WHAT PEOPLE BUY: TELEVISIONS, RADIOS, VCRS, DVD PLAYERS, ETC.

Most television, radio, VCR, and DVD player purchases are made today to replace or upgrade existing equipment. New flat screen and plasma TVs and DVD players represent the latest technological innovations drawing shoppers into the stores for new entertainment equipment. Nearly all (99 percent) of U.S. households own a color television, while 71 percent own two or more TVs. VCR and DVD player ownership is almost as high, with about 90 percent of households having a VCR or DVD player.

Today the digital DVD is being used more as a video recording medium, thus encouraging consumers to upgrade their older VCR player for the latest and greatest digital DVD player. With a purchase incidence of 38 percent in 2000, purchase incidence of TVs, radios, VCRs, and DVD players rose in 2001 to 46 percent of households only to drop back down to 38 percent of households in 2003.

Industry Snapshot

With consumer purchases of $26.5 billion in 2002, the market for televisions and other video equipment is robust (see Figure 7.19). Like computers and audio equipment, upgrades in technology, such as today's large-sized plasma screen televisions that are so flat they can be mounted on the wall like a painting, tend to drive consumers into the stores to upgrade their old TV sets with newer models. For consumers, it is all about enhancing the television experience and today shoppers can find an enormously wide range of viewing options that improve upon the traditional 21-inch color console set.

	2000	2002	% CHG '00–'02
Total Personal Consumption in millions	$25,148	$26,461	5.2
Televisions	14,422	15,365	6.5
Video equipment and media	10,726	11,097	3.5
Source: Bureau of Economic Analysis

Figure 7.19: Television, Radio, VCR, and DVD Player Industry Snapshot

Retailer Overview

With nearly equal purchase incidence, shoppers are as likely to shop for new TVs and other entertainment players in discount department stores as in specialty electronics and appliance stores. Some 52 percent of shoppers made purchases for these products in a discount department store, while 51 percent bought at electronics and appliance stores.

Traditional department stores have a small, but meaningful, share of shoppers in this category of goods, with some 14 percent buying entertainment players in these stores. Shoppers want to see in person the player media they buy, so only 7 percent of shoppers make purchases of this class of goods through nonstore channels such as Internet, mail order, or television shopping.

Product cycle is the key to successful electronic appliance retailing, including televisions. The product cycle includes the pattern of new consumer electronic introductions and the rate at which they gain consumer acceptance. Without new products to promote, retailers can only sell replacement items to their customers, which is not enough to sustain growth, especially because the price of consumer electronic products continue to fall after their initial introduction. A new electronic product, like the plasma screen televisions, sell at a premium and tend to draw shoppers into the stores to see what all the fuss is about.

Today, analysts see the product cycle as very strong with the potential of wireless technology, HDTV, and plasma televisions just beginning to climb on the typical consumer's radar. "The product cycle should remain strong for the next three to five years," says analyst Ken Gassman of Davenport & Company. "There are brand new technologies hitting the stores that everyone has to have, like with the VCR revolution of the 1980s."

Because television retailing mirrors that of audio and stereo equipment, for a discussion of market share leaders at retail see the audio equipment section.

Purchase Drivers

Like computers, technological innovation in the recording and display of video images is a major driver for growth. DVDs are rapidly replacing videocassettes as the recording medium of choice for video images, thus motivating U.S. households to upgrade their video playback equipment to be compatible with DVDs.

Television too is changing with digital technology. The new flat-screen and plasma television display technology brings improved display of digitally stored images, as well as cable and satellite digital transmission. Consumers are also buying wide-screen television sets, enhanced with new sound technology that projects such a large image that consumers can re-create a movie theater experience in their own homes. As one focus group respondent explained: "My husband just bought a wide-screen television set. It was actually a practical purchase since we have had two television sets stolen in the past. My husband bought the big wide-screen television because thieves wouldn't be able to get it out the door. We also have the only wide-screen television in the neighborhood, so it is a WOW when people come over. My husband likes to watch sports." I suspect that television thieves have mastered the skill of stealing the much more expensive large wide-screen television sets, but this wife seemed convinced that her husband was making a practical decision when he bought the new set to enjoy the football games and show off to his friends.

Demographic Variables

A gender-neutral category, most households view expenditures in entertainment equipment as a joint purchase, so men and women are about equally likely to buy. This is a category of goods that tends to skew toward a more youthful market. As the age of the consumer increases, the likelihood that they will make a purchase of a television, radio, VCR, or DVD player decreases.

Black American households have a statistically significant increased purchase incidence, as compared with white or Hispanic households. Except for a spike at the highest income level, purchase incidence is fairly equal across the income ranges.

A key determinant of purchase of this category of products is household size and/or presence of children in the home. Households with three or more people and those with children are most likely to buy. Likelihood of purchase in this category cuts equally across education levels.

Key Demographics of Buyers of Televisions, Radios, VCRs, DVD Players, Etc.

• This is a gender-neutral category.

• Purchase incidence skews toward younger households.

• Black Americans are more active buyers.

• All incomes buy, but higher-income households buy more.

• Households with children buy more.