As the world waits for the economy to rebound, considerable attention has shifted to forecasting how it will happen and gauging what awaits us once we’re there. One increasingly popular theory involves the emergence of New Normal behavior. Under this theory, consumerism as we know it will undergo a fundamental change as people embrace necessities, spend and borrow less, and view both their home’s equity and their own 401k accounts with increased skepticism.
Although each of the booms that followed previous recessions suggests that Back to Normal
is still a viable option, we are already seeing businesses position themselves for whatever kind of normal the future brings. Embracing their bellwether status, both Microsoft and Walmart have actively positioned themselves for a delayed recovery and the possibility of a long-term shift in buying behavior. has reduced inventories and assortments across categories and significantly delayed its holiday product refresh, while placing increased emphasis on its value-oriented message to consumers. Microsoft meanwhile has increasingly touted the efficiency provided by its products, highlighted by a recent from CEO Steve Balmer that introduced the company’s New Efficiency
message in response to the possibility of a New Normal future.
Although established businesses and markets can similarly adjust their strategies, still evolving categories such as digital photo frames face a more difficult task when planning for the New Normal future. To put it simply, the digital frame market has never really experienced a period of true normalcy that it could refer to when forging a path forward. The economic downturn occurred at such a strange time for the category as the exponential growth that took place in 2006 and 2007 created a gold rush mentality for 2008 and caught many players off-guard as the recession flattened-out the market’s impressive growth rate. By most early accounts, meeting demand posed the greatest challