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Understanding Why Consumers Shop at Specialty,
High-End Electronics Stores
Joe Bates Director of ResearchConsumer
Electronics Association
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Survey Method - A

• Random National Sample
• 1,042 US Adults
• Fielded 4/8/05 to 4/11/05
• Margin of error /- 3.1
• All results weighted to reflect general US
  population

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Survey Method - B

• National Online Sample
• 2,770 US Adults
• Fielded 4/20/05 to 4/27/05
• Margin of error /- 1.9
• Results segmented by K-means Cluster Analysis
• All results weighted to reflect online US
  population

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Objectives

• Get an overview of CE market
• Determine why consumers shop or purchase at
  specialty, high-end electronics stores
• Determine why consumer dont shop or purchase at
  specialty, high-end electronics stores
• Understand consumers perceptions of specialty,
  high-end electronics stores
• Identify target markets for specialty, high-end
  electronics stores
• Learn how to go after target markets

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Market Overview

• Setting the Stage

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CE Industry Growth
10.7
10.7
7.1
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2004 Fastest Growing Products(Based on Shipment
Revenues)

• Blank DVD Media 211.7
• LCD TV 204.5
• Digital Video Recorders 203.9
• Portable MP3 Players 184.0
• SDARS Tuners and Accessories 145.1
• 5.8Mhz Cordless Phones 144.8
• Flash Media 127.6
• Plasma TV 58.4
• Digital Direct-view and RPTV 40.2
• Mobile Video and Navigation 34.8

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AV Quarterly Trends
Units 3.0 Dollars 9.2
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Audio Quarterly Trends
Units 4.1 Dollars 14.1
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Video Quarterly Trends
Units 1.7 Dollars 7.4
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Overall A/V AWP Trends
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Audio AWP Trends
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Video AWP Trends
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Consumer Overview

• Where Do Consumers Shop and Spend?

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The Top 20 CE RetailersRANKED BY 2003 ESTIMATED
CE SALES IN MILLIONS () Source TWICE

• 1 Best Buy 19,531
• 2 Wal-Mart 15,680
• 3 Circuit City 9,750
• 4 Dell Computer 6,263
• 5 Target 4,962
• 6 RadioShack 4,649
• 7 Staples 4,022
• 8 CompUSA 4,010
• 9 Sams Club 2,763
• 10 Office Depot 2,599

• 11 Sears 2,300
• 12 Costco Wholesale 2,283
• 13 Gateway 1,743
• 14 Kmart 1,728
• 15 OfficeMax 1,672
• 16 Frys Electronics 1,622
• 17 Gamestop 1,579
• 18 Toys R Us 1,165
• 19 Electronics Boutique 1,120
• 20 Micro Center 859

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• Average consumer spends almost 1,200 a year on
  home A/V products.
• Of this, 17 (204) is spent at specialty,
  high-end retailers.
• BUT.
• Average specialty, high-end retail consumer
  spends 1,985 per year on home A/V (all
  channels).
• Of this, 52 (1,032) is spent in this channel.

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Consumer Overview

• Why Dont Consumers Shop At Specialty, High-End
  CE Retailers?

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• 2 of the US adult population shops primarily at
  specialty, high-end CE retailers.
• 4 shop primarily at local independent CE
  retailers.
• The rest primarily shop somewhere else.

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The Customer Speaks
The prices in these stores usually run a lot
more than the average price They very rarely
discount anything.
Location is a little far away from home.
Sales people were very pushy and fake - not very
genuine in their desire to meet your needs.
Sales staff was very friendly, but annoying. You
just want to look around, they just want to sell
something!
Staff did not treat me as though I could afford
the merchandise. Treated other customers much
better. Did not feel like spending my hard earned
money there.
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Consumer Overview

• Why Do Consumers Shop At Specialty, High-End CE
  Retailers?

