2004: The Year That Was

An industry-by-industry look at the top categories, segments and trends of 2004 . . . with an eye toward what’s coming in 2005

Recent history can lead us to a better understanding of what might be in store in the new year. To get to the bottom of 2004's hot categories, segments and trends, we consulted with NPD's team of Industry Experts. Here's a look at 2004’s top categories and segments in their respective industries —and a hint of what that might mean for 2005.

Over the past year, many of NPD's Industry Experts observed shifts in consumer shopping behavior that may continue into the new year. In fashion, for example, NPD's Chief Industry Analyst Marshal Cohen noted a concerted consumer "movement towards dressier footwear and fashion: shirts, ties, sweaters and dress shoes all moved into high gear and demonstrated growth in these areas for the first time in years."

Similarly, in the fragrance industry, NPD Beauty President Timra Carlson reported that “categories in the prestige channel have shown an increasing focus on the affluent consumer. This is a market segment that has received a lot of attention recently, with many beauty manufacturers looking to understand what appeals to the high-end consumer."

Products of Convenience

In the food and foodservice industries, consumers' focus in 2004 started to shift back from healthier eating to convenient eating – and that trend will become even more important in 2005. Harry Balzer explained: “Clearly hamburgers and donuts aren't a normal part of a low-carb diet; however, these restaurants aren't suffering as a result of the low-carb craze. In fact, traffic is way up.”

A similar trend was noted by Peter Greene at NPD Houseworld, in that the demand for convenient, versatile and easy-to-use products brought innovation to the forefront of the appliance and housewares industries in 2004. “During the year, manufacturers added numerous products to the market with many building off of momentum gained in the previous year,” Greene said. “Single-serve coffee pod machines were among the products that stood out in 2004.”

Smaller and Thinner Got Bigger

In the consumer electronics industry, 2004 was a year of contrasts – a year in which televisions got thin and music players got small, as content digitization forced consumers to rethink how they consume entertainment and pay for the privilege.

Ross Rubin, director of industry analysis for NPD Techworld, reports that digital television was one of the year's hottest trends, and will continue to be a must-watch sector in 2005. “In 2004, television proved that consumer electronics products couldn’t take more space on the wall or more dollars from the wallet,” Rubin reported. “Consumers embraced thinner displays even as these televisions commanded a pricing premium.”

Younger but Acting Older

Marketers have long claimed consumers are a fickle bunch, with last year’s must-have products taken out with this year’s trash. And nowhere can this fact be seen more clearly than in products for children. “As children get older, there's a natural tendency for play time and interest to decrease, so makers of traditional toys are attempting to expand the definition of toys to appeal to a broader age group, and to counter erosion from video games,” said Anita Frazier, NPD Funworld entertainment industry analyst. “As children continue to move toward playing video games at ever-younger ages, manufacturers have recognized this shift as a real threat to play--and wallet-share, and a new category of ‘Video Game Toys’ has emerged.”

Industry-by-Industry Trends

• NPD Fashionworld – Marshal Cohen notes the shifting sands of consumer desires throughout 2004. Early on, apparel was a hot consumer category--shoppers were excited about new colors in the latest spring fashions. That early excitement, however, wore off as summer arrived: Sales started to slow down and the novelty of color wore off. Shopping then became more about pent-up demand, since adults had cut back on apparel spending for the past three years and needed to again update their wardrobes. In addition, retailers reported a continuation of the “mixing” trend in which consumers mix casual and active apparel and footwear.

• NPD Funworld – With approximately 50 percent of 2004's annual toy sales still to come from cash register rings during the fourth quarter, looking at year-to-date sales does little to reveal which will ultimately be the most important categories within the toy industry for the year. Instead, industry buzz, generated from recently issued "Must-Have" toy lists, retailer price competition, and manufacturer marketing efforts portend the categories that will likely have the most profound influence on the industry by year-end.

• NPD Techworld – Ross Rubin had his eye not only on the increasing popularity of flat-screen TVs and smarter, more functional cell phones, but also on the rise of portable digital audio in 2004. Led by the Apple iPod, portable digital audio has seen greater than 30 percent annual revenue growth throughout the year, as home and mobile audio have consistently seen double-digit revenue losses. In fact, portable audio has been the fastest growing major consumer electronics category in 2004, and the arrival of lower capacity hard-disk-based products are driving average sales prices lower.

• NPD Foodworld – “Common” food is what Harry Balzer has been tracking in 2004. The foodservice industry has taken up this long-standing truism in hamburgers, coffee and donuts. These very common food items have risen in popularity -- and restaurants are finding new ways to offer them and make them even more interesting to consumers.

• NPD Beauty – In prestige beauty, Timra Carlson noted that skincare -- fueled in 2004 by continued demand for anti-aging products like newcomer StriVectin-SD -- remains the category with the highest price points. In the prestige fragrance marketplace, products with a high-end image that appeal to the affluent consumer are on the rise. Exclusive designers such as Burberry, Prada and Christian Dior are just a few of the companies that have introduced new fragrances in 2004. This year fragrances associated with celebrities from Britney Spears to Donald Trump are creating quite a buzz within the industry, making a mark not only in the department stores, but in mass outlets as well. This past year we have seen Antonio Banderas launch a new fragrance in mass and Matthew McConauhey named the new spokesmodel for Stetson. And in makeup, many manufacturers and retailers saw success in 2004 with multi-purpose products, calling attention to the relatively small "Other Color" segment of the industry. These products are often used on eyes, cheeks and lips, making them ideal for women on the go and pushing the segment up 30% YTD over 2003.

• NPD Houseworld – According to NPD Houseworld Vice President and General Manager Peter Greene, industry innovation helped make single-serve coffee pod machines, alternative floor care and silicone bakeware some of the more talked-about products in the appliance and housewares industries in 2004.