2016 holiday outlook

CTA’s 23rd Annual

Holiday Outlook

Shawn DuBravac, Ph.D., CFA Chief Economist

shawnd@CTA.tech @shawndubravac

Steve Koenig Sr. Director, Market Research

skoenig@CTA.tech @koenigsteve

Scoring Our 2015 Holiday Forecast

2015 Holiday Forecast Assessment

Series Projected 2015

Holiday Growth

Actual 2015 Holiday

Growth

Overall Retail Sales 3.4% 3.9%

GAFO Retail Sales 1.7% 0.7%

Electronics Retailers 1.9% -5.4%

Online Sales 13.9% 14.8%

Mobile Sales 34.7% 50.9%

Consumer Spending on

Tech 2.3% 1.4%

Looking Ahead to Holiday 2016

2016 Holiday Forecast

Series Projected 2016 Holiday Growth

Overall Retail Sales 3.8%

GAFO Retail Sales 0.5%

Electronics Retailers -2.9%

Online Sales 16.4%

Mobile Sales 45.2%

Consumer Spending on Tech 3.1%

CTA Forecast: Holiday Tech Spending up 3.1%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

19

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Consumer Holiday Spending on Tech Forecast 10-yr Average (4.7%) 20-yr Average (6.7%)

Key Holiday 2016 Themes

1. Sentiment: Mixed Signals

2. Existing Tech Stays Strong

3. Emerging Tech Percolates In Gifting Plans

4. Online (led by mobile) Defines Growth Profile

5. Rapidness of Online (Deals) Creates Isolation

#1 Sentiment: Mixed Signals

2010

65%

2011

76%

2012

80%

2013

86%

2014

87%

2015

88%

2016

92%

% of consumers planning to spend money on holiday gifts

Holiday Gift Buying Plans

2016 = 227 million U.S. adult gift givers

Consumer Tech is the Gift to Give

2012

77%

% of gift buyers planning to buy tech as holiday gifts

2010

76% 77%

2011

Q: B21: What % of your holiday gift spending will be on consumer electronics? Base: random national sample of 1,005 U.S. adults

2013

74%

2014

73%

2015

74%

2016

75%

% of U.S. Adults Buying Technology Gifts

CTA Sentiment Tracking Steadily Higher

0

20

40

60

80

100

120

140

145

150

155

160

165

170

175

180

185

2007 2008 2009 2010 2011 2012 2013 2014

CEA Index of Consumer Expectations (Left) CEA Index of Consumer Technology Expectations (Right)

13

-15%

-10%

-5%

0%

5%

10%

15%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Revolving Credit (Y/Y % Change)

Consumer Credit Growing Again

Holiday Gift Spending Trend

Shifts in Holiday Gift Spending Plans

Spend More

Spend Same

Spend Less

Allocation of Gift Spending on Tech

Base: random national sample of 1,005 U.S. adults

2008 2009 2010 2011 2012 2013 2014 2015 2016

% of gift spending on CT

28% 29% 32% 32% 30% 33% 32% 32% 30%

Amount $222 $222 $245 $251 $258 $248 $286 $287 $241

-16%

Spend Less: 30%; $96

Spend More: 16%; $603

2016 Average Tech Gift Spending:

Q: B21: What percent of you gift budget will be spent on CE this holiday?

2015: 18%, $326 2015: 28%, $194

Top 20% Captured over 80% of Income Growth

$(2,000)

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Lowest Second Third Fourth Highest

2008-2012 2008-2014

Average annual income changes by income quintile between 2008 and 2014

Top 20% Account for 50% of Spending Increase

$(1,000)

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Lowest Second Third Fourth Highest

2008-2012 2008-2014

Average annual expenditure changes by income quintile between 2008 and 2014

2011 2012 2013 2014 2015 2016

Don't have the money 71% 62% 66% 53% 44% 60%

Increased cost of living 59% 56% 64% 50% 38% 57%

Fixed Income 60% 48% 56% 48% 44% 54%

Concerns with the economy 77% 66% 68% 46% 36% 46%

Have What You Need 55% 57% 67% 47% 38% 45%

Earning less money 52% 52% 49% 37% 38% 40%

Concerned with the Presidential Election Outcome 38%

Lost Job / Unemployed 37% 34% 34% 18% 25% 27%

Stock Market / Investment Concerns 42% 22% 26% 20% 17% 18%

Lower Spenders: Other Spending Priorities?

