By looking at Amazon’s sales alone, you would never guess that the consumer electronics market had a lackluster 2016. While US consumer electronic sales decreased by 3% YoY, making 2016 the fourth consecutive year to show no volume growth, Amazon.com gained significantly on its already-impressive share of market: from $10 billion in sales in 2015 to $12 billion last year.

From following the trends, we knew (as many other industry analysts also predicted) that the CE market was in for a few challenging years, as the smartphone industry reached maturity and newer product categories, such as wearables and VR, have not yet grown enough to compensate for it. But Amazon, the only one of the top 5 CE retailers in the US that isn’t a brick-and-mortar retail chain, continues to collect more customers (and more sales) while its competitors fail to do so.

 

The Numbers

 

Amazon's total U.S. consumer electronics sales data

The numbers reveal pretty clearly that Amazon is a major contender in the consumer electronics market, now responsible for over 16% of US domestic CE sales after a growth of 20% in 2016.

*Note: Since Amazon does not have a dedicated “Consumer Electronics” product group, One Click Retail has amalgamated various sub-categories from disparate product groups to paint a picture of Amazon’s consumer electronics sales, including Laptops, Hands Free, Headphones, Computer Components, and several others. 

US – Fastest Growing Subcategories 2016 US – Top Selling Subcategories 2016
Subcategory Growth Subcategory Sales
Security & Surveillance 50% Laptops  $           550,000,000
Headphones 45% LCD Monitors  $           400,000,000
Single Function Laser Printers 45% Headphones  $           350,000,000
Motherboards 45% LCD TVs  $           300,000,000
Uninterrupted Power Supply 40% Graphics Cards  $           200,000,000
Audio Speakers 35% Lenses  $           150,000,000
Headsets 35% Unlocked Phones  $           150,000,000
Graphics Cards 35% Desktops  $           150,000,000
Laptops 30% OLED TVs  $           150,000,000
Home Theater Projectors 30% Security_&_Surveillance  $           150,000,000

 

Amazon Showing Global Growth in a Stagnant Market

 

Amazon International Growth 2016 Category

Despite flat growth in recent years, consumer electronics remains one of the major global retail industries, responsible for over 1.7 trillion USD in worldwide sales in 2016. However, brands looking to compete in the CE market must look to eCommerce and in particular Amazon, as consumers are forsaking brick-and-mortar stores in favor of the leading online retailer of consumer electronics.

In contrast to the negative growth in nearly all markets, Amazon’s sales of consumer electronics last year grew rapidly in every market in which it operates. For example, Amazon’s CE sales in Germany grew by 35%, reaching a value of € 1.5 billion.

Amazon fastest growing subcategories U.S. and D.E.

Germany – Fastest Growing Subcategories 2016 Germany – Top Selling Subcategories 2016
Subcategory Growth Subcategory Sales
Graphics cards Nvidia 60% Consumer notebooks Intel  € 115,000,000
Tablet computers other 45% Modems & networking devices  € 105,000,000
Headphones 40% Consumer monitors without TV tuner  € 95,000,000
Audio Receivers, Amplifiers, and Preamplifiers 40% Smart Phone  € 70,000,000
Network attached storage 35% Solid state drives  € 65,000,000
Radios 35% Headphones  € 55,000,000
Memory cards 30% Tablet computers other  € 55,000,000
Switches 30% External hard drives  € 55,000,000
Consumer monitors without TV tuner 30% Memory cards  € 45,000,000
Computing Accessories: Other 30% Media Speaker Systems  € 45,000,000

 

Q1 2017

In the first quarter of 2017, the global consumer electronics market seems to be in recovery. Germany, for example, has gone from a 2016 growth rate of -0.6% to a rate of 3% in Q1 2017. In the UK and in other markets, this renewed growth is driven almost exclusively by Amazon, with Amazon.co.uk showing a 15% YoY growth rate in Q1 2017, bringing total sales in the first three months of this year to £340 million.

UK – Top Selling Subcategories Q1 2017
Subcategory Sales
Consumer notebooks Intel  £ 17,500,000
Headphones  £ 17,000,000
External hard drives  £ 16,000,000
Consumer monitors without TV tuner  £ 15,000,000
Memory cards  £ 13,000,000

 

Key Trends

Cannibalization

A flat growth rate doesn’t mean the CE market is stagnant. One of the primary reasons the growth is so limited is that new consumer electronics tend to cannibalize older ones. Newer products such as soundbars and wireless speakers eliminate the need for older product categories. As smartphones become more multi-functional, consumers require fewer gadgets and older devices, such as portable media players, go obsolete.

Gadget-of-the-Moment

The GoPro is still a very popular item (in fact, it was the best selling item on Amazon.co.uk in Q1 2017), but no single item in 2016 sold as well as the GoPro did in 2015, when that product exploded in popularity and earned $50 million in sales in the US alone. Products like this are challenging to predict, especially in the consumer electronics category when one new gadget can appear seemingly out of nowhere, but keeping a careful eye on the movement and growth of individual SKUs can help to identify products with the potential of becoming the “next big thing” in 2017.

US – Top Selling Items 2015 US – Top Selling Items 2016
Subcategory Title Sales Subcategory Title Sales
Hands-free Video Cameras GoPro HERO4 SILVER  $    50M Solid State Drives Samsung 850 EVO  500GB  $    35M
Solid State Drives Samsung 850 EVO 500GB  $    35M Laptops Acer Aspire E 15  $    35M
 Solid State Drives Samsung 850 EVO 250GB  $    30M Hands-free Video Cameras GoPro HERO4 SILVER  $    30M

 

Larger Online Receipts

It goes without saying that millennials are the primary driving demographic behind the growth in online sales. Even though this generation is known for being relatively careful with money, their frugal instincts seem to disappear when they go online. For consumer electronics specifically, young Amazonians spend on average more than twice as much per order for online purchases as they do for in-store purchases.  Getting millennials to buy more is as simple as getting them to buy online.

In much of the world, consumer electronics has been showing little to no growth, yet on Amazon consumers are buying electronics at a rate never seen before. Amazon now holds the second-highest market share of consumer electronics in the US and the highest growth rate of any retailer, so for brands to compete in the CE market, Amazon is by far the most fertile ground.

“The Amazon Effect” series breaks down specific product groups, compares Amazon’s performance in that category to total retail sales (online and offline) and considers the effect Amazon has on that specific industry as a whole. In this latest edition, we explore how Amazon has impacted the Consumer Electronics market.

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