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HomeCover Story
What's Ahead for 2010?
NPD's Industry Experts ShareTheir Perspectives
Watch for
Buy Me!, NPD Chief Industry Analyst Marshal Cohen's latest book, available in January.
NPD Insights asked NPD’s Industry Experts across a range of industries to share their thoughts about what you can expect at retail and from consumers in the coming year. Read on for their perspectives on what may be ahead for your industry.
Fashion
2010 will be the year for recovery for fashion. The big color will be black – back to black – as manufacturers and retailers both look for consumers who have used fashion as the most discretionary product category for spending cut-backs. Fashion has had a tough go of it throughout 2009, and 2010 will likely bring pent-up demand for new wardrobes, due to tired fashion looks as well as worn out items or articles that just don’t fit anymore. After all, how long can one go with the same old outfits to wear to work or class? Two years is asking a lot of fashion. Now add in the return of the economy, albeit slow and steady, and fashion will find its way back into the shopping bags as consumers face up to their "frugal fatigue." This is the point at which consumers get so tired of being frugal that they start to reward themselves and loosen the purse strings. So, fashion – led by accessories, then footwear – should bring apparel to a return to profits, and even some growth, in 2010. Now if the manufacturers and retailers will showcase some new, dramatic changes in product through innovation and product differentiation, "back to black" will be all that much richer.
Marshal Cohen
Chief Industry Analyst
Food
The biggest issue facing food marketers next year will be where consumers get their meals – in their homes or from restaurants. It’s been well reported that Americans have been cutting back on going out to eat at restaurants, and instead they are preparing more meals in their homes. While this trend has been greatly exaggerated, the movement back to home is real, and it did not just start with this year’s economic difficulties. It’s been going on for nearly a decade. The current restaurant weakness is really about something that affects everybody, everyday: food prices!
Consumers adjusted their food and beverage choices to first deal with rapidly rising food costs in 2008 and then falling food prices in 2009. Nothing motivates a behavior change faster than money! This year, food prices were below year-ago levels! It is hard to imagine they will continue to drop below year-ago levels for two years in a row. If food prices begin to rise again, then expect that Americans will use restaurants more than they did in 2009 – and supermarkets will need to get creative to attract more purchases. If this sounds counterintuitive, drop me a line, and I’ll give you my thoughts on the impact of rising food costs and its real impact on where Americans will eat!
Harry Balzer
Chief Industry Analyst
Consumer Electronics
The AV space will continue to pull itself out of the 2009 mire that saw nearly every category experience a decrease in revenue. HDTVs will continue to drop in price and find their way into secondary bedrooms, pushing out old analog CRTs. That means manufacturers and retailers will seek to preserve margin and the appeal of the high-end by introducing thinner form factors that can connect to broadband-delivered programming. The declining prices of Blu-ray players and the introduction of more integrated Blu-ray home theater systems will also ensure an ample supply of high-definition content. The year should also see progress made on wireless video systems that provide new flexibility in shuttling high-definition video around a room or a whole home.
With many categories in the AV space now having made the move to high-definition, the integration of connected services stands at the intersection of practical value and affordability. TVs that can receive Netflix streams, receivers that can "tune" Internet radio stations, and imaging products that streamline the path to sites such as Flickr and YouTube will become more prominent. However, the introductions of 3D-based, flat-panel TV, and Blu-ray sets are what many manufacturers see through rose-colored 3D glasses as creating a technology leap as significant as that from monochrome to color or standard-definition to high-definition video.
Telecom
The ramp-up to the 2009 holiday season saw an influx of smartphones, particularly those running the Android operating system. Android-based units will continue to grow in 2010 as high-volume manufacturers and operators embrace the operating system. Of course, we will also see new handsets based on competitive offerings, as well. The race to attract developers' attention will continue to dominate headlines, but many consumers will be drawn simply to the better Web and media experiences that are offered by these handsets.
2010 will also be a significant transition year for wireless broadband. Clear and Sprint will move into major markets with their 4G WiMAX technology, and Verizon Wireless will get closer to beginning its switch- over to its 4G network based on LTE. The availability of such high-speed networks will make video delivery and other streaming services more practical and affordable, and will pave the way for wireless connectivity far beyond the handset – and into consumer electronics and vehicles.
Ross Rubin
Director, Industry Analysis, Consumer Technology
Imaging
As families invest more in creature comforts closer to home, one of the mainstays is recording memories. Digital cameras remain one of the top five technology categories, and three in four households own at least one. Largely through social networking, images have become an inherent part of our daily communication with friends and family. In 2010, consumers will take advantage of further affordability and convergence of still image and video capture devices. We can expect to see more of both spontaneous shooting and sharing, as well more awareness of specialty items like photo books that inspire creative output but don't break mom's bank or her sanity.