Reasons to Adjust Holiday Expenditures Much Higher This Year

QB18: You indicated you plan to spend less this year than last. Which of the following, if any, are reasons why you plan to spend less on gifts this year? Base: random national sample of 1,005 U.S. adults

How much consumers will spend on technology products?

More Less Much more The same

11%16%17%56%

61% 20% 8% 13%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

More Less Much more The same

11%16%17%56%

61% 20% 8% 13%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

More Less Much more The same

11%16%17%56%

61% 20% 8% 13%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

More Less Much more The same

11%16%17%56%

61% 20% 8% 13%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

More Less Much more The same

11%16%17%56%

61% 20% 8% 13%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

Last holiday season, total consumer purchases of technology products averaged $274 per person. Compared to last year's holiday season, how much do you think, on average, consumers will spend on technology products this holiday season?

Growth rate for technology products?

0% (no growth) 5% or more 3.5% 3.6% to less than 5%More than 0%, but less

than 2%

12%16%16%20%28%

29% 16% 17% 19% 16%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

2% to less than 3.5%

8%

9%

0% (no growth) 5% or more 3.5% 3.6% to less than 5%More than 0%, but less

than 2%

12%16%16%20%28%

29% 16% 17% 19% 16%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

0% (no growth) 5% or more 3.5% 3.6% to less than 5%More than 0%, but less

than 2%

12%16%16%20%28%

29% 16% 17% 19% 16%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

0% (no growth) 5% or more 3.5% 3.6% to less than 5%More than 0%, but less

than 2%

12%16%16%20%28%

29% 16% 17% 19% 16%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

0% (no growth) 5% or more 3.5% 3.6% to less than 5%More than 0%, but less

than 2%

12%16%16%20%28%

29% 16% 17% 19% 16%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

Last holiday season, total consumer purchases of technology products experienced a growth rate of approximately 3.5% over the previous 2014 holiday season. Compared to last year (2015), the growth rate for technology products this coming holiday season (2016) will be?

#2 Existing Tech Stays Strong #3 Emerging Tech Percolates

Most Requested

2016 Holiday Tech Gift Wish List - Adults

Smartphone, 8%

TV, 8%

Tablet, 7%

Smartwatch, 3%

Portable GPS, 2%

VG console, 5%

Notebook, 11% VR Headset, 2%

Home Robotic

Vacuum, 2%

Innovation Continues to Grow Into Holiday Gift Mix Purchase Intent – Yes/Maybe

Base: random national sample of 1,005 U.S. adults

Holiday Tech Gifts: Computers & Smartphone Devices

eReader

12% (14%)

Notebook

23%

Tablet

22% (26%) External Storage

15% (14%)

Computing

53%

Smartphone

26% (24%)

2016 % (2015 %)

Tablet Forecast U.S. Unit Shipments (000s)

-2% -6% -7% -1% -2%

Source: CTA, July 2016 Consumer Tech Sales and Forecasts

Feature % of Laptop Buyers

2015 2016

Touch Screen 73% 56%

Hybrid PC 61% 45%

Chromebook -- 19%

Laptop Features

Smartphone Forecast U.S. Unit Shipments (000s)

5% -2%

-3%

-3%

-2%

-4%

Source: CTA, July 2016 Consumer Tech Sales and Forecasts

2016 HH

Penetration

74%*

+2pts from

2015

* CTA, 18th Annual Consumer Technology Ownership Study, March 2016

Holiday Tech Gifts: Video & Imaging Devices

Video

34%

TV 18% (17%)

Digital Media Player

18% (16%)

Blu-ray or DVD Player

12% (15%)

Action Camera

12%

Camcorder 6%

Digital Camera

(Any Type)

13% (14%)

Digital

Imaging

24%

(22%)

360-degree camera 6%

Ultra HD

Blu-ray Player

7%

2016 % (2015 %)

4K Ultra HD TVs – Big for Holiday 2016

2011 2012 2013 2014 2015 2016

Internet connected 51% 63% 61% 63% 78% 76%

Screen <60”

76% (79%) Screen >=60”

45% (35%)

4K Ultra HD

56% (59%)

HDR TV

53%

2016 % (2015 %)

