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US Smartphone Sales Put Pressure on Traditional CE and IT Sales

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U.S. consumer technology holiday sales declined 5 percent in 2010 totaling $10.3 billion, according to the NPD Group's Weekly Tracking Service. The heavy sales promotion early in November, prior to Black Friday, did not entice shoppers to spend early as sales results for the first three weeks of November fell by 5 percent compared to the prior year.

In addition, the traditional CE and IT categories felt significant spending pressure from the expected growth in smartphones, strong tablet and e-reader sales, as well as the rebound in the video game market. Overall NPD estimates that 2010 sales for the 9 week sales period will total $14.9 billion down 4 percent from last year.

"Record sales in 2009 across major categories such as notebook PCs and TVs, combined with a significant slowdown in the pace of price declines created a difficult headwind for the industry in 2010," said Stephen Baker, vice president of industry analysis at NPD. "With retailers and manufacturers focused on price maintenance, tech consumers ignored early season promotions, and instead keyed in on the traditionally price-aggressive deals offered during Black Friday and the week before Christmas. As a result, sales for the first three weeks of November and the first three weeks of December were significantly weaker than the traditional bookmark shopping periods."

The PC market had tough shoes to fill this holiday season coming off last year's buzz around netbooks and the Windows 7 launch. Adding to the already expected sales challenges for this holiday has been the tremendous success of tablets in the consumer market to date. NPD estimated early this year that tablet cannibalization rates could be as much as 15 percent likely impacting the sales of close to 1 million PCs during the holiday season. Notebook unit volume fell 9 percent with little to no discounting, as ASPs remained flat. Netbook unit volume declined 38 percent versus last holiday and accounted for 19 percent of Windows' notebook sales down from 27 percent of last year's volume. Desktop sales also took a hit dropping 16 percent in units.

Among the top growth categories were stereo headphones, which saw 30 percent unit and 48 percent dollar increase over 2009. DSLR cameras grew 16 percent in units and 23 percent in dollars, Blu-ray unit volume jumped 27 percent and hard drives were up double digits for the second straight year.

Some of the categories that have traditionally lent themselves to gift-giving items experienced a rough holiday season. Point-and-shoot camera sales declined 9 percent in units, MP3 player unit sales dropped 8 percent, GPS fell 24 percent in units, and digital picture frame unit volume fell by 24 percent.

"The industry suffered during the 2010 holiday season as the high-volume categories such as cameras and MP3 players experienced unit volume declines," said Baker. "Though more niche and converged devices were attractive to consumers looking to replace older products, the volumes to drive industry growth simply weren't there."

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