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The Customer Speaks
The store had a lot of really cool, high quality
products .
The customer service is great. The employees
actually know something about their products.
Many available brands to test and choose from.
Products displayed well, so that you could see,
hear, touch and get an idea of how it would work
for you. Products displayed were actually in
stock and available.
Someone that knows the answer to your question .
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Top Products Shopped For AtSpecialty, High-End
Electronics Stores

• HDTV (18)
• Flat Panel TV (18)
• DVD Recorder (13)
• Component Stereo Receiver (11)
• Component CD Player (10)
• Rear Channel Speakers (10)
• Subwoofer (10)
• Front Channel Speakers (9)

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Consumer Overview

• Why Do Consumers Shop At Other CE Retailers?

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Weakness of Specialty Pt. Deficiency
Analysis of Appeal of Store Type
Strength of Specialty Pt. Advantage
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Weakness of Specialty Pt. Deficiency
Analysis of Satisfaction With Store Type
Strength of Specialty Pt. Advantage
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Top Products Shopped For At Other CE Stores

• DVD-Audio Player (19)
• TV (non-HD) (18)
• Component DVD Player (12)
• DVD Recorder (11)
• Flat Panel TV (10)
• Mini stereo system (10)
• HDTV (9)

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Consumer Overview

• What Are Consumers Perceptions of Specialty,
  High-End CE Retailers?

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Perceptions of Specialty, High-End Electronics
Stores

• High priced
• Knowledgeable sales staff
• High-quality A/V CE products
• Offer special services installation and
  consultation
• Have the latest CE products
• Cater to the wealthy CE buyer
• Better product displays

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Consumer Overview

• Which Types of CE Shoppers Should You Target?

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Unhappy, Rare CE Shoppers 8 of consumers
Shopping Descriptors

• MUCH lower than average spend on home A/V CE
• Shop at big box and mass merchants for home A/V
• One-half have not shopped for CE in past year
• Spends very, very little at specialty, high-end
  stores

• Unhappy with CE shopping experiences
• Shop around for lowest price
• Want convenient store locations
• Want CE to work right out of the box

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Unhappy, Rare CE Shoppers (cont)
Future Outlook
Demographics

• Not likely to shop at specialty, high-end stores
  in the future
• Will likely spend half of average amount on CE in
  next year (less than half plan to spend anything)
• Advertising / promotions will not lure them to
  your stores

• High proportion of older consumers
• 53 female - 47 male
• Predominantly White/Caucasian (90)
• Most are Married (50)
• Average HH income is 51,000
• Half are late-cycle CE adopters

Bottom Line Definitely Not a Target Market
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Infrequent, Laggard CE Shoppers 18 of consumers
Shopping Descriptors

• MUCH lower than average spend on home A/V CE
• Shop at big box and mass merchants for home A/V
• One-third have not shopped for CE in past year
• Spends very little at specialty, high-end stores

• Shop around for lowest price
• Want convenient store locations
• Want CE to work right out of the box

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Infrequent, Laggard CE Shoppers (cont)
Future Outlook
Demographics

• Not likely to shop at specialty, high-end stores
  in the future
• Will likely spend MUCH less than average amount
  on CE in next year (only half plan to spend
  anything)
• Advertising / promotions will not lure them to
  your stores

• 53 female - 47 male
• Predominantly White/Caucasian (90)
• Most are Married (50)
• Average HH income is 50,000
• Half are late-cycle CE adopters

Bottom Line Definitely Not a Target Market
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Cost Conscious CE Shoppers 15 of consumers
Shopping Descriptors
Demographics

• Lower than average spend on home A/V CE
• Shop at big box and mass merchants for home A/V
• Spends only 4.2 of at specialty, high-end
  stores
• Shop around for lowest price
• Want convenient store location

• 56 female - 44 male
• Predominantly White/Caucasian (86)
• Most are Married (55)
• Average HH income is 50,000

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Cost Conscious CE Shoppers (cont)
Future Outlook

