4 Predictions for Consumer Electronics Retail in 2019
The year 2018 was, for all intents and purposes, a major rebound year for the consumer electronics retail industry. After a rough 2017, which many had dubbed the year of the retail apocalypse, this industry put its head down over the past 12 months and proved why it’s still a viable industry. Consumer confidence trended higher throughout the year, which translated to more spending year-over-year. The same could also be said about our own Dealerscope CE Retail Confidence Index in 2018. Retailers in the space were, on average, more confident throughout 2018 than they were over the 12-month period prior.
So, as we enter our third full calendar year’s worth of CE retail confidence data, what should we expect to unfold throughout 2019? With such positive performance leading into this new year, is the industry set up for a major letdown? Are expectations to high for the industry?
We can certainly sit here and pontificate about all of the great things that may or may not happen. But with the trove of data that we have available to us, we like to ground ourselves in numbers here at Dealerscope. So, much like we did last year at this very same time, we looked to the data to try to uncover some of the realistic trends that we expect to see occur throughout 2019.
It’s with those hard numbers and other outside projections that we present to you our major predictions for the consumer electronics retail industry in 2019. (And don't forget to take a look at how we did in our predictions for last year.)
1. Connected Home becomes the top-performing product category of all time.
Though it’s not that far of a stretch to make this prediction—Connected Home was the second-best performing product category of 2018—this speaks volumes for the turnaround in consumer sentiment towards connected home products in a very short period of time. It wasn’t long ago that the retail industry was talking about having to combat with some tough consumer perceptions of the smart home space and the products that connect to the Internet of Things. Of course, privacy and the like are still very much a concern to the average consumer, but as our own DS Index data has shown, those concerns haven’t translated into poor sales within the category.
Through 2018, Connected Home trailed only Smartphones as far as their lifetime average is concerned—7.32 on a 1-to-10 scale compared to 7.24. However, looked at in a vacuum, the 2018 calendar year saw the two end in a statistical tie with 7.39 ratings. And diving even deeper into the numbers, Smartphone was the only category this year that saw a drop in its lifetime average.
Numbers tell half of the story though. The smartphone market has really stagnated over the last year or so as manufacturers of the devices have all but run out of ideas for how to innovate in this category. The camera appears to be the last frontier for smartphones as makers jam more and more lenses onto the back and front of our phones, but other than that, the market seems just about tapped out. And because of that, people are holding onto those devices longer.
On the flip side, the Connected Home segment is experiencing impressive growth both from the sheer mass of product available, to the innovation in the space. It’s getting easier and cheaper to make one’s home connected. And as such, retailers will find greater benefits from this space than any other available to them. And that’s where the DS Index will start to show this category as being the most important to the CE retail industry.
2. Independent retail tracks higher, year-over-year.
One of the coolest things about our 2018 DS Index reports was our closer look at the store-type confidence levels throughout the year. Whereas we’ve always reported on the confidence level of the industry as a whole, our breakdown this year included an additional layer that looked into the different segments of retailers—from big box, to regional retailers, to independent store owners.
Throughout the year, the regional channel consistently lead the way as far as the most confident sector of the CE retail industry, and they ultimately outclassed the other channels from an average confidence score standpoint (regional stores average a DS Index score of 203.06 in 2018, followed by independents at 183.71, and big box at 175.63). But towards the end of the year, the narrative really took a sharp turn. Whereas the regional segment still posted strong albeit declining scores throughout the final six months of the year, their independent counterparts saw their scores consistently climb.
In fact, the two strongest months the channel posted in 2018 came during the final two months. And as such, we expect that momentum to continue into 2019 and carry the independent store to a much stronger 2019 average confidence score.
3. The average DS Index score will rise again…
With their “sea legs” back under them and the worries of the 2017 year well in the rear view mirror, we believe the industry will post another strong year in terms of overall confidence. The DS Index’s average score in 2018 was a 190.8, up from 186.01 in 2017. Looked at closer, the DS Index tracked higher in 10 of the 12 months this past year.
Looking to 2019, as the industry continues to innovate and find ways to get consumers into their stores, we expect the DS Index to track even higher in 2019.
But, from a pure numbers argument, the momentum that the industry has heading into 2019 is really what firms up that prediction. The DS Index experienced its largest-ever single-month gain during the final quarter of the year, and the report closed with its second highest total ever recorded to date. Understanding that our historical data shows another rise heading into January, that means we could see a record-high DS Index score in January, which would set the industry up for another strong year.
4. …but only after taking an initial hit because of the tariff issue.
That said, if there’s going to be one thing that holds the industry up from experiencing those gains, it’s the continued concern over tariffs and their impact on the retail sector. The 90-day delay that was agreed upon between the U.S. and China felt like a bit of good news during December, just as the industry was preparing for proposed increases to 25 percent tariffs on hundreds of billions of dollars of goods imported from China.
How these continued negotiations will ultimately end up is really a coin-flip scenario. But our gut says that we’ve seen the worst of these policies. It’s not good for business, for consumer confidence, or for the jobs market here in the U.S. for these policies to remain in place or to escalate even further. We have to believe that those in Congress and the White House feel the same way, and that they’re working to ensure the two countries can put an end to this trade war.