Autosound Slump: Is It Temporary?
By Amy Gilroy
TWICE
9/29/2003
The continued downslide in autosound sales this year is causing some industry members to ask if this is more than a temporary slump.
Overall sales have declined by 11 percent year to date according to The NPD Group, Port Washington, N.Y. Amps and equalizers are down 18 percent and speakers down 14 percent. CD players are off by 13 percent.
"We're in a slump, absolutely," says Sony general manager Bill Lee, adding, "I do believe it's temporary. Music in a great environment like the car doesn't mean less today, in fact, it means more."
Suppliers admit that at least part of autosound's recent trouble is due to the OEM market. But most say the problem is multi-pronged as the industry collides head on with an uncertain economy, competition from other hot products and Internet sales.
Lee points out that the market for performance accessories is still vibrant, indicating that kids continue to spend money on their cars. "I would imagine kids have shifted their limited amount of dollars this year to SEMA-type accessories," he said. "What we have to do in '04 is to introduce excitement back into the 12-volt business. We need to make head units cool again and give kids incentive to shop, not by low price, but by level of coolness."
Ray Windsor, Eclipse marketing and sales VP, pointed to another culprit. "I think there's a shift. NPD is not accurately reflecting all the business going on in car audio. They don't ask Internet sellers about sales and they don't take into account the transshipping business. These are becoming much larger factors, which industry people have elected to ignore."
Retailers offer mixed opinions on the slowdown, with a few key players claiming to buck the trend.
Both Crutchfield and Best Buy said car A/V is up slightly over the prior year, and Car Toys, Seattle, Wash., reported sales were only slightly down. But all acknowledged a general slump.
Best Buy's mobile audio marketing director, Mike Manske, said it's likely that young people are putting their dollars into wireless products and buying higher-end cellphones such as those with built-in cameras.
He said the industry must find a way to push prices back up on single CD players, which are the heart of most systems. "There's an opportunity to learn from the cellular world, which is offering new features like sharing photos. We need to find out how we can personalize the equipment," Manske said.
Crutchfield senior VP of business development, Dan Hodgson, sees price pressure on all CE products driving down dollar sales. "I don't subscribe to the notion that there's some sort of structural change in the market that's happened in the last several months. That doesn't make sense to me. It's likely we're seeing the impact of economic pressures and low consumer confidence levels among this demographic group," he said.
At least one company is not waiting to find out. Alpine is conducting research to determine if "we are experiencing a structural change where consumer demand is actually turning off, or if it is a short-term scenario," marketing VP Stephen Witt said. One of the elements in the study is an examination of the OEM market and its impact now that CD players are available in almost all new vehicles.
Witt said, however, that aftermarket CD players still have an advantage as OEM systems do not allow MP3 or WMA playback, "so therein lies a continued opportunity for the aftermarket." Driving MP3, WMA and AAC products to lower prices should be a goal for every manufacturer, he claimed.
Alpine will share the results of its study at next year's CES and MERA KnowledgeFest. It will conclude with a five-year forecast "of how many dashboards will be out there for us to sell into. This includes exhaustive research breaking down by car make and model that each vehicle platform contains and looking at the bus systems so that we can start an analytical approach," Witt said.
Autosound Sales
January through July
Total 12-volt -11.16%
Amplifier/equalizer -18.49%
Add-on changer controller 10.54%
Cassette player -45.92 %
In-dash CD player -12.63%
CD changer -35.15%
Speaker -14.49%
Mobile multimedia 16.55%
Satellite tuner 76.96%
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