Source: CTA, July 2016 Consumer Tech Sales and Forecasts

The Outlook for 4K Ultra HD LCD this Holiday Season

1. LCD TV unit volume is down 1% YTD

2. 4K UHD unit volume up 41% YTD

3. October 2015 and November 2015 were the first

months to see 4K UHD unit volume exceed 1M units

a month

4. CTA anticipates 4.6M to 5M units in 4Q2016

Holiday Tech Gifts: Audio

Audio

53%

(52%)

Portable Wireless

Speakers 18%

MP3 Player

16% (14%)

Soundbar

12%

Headphones (any kind)

40%

Bluetooth Speaker

25%

High Res Audio Player

8%

Headphone Feature

% of

Headphone

Buyers

Over or on the ear: less than $100 53%

Wireless 45%

Earbuds 35%

Sports or fitness 25%

Over or on the ear: $100 or more 24%

2016 % (2015 %)

Holiday Tech Gifts: Automotive & Gaming

Portable GPS

11% (12%)

Automotive

24% (22%) Hands-Free Kit

12%

Rearview or Dashboard Camera

8%

2016 % (2015 %)

Mid-generation

Game Console

14%

Gaming

24%

(26%)

Portable Game

Console

10% (11%)

Game Console

17% (22%)

Smartwatch

17% (12%)

Holiday Tech Gifts: Wearables

Wearables

27%

Activity Tracker

15% (12%)

GPS Sports Watch

6%

2016 % (2015 %)

Consumer Purchase*

*Consumer Journey to Purchase: Health & Fitness (November 2015)

Purchased Most Recently

Plan to Purchase in Next 12 Months

Smartwatch 17% 35%

Dedicated Wearable Device 25% 27%

Fitness GPS 9% 21%

Heart Rate

Monitor or Strap

9%

Fitness Tracker Forecast U.S. Unit Shipments (000s)

5% -2%

60% 25%

20% 15%

10%

Source: CTA, July 2016 Consumer Tech Sales and Forecasts

Smartwatch Forecast U.S. Unit Shipments (000s)

15% 5% 2% 1% 0%

Source: CTA, July 2016 Consumer Tech Sales and Forecasts

Holiday Tech Gifts: Smart Home

Smart Thermostat

10% (6%) Smart

Home

24% Home Camera

8%

Digital Assistant Device

6%

Home Robotic Vacuum

5%

Smart Door Lock

5%

2016 % (2015 %)

Estimated U.S. Installed Unit Base

2016 HH Purchase Intent

Smart Home Device (excluding Smart Thermostat)

28.6 million 6%

Smart Thermostat 10 million 5%

Consumer Ownership*

*18th Annual Consumer Technology Ownership & Market Potential Study

Drone

9% (7%)

Holiday Tech Gifts: Emerging Tech

Emerging

Tech

30%

Connected or Digital Toys

11%

Smart or Connected

Sports Equipment

6% 3D Printer

6% (4%)

Pet-related Tech

6% Smart Tracker Tags

5% Connected Scale

2%

2016 % (2015 %)

VR Headset

10%

Video Game Accessory

18% (23%)

Holiday Tech Gifts: Accessories

Accessories

51% (58%)

Electronic Device Case

25% Additional Memory Card

24% (25%)

Portable Battery Charger

23%

Computer Accessory

17% (20%)

Bluetooth Headset

17% (14%)

2016 % (2015 %)

#4 Online Defines Growth Profile

Planning to Buy More

Holiday Gifts Online

This Year

2016 = 28%

2015 = 27%

2014 = 26%

Online vs. In-Store Purchase Intent

% Very or Somewhat Likely to Purchase Tech from…

2011 2012 2013 2014 2015 2016

77% 77% 75% 77% 77% 74%

47% 46% 45% 54% 55% 57%

Physical Store

Online

% making an online consumer technology purchase?

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

50% to less than 55%

6%

11%

65% to less than 70%

3%

7%

Less than 50%

14%

22%

55% (remain the same)

7%

6%

56% to less than 60%

25%

27%

60% to less than 65%

12%

14%

70% or more

33%

17%

Last holiday season, about 55% of consumers said they were likely to make a technology product purchase online. What percentage of consumers will likely make a consumer technology purchase online this holiday season?

% making an in-store consumer technology purchase?