Liz Cutting
Digital Imaging Analyst
Video Games
We expect 2010 to be a really exciting year for the video games industry. First, Q1 is shaping up to be the biggest first quarter in video game history as several marquee titles slipped from this year into next, joining the already strong line-up of new releases. Motion-sensing controllers will be a focal point as Microsoft’s NATAL will likely make its way to market during the year. In PC games, sales generated via digital distribution will overtake those generated at retail, and there will be some big PC game releases, most notably from Activision Blizzard.
But perhaps the biggest issue facing the industry in 2010 is the proliferation of mobile and social gaming, much of which is free to the consumer. While they can't replace or replicate the gaming experience that a full frontline game offers, they can and do satisfy the gaming craving for many occasional gamers. Their existence is putting pressure on the casual games side of the industry, and the impact may spread to the more traditional segment of the industry through downward price pressure on content.
Toys
In 2010, the toy industry will continue to wrestle with figuring out how to stay relevant to kids in the increasingly digital world. Web-connected toys of all sorts have been introduced in the spirit of "if you can't beat 'em, join 'em," but none has yet realized the success that the now- fading Webkinz brand did at the height of its popularity. That said, we'll continue to see new toys that utilize Web-connected play. It is important for the toy industry to recognize that there is a tremendous amount of engaging, free online gaming content available. To remain relevant, the Web portion of any new product’s play experience really has to be top-notch.
We'll continue to see a focus on lower-priced toys and a lot of value for the buck as the industry addresses the ongoing economic crisis. To offset domestic declines, we'll see more emphasis on global expansion as toy manufacturers try to reach new markets for their products. The retro/nostalgia marketing machine should be in full force next year, as well, as a lot of big-property anniversaries are celebrated by their owners. Finally, the little toy hamsters that are so hot right now will most likely be a short-lived phenomenon.
Anita Frazier
Industry Analyst, Toys & Video Games
Automotive
Three key factors will contribute to growth in the automotive aftermarket in 2010, especially in application parts (typically replacement parts specific to a particular make and model vehicle). First, new car sales remain historically low, even in the wake of “Cash For Clunkers” programs. This means more consumers will try to keep their existing cars longer. Second, with gasoline prices down from 2008 record highs, miles driven has started to grow again. More miles equates to more wear-and-tear on the vehicle, and it is historically a key driver of aftermarket sales. Third, consumers initially responded to the recession by deferring automotive spending to save money. Now those consumers are finding that repair and maintenance can't be ignored if they are to economically maintain a functioning vehicle.
Take aging cars, put more miles on their odometers, and add in a consumer sentiment favorable to the cost of vehicle repair over vehicle replacement, and you have a recipe for continued aftermarket growth. Dollar sales in the auto parts channel were up 4.5 percent year-to-date September, with sales especially strong in key application categories critical to vehicle function such as suspension, brakes, and batteries. Consumers desiring to extend the lives of their vehicles have also stepped up sales in key maintenance categories such as motor oil and antifreeze. The necessity of reliable transportation will lead to strong sales of non-discretionary replacement parts and maintenance categories. However, persistent high unemployment and stagnant disposable income will likely mean discretionary categories relating to vehicle appearance will continue to struggle.
David Portalatin
Industry Analyst, Automotive
Beauty
For 2010, we anticipate the beauty industry will get off to a slow start but will improve compared to 2009. Skincare is positioned to be the first category that moves out of negative performance, possibly by first quarter. By the second quarter, we anticipate that makeup may begin to post at least flat performance, or possibly a slight increase. After a year of double-digit declines, the hope is that the fragrance category is at a point where it can stabilize and begin to post at least flat performance by the middle to late third quarter.
Karen Grant
Vice President and Global Beauty Industry Analyst
Sports
For the first time in the five years NPD has tracked its evolution, the global sports market posted a negative growth trend in 2009. We forecast the market will bounce back in 2010, though more as a consequence of the global economy recovery rather than as a result of dramatic change in the sport market structure.
In developed countries we expect to see less interest in branded products, resulting in an expansion of private label merchandise. This is due in part to an aging population that is less brand-sensitive than younger consumers, but it is mainly related to consumers’ overall price-sensitivity. We anticipate that value will gain importance to consumers, who will move away from the immaterial – endorsement of athletes and clubs – to more tangible aspects such as style, attributes, function, and price.
However, the story is different in emerging countries like China, Brazil, and Russia, where consumers are just discovering brands and have a healthy appetite for the status some products carry. There is sky-rocketing demand for branded footwear among teenagers in emerging countries. We anticipate that 2010 sport growth rates in emerging countries will exceed that of the local gross domestic product.
Renaud Vaschalde
Industry Analyst, Global Sports
To find out how NPD information and insights can help you anticipate 2010 trends, contact Charles Camaroto at 866-444-1411 (contactnpd@npd.com).
