Mid-Priced CD Showing Signs Of Growth
By Amy Gilroy
TWICE
8/5/2002
Offering a glimmer of hope in the continued downward spiral of CD player pricing, head unit sales are seeing greater activity at mid-level price points this year, according to many retailers and suppliers, despite industry figures to the contrary.
Sales in the $200-plus price points have been increasing this year due to the influx of features such as MP3, satellite radio and plain old cosmetics, industry members said.
Alpine claims CD player sales over $300 are up 20 percent this year compared to 2001. Kenwood says sales in the $200 to $249 range have been unusually strong, with a lot of activity up to $300 and Pioneer says its DEH-P6400 Organic EL unit, at $280, is outpacing expectations in all retail channels.
Mass merchant Sears said the trend in up-selling is very notable.
"In general, more and more people are shifting up to mid-price. I'm not sure of the reasons, but I've recognized it. The better head units have features that lend themselves to the cool factor, so I think there is a higher balance of sales there," said associate buyer Timothy Brown, adding that manufacturers have done a better job of recognizing that cool looks sell head units.
"Before, the line of Sony products was all the same. Now each unit is different, so from $279 to $329 you see a ton of different looks and that's what the kids are looking for," Brown said.
Pioneer senior assistant brand manager Ted Cardenas noted that "in the last couple of years, we've seen the majority of CD sales compressed under $200, and more and more manufacturers putting more and more models in that range." He noted however, that the upscale trend this year caught the company by surprise, particularly with its low-end organic EL model. "I wouldn't say we had low expectations for the unit, but we didn't anticipate the response we've had. It's a $280 model and it's doing extremely well across all channels, even at Wal-Mart."
Head Unit Sales
Year-to-Date Through May
(Percentage change from '01 to '02)
Unit Sales At Retail
Total: +17.46%
Under $160: +43.29%
$160 to under $200: -35.92%
$200 to under $300: -2.16%
$300 and over: -4.97%
Dollar Sales At Retail
Total: +8.05%
Under $160: +38.38%
$160 to under $200: -35.83%
$200 to under $300: +0.77%
$300 and over: -9.10%
Source: NPDTechworld ©TWICE 2002
Specialty stores are also seeing more step-up sales and attribute it mainly to strong features. Mark Miller, owner of Westminster Speed & Sound, Westminster, Md., said the customers who previously spent $200 are now spending $250 to $300. "It used to be the customers got wireless remote or an extra set of pre-outs [at higher prices]. That may be great for some of the kids, but a 35-year-old woman doesn't care how many pre-outs the unit has. But now with MP3 and satellite radio, the step up features are there."
Overall, Westminster Sound said its head unit sales are up 25 percent this year.
Not all the gains are due to MP3 and satellite radio, Miller said.
"This is the best year I've had in years in showing customers how to step up. This year Kenwood has their D MASK+ where the faceplate flips all around in two high-end units and one at $250. So a guy comes in wanting to spend $180 and he sees this silver unit that flips around and he has to get it. That was a great marketing ploy. Pioneer gives people Organic EL at $299. A guy will come in and foam at the mouth. And Blaupunkt has Digiceiver tuning at $279, which is incredible," Miller said.
He continued, "If you go back two years ago, you had just about every feature in the world in the base model and if you moved up two models you picked up remote and 5 watts of power, and not as many people want a remote as manufacturers think."
Kenwood VP product planning Bob Law explained that while the high end is gaining this year, the low end continues to grow as well, at the expense of the $150 to $200 segment. (See chart, p.37).
Year-to-date figures through May from NPDTechworld, Port Washington, N.Y., show continued dramatic gains at the low end of the market and do not yet show high-end gains. According to NPD, the bulk of the market has continued to shift below $160 with unit sales up 43 percent in that segment at the expense of a 36 percent decline from $160 to $200.
NPD said sales above $200 to $300 have declined slightly in units with a gain of one percent in dollar sales between $200 and $300. However an increasing number of mid-level products are showing up on NPD's list of best-selling units, suppliers said.
Some industry members note that the rise in MP3, one of the key features driving up prices in head units this year, may be responsible for fewer CD changer sales. An MP3-encoded CD can hold up to 10 hours of music.
Joe Monahan, president of Car Stereo City, Portland, Ore., explains, "We're seeing some more mid-priced activity because of MP3 at the expense of a deck and changer. People who used to come in and buy a CD and changer can now buy an MP3 and be able to have all those songs right in the dash. So it's driving sales up, but losing it in changers."
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