70% to less than 77%

7%

12%

78% to less than 85%

7%

10%

85% to less than 90%

7%

4%

Less than 60%

36%

39%

Strength Meter How strongly respondents felt about

their answers

% of PeopleResponse Mix

Likelihood% Probability

60% to less than 65%

10%

19%

65% to less than 70%

9%

12%

90% or more

11%

4%

77% (remain the same)

13%

7%

Last holiday season, 77% of US adults said they planned to purchase consumer technology products at a physical store. What percentage of consumers will purchase technology products from a physical store this coming holiday season?

61% (+4% over 2015)

of consumers buying tech

will use a mobile device to

help them shop for tech.

24.4%

2016

Holiday Mobile Share of Online Sales

Mobile Holiday Sales

$20.1B

Online and Mobile Driving Holiday Growth

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Online

Holiday Sales $29B $28B $29B $34B $41B $48B $53.9B $62.5B $72.3B $84.2B

Total Online

Holiday Sales

(Y/Y Growth)

16% -3.4% 3.6% 17.2% 20.6% 17.1% 12.4% 15.9% 15.7% 16.4%

Mobile Holiday

Sales $1B $3.7% $6.2B $7.3B $9.2B $13.9B $20.1B

Mobile as a %

of online

holiday sales

3% 9% 13% 13.4% 14.7% 19.2% 23.9%

#5 Online Deals/Shopping Creates Isolation

Where Will Consumers Learn About Deals? 2015 2014

52% (2015)

63% (2015)

30% (2015)

Two-Thirds of U.S. Adults Start Shopping in Nov/Dec

Q: When do you typically start buying gifts?

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

September or Earlier 22% 18% 17% 16% 17% 15% 16% 14% 18% 15% 15%

October 21% 19% 16% 19% 17% 16% 11% 11% 13% 9% 10%

November 29% 31% 36% 33% 32% 35% 39% 38% 38% 38% 39%

December 23% 26% 26% 25% 27% 28% 25% 30% 23% 29% 27%

Don’t Buy Gifts 3% 4% 5% 7% 7% 5% 7% 7% 8% 8% 8%

Base: Random national sample of 1,005 U.S. adults

… And Most Gift Buying Occurs Later

When do you expect to buy gifts? 2014 2015 2016

October or earlier (Net) 16% 12% 13%

September or earlier 9% 5% 7%

October 7% 6% 6%

November or December (Net) 83% 87% 85%

November 49% 44% 44%

In November before Thanksgiving 16% 15% 12%

From Thanksgiving (incl. Black Friday) 33% 29% 32%

December 34% 42% 41%

53%

50%

Consumers Ready to Pounce on Deals

41% Make an

Unplanned

Purchase

Based on

a Deal

Shop

Specific

In-Store

Holiday Sales

Events

42%

2016:

2014:

52% Shop

Specific

Online

Holiday Sales

Events

N/A

50% 41% 2015: 51%

Promo Programs Popular

IN-STORE RETAILER [NET] 64%

ONLINE RETAIL STORE [NET] 53%

83% plan to take part in a promo

program when shopping for tech products

Final Things to Consider

• Emphasis on Exclusivity

• Flash Sales and Season Long Deals

• Apps Drive More Mobile Purchasing

• Wish Lists: Shop, Scan, Build

• Price-Matching, Free Shipping, In-Store Pick-Up

Holiday 2016 Will Build On 2015 Retail Trends

Tech in the Bullseye: Target’s Top Teen Toys for 2016

• Jetson V6 Hoverboard (available Oct. 23; Target Exclusive) • Nerf Rival Khaos in Red or Blue • Pokémon Sun for Nintendo 3DS • Pokémon Moon for Nintendo 3DS • PlayStation 4 Console • PlayStation VR Headset for PS4 (available Oct. 13) • Madden 2017 for PS4 • Beats Solo 2 Headphones in Red, Yellow or Blue

The Growing Tension Between Opening and Closing

Holiday Shopping Rituals: Then and Now

2016 Holiday Forecast

Series Projected 2016 Holiday Growth

Overall Retail Sales 3.8%

GAFO Retail Sales 0.5%

Electronics Retailers -2.9%

Online Sales 16.4%

Mobile Sales 45.2%

Consumer Spending on Tech 3.1%

Questions?

Shawn DuBravac, Ph.D., CFA Chief Economist

shawnd@CTA.tech @shawndubravac

Steve Koenig Sr. Director, Market Research

skoenig@CTA.tech @koenigsteve

CTA.tech/holiday