3 players aren’t for everyone. In fact, 56 percent of non-owners still say they’ll never own one. Despite the fact the technology has been in the market for over a decade, only 37 percent of self-identified late adopters own one. Here again, the category declines as a result of hitting market saturation and not necessarily because there are alternatives.
Certainly, single purpose devices are impacted by Swiss Army Knife-like devices. Calculators likely have lower replacement rates (and subsequently growth rates) because of the ubiquity of computers. Multi-function printers represent a large share of the computer printer market. And I’m sure paper calendar
sales have slowed since the introduction of digital alternatives. Some of these changes might be more a result of living in an increasingly digital world than as a
result of multi-function device substitutes. Still, the impact is noted. About a quarter of the households who own a digital camera say they’ll never buy another digital camera. This rate is consistent with many other products (18 percent of households owning a smartphone say they’ll never buy another one). Still this result does suggest some households will not replace/upgrade their digital cameras because of alternatives.
Single-purpose devices have through the history of technology existed – even with the entry of multi-function devices. Single purpose devices have (and always will have) an important place in the market. The article/report cites Cisco’s decision to shutter Flip. By all accounts, Flip was highly successful. It was profitable and owned 40 percent of that market. Cisco closed the business unit to send an important message to the market generally and shareholders specifically that they were committed to moving away from experiments in adjacent consumer businesses and return a full focus within their core enterprise business. Despite high ownership rates of digital cameras (most if not all of which shoot video), Flip was able to do well. It did one thing and it did it well.
e-Readers are another great example of a single-purpose device that can thrive despite the introduction and existence of multi-function alternatives. e-Readers continue to grow rapidly despite the success of products like the tablet and the smartphone – both of which enable mobile/portable reading. Recent research shows consumers have a very low interest in considering other devices when they shop for an e-Reader – suggesting consumers largely find no alternatives to an e-Reader.
These are just a few examples of devices that have (and continue to) do well despite the introduction of new multi-function devices.