• Not likely to shop at specialty, high-end stores
  in the future
• Will likely not spend more than average on CE

Bottom Line Not a Target Market
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Value, Spendthrift CE Shoppers 24 of consumers
Shopping Descriptors

• Average spenders on home A/V
• Shop at big box and mass merchants for home A/V
• 14 have shopped at specialty, high-end, but only
  2 bought
• Dissatisfied with price at specialty, high-end
  stores

• Spends only 4.1 of at specialty, high-end
  stores
• MUCH happier with their shopping experience at
  non specialty, high-end stores
• Shop around for lowest price
• Want convenient store location
• Quality is strong motivator

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Value, Spendthrift CE Shoppers (cont)
Future Outlook
Demographics

• Not likely to shop at specialty, high-end stores
  in the future
• Will likely spend average amount on CE in next
  year

• 57 female - 43 male
• Predominantly White/Caucasian (86)
• Most are Married (52)
• Average HH income is 50,000

Bottom Line Attractive, but Not a Target Market
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Itinerant CE Shoppers 18 of consumers
Shopping Descriptors

• Higher than average spenders on home A/V
• Many shop at big box and mass merchants for home
  A/V, but
• 27 have shopped at specialty, high-end, with 10
  buying
• Spends 20 of at specialty, high-end stores

• Very satisfied with specialty, high-end store
  experience
• MUCH happier with their shopping experience at
  specialty, high-end stores

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Itinerant CE Shoppers (cont)
Future Outlook
Demographics

• Many will shop at specialty, high-end stores, but
  most will still shop at big box and mass
  merchants
• Open to buying at specialty, high-end stores
• Will likely spend above average amount on CE in
  next year
• Advertising / promotions not likely to attract
  this segment

• 38 female - 62 male
• Higher proportion of young consumers
• Predominantly White/Caucasian (80)
• Most are Married (50)
• Average HH income is 50,000

Bottom Line Tough to Crack, but Target Market
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Quality, Big-Spender CE Shoppers 18 of consumers
Shopping Descriptors

• MUCH higher than average spenders on home A/V
• 25 have shopped at specialty, high-end, with 9
  buying
• Spends 16 of at specialty, high-end stores
• Very satisfied with specialty, high-end store
  experience AND other store experiences

• Also do a lot of shopping at other stores
• Strong, positive perception of specialty,
  high-end stores
• Quality is more important than cost (but cost is
  important too)
• Like having the latest CE
• Convenience shoppers
• Sales staff are important

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Quality, Big-Spender Shoppers (cont)
Future Outlook
Demographics

• Many will shop at specialty, high-end stores, but
  most will still shop at big box and mass
  merchants
• Open to buying at specialty, high-end stores
• Will likely spend much more than average on CE
  in next year
• Advertising / promotions WILL attract this segment

• 45 female - 55 male
• Most ethnically diverse segment (20 non-white)
• 2 in 5 are Early Adopters
• Most are married (50)
• Average HH income is 50,000

Bottom Line Primary Target Market
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Consumer Overview

• If You Do Nothing Different, What Will Happen In
  The Next 12 Months?

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Consumer Overview

• What Type of Marketing Will Best Attract New
  Shoppers?

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What Else Consumers Say Will Attract Them To You

• Knowing you are there
• If there was a store by me, that I was aware of
  - if I heard good things about it from friends.
• Better pricing
• Ad reminding me they exist and showing good
  prices for what I want.
• Sales / Discounts
• Big sale, clearance sale
• Convenient store locations
• If there was a specialty, high-end electronics
  in my area, I would check it out.

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Recap

• Challenges for Specialty, High-End A/V Retailers

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• Focus on the right market segments
• Increase awareness of channel
• Promote your strengths
• Explain the value proposition to consumers
• Target your market with appropriate
  communications vehicles

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Q A

• jbates_at_CE.org
• Stay tuned for more
• www.ebrain.org/content/crs240.pdf

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