Car audio turns up volume - Statistical Data Included

Discount Store News,  Nov 8, 1999  by Laura Heller

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For the first time in a several years, 1999 was a growth year for mobile electronics. And with the economy still holding its own, prices dropping and new technology in the pipeline, the category now can justly call itself strong.

"The industry was projected to be fiat, and this caught many people by surprise. [But] it didn't catch us," commented Phil Kalleberg, senior buyer, car stereos, Best Buy. "We budgeted for growth."

According to the Consumer Electronics Manufacturers Association (CEMA), 1996 through 1998 was relatively flat, but so far this year manufacturer shipments in aftermarket auto sound are up 11%. CEMA is projecting the market will increase another 6% to 7% in 2000.

What's driving this growth? For one thing, prices on products such as in-dash CD changers have finally dropped to around $250, making them a much more attractive mass product, especially to the typical 18-to-25-year-old male, the category's primary shopper.

Stronger emphasis on pre-installed units also is causing a ripple effect in the aftermarket. "Car manufacturers are focusing on car audio as a selling feature," Kalleberg said. "Two years ago they were focused on safety features." That was a much less compelling proposition for CE retailers, which can benefit from increased consumer awareness, additional sales and upgrades to existing units.

Additionally, retailers are seeing increased interest from women, a demographic that finally reaches beyond the typical young, male CE consumer.

According to Gene Kelsey, vp and gin of Panasonic's audio division, recent cosmetic enhancements on mobile audio units are increasingly appealing to women.

Products such as in-dash CD changers with multi-color faceplates and dual day-and-night displays are eliciting positive comments from female consumers regarding design and style--something Kelsey claims is new for the mobile audio category.

And of course, these products appeal to young men, as well. "What mainly drives this category is sound performance and power," Kelsey said. "But cosmetics in the last two or three years have become very important, [even] among 16-to-24-year-olds. This is a way for them to bring some flash and a separate identity to their vehicle."

Manufacturers are using this interest in form to develop products and explore new niches, Kelsey said. "We have been marketing differently in the last few years to make product more visually interesting or more fashionable."

But in terms of merchandising, retailers pretty much control how product is brought to market. Best Buy uses its trademark sports car as a listening station and recently began installing enhanced custom listening stations in new stores. Circuit City also has separate listening rooms that allow consumers to test and customize product through high-tech displays. The retailer even owns its own engineering firm that helps design and develop such displays within stores. Wal-Mart and Kmart currently only sell low-priced in-dash systems for the DIY crowd, although that may change as both chains expand their Internet retail presence. Of the Big Three, only Target has opted out of the category completely.

But merchandising and environment play a large role in the sale of mobile audio. While the typical consumer of these products wants power and volume, such an environment may actually he driving away older and potentially lucrative customers.

Although the typical, pumped-up retail environment for this category "is a really good tool for the 18-to-25-year-olds, once people get past 28, that gets to be a real turnoff," said Todd Thibodeaux, VP, market research, CEMA. He suggests providing alternative listening environments for these buyers, something specialty stores are beginning to do.

"A lot of our dealers have looked at multimedia and created separate demo rooms or areas to woo an older, higher-end customer," Kelsey said. These are customers that are being drawn in by new auto entertainment systems in spite of the high price points.

"The fastest growing market is mobile video," said Best Buy's Kalleberg. TVs, VCRs, flushmounted monitors in head sets, and even in-dash DVD systems are increasingly being sought by consumers. With price points anywhere from $700 to $10,000 installed, these new systems will be the drivers of growth.

"That's an emerging area, this idea of home entertainment for the car," Kelsey said. Parents are installing video systems in mini-vans and SUVs, and mobile homes and even boats are being given the full treatment with home theater, digital sound and DVD players.

"Given the price points, sales have exceeded expectations," Kelsey said. But price points in mobile electronics are not dropping at the rate seen in the rest of the CE industry, hindering rapid acceptance of new technology within this market, mainly due to size and design restraints. Regardless, "mobile video will be the hottest thing going" into next year, Kelsey said. And he hopes navigation systems will begin to make inroads into the mass market. Every year at the Consumer Electronics Show, the Auto PC causes a media stir and then promptly fades from the spotlight. Perhaps this could be the year for this product, mused a hopeful Kalleberg. "As a platform, [it could] evolve into a very strong consumer product," he said. "It could be a platform for adding a navigation system and for expanding these new technologies."

COPYRIGHT 1999 Lebhar-Friedman, Inc.
COPYRIGHT 2000 Gale Group