Canon Digital Lifestyle Index indicates digital product sales slowing

By Matthew Henry

SYDNEY: While Australian consumers look likely to spend a record $5 billion on digital gadgets this year, figures released by GfK in the Canon Digital Lifestyle Index (CDLI) reveal that market growth is starting to slump.

According to GfK data, consumers spent over $2 billion on digital products during the first half of 2007 and given the historical second-half splurge, this figure will be eclipsed in the period from July through December 2007.

“Assuming economic conditions remain favourable, we expect that digital spending by Australians will exceed five billion dollars by the end of 2007,” said Canon marketing manager – consumer imaging products group, Stuart Poignand.

“Having already spent two billion dollars in the first half of the year, and coupled with the second-half trends we’ve seen over the last four years that take into account the Christmas period, we anticipate this year will produce the highest consumer spending on digital technology that we have ever seen.”

But while consumers have again upped their first-half spend on digital goods such as flat panel TVs, digital imaging products, DVD players and games consoles in 2007, the market growth rate has slowed compared with the first half of 2006, falling to just 10.2 per cent – an extra $200 million.

Compared to the 43 per cent jump between 1H 2005 and 1H 2006 revenue, the relatively modest rise in spending has led CDLI author and GfK project manager, David Griffin, to suggest the staggering growth of 2004/2005, and early 2006, is for now behind us.

“We have seen downward shifts in some digital technology categories,” noted Griffin.

“The majority of Australian households now own a digital still camera and DVD player causing category growth to slow as these products are now mainly purchased as upgrades, and not as the first household purchase,” he said.

“By contrast, previously we’ve seen slow take-up of the flat panel TV categories – largely due to the high initial pricing of these devices. As prices inched lower over time, more of us were prepared to invest in this technology – with the net result being that Australians are now buying almost a hundred thousand of these TVs each month. This increasing demand has in turn reduced prices further, making the flat panel TV more accessible to all consumers.”

Flat panel TVs accounted for 52 per cent of total revenue for all CDLI product categories, with LCD the leading contributor with $685.1 million in sales for almost a third of all spending on CDLI products (32 per cent). Plasma was the second highest contributor with $439.3 per cent, amounting to 20 per cent of total CDLI sales.

Digital still cameras were the third ranked, accounting for 14 per cent of total CDLI revenues or $293.7 million, followed by digital media players with 8.1 per cent ($175 million) and games consoles with 6.9 per cent ($149.2 million).

Falling price points in digital categories are also being blamed for slower market growth, with plasma recording the biggest absolute drop in average price of $591.71, or 18.9 per cent – meaning plasma prices have now dropped 38 per cent in the last two years.

Griffin predicts that retailers will gravitate to premium brands to bouy the bottom line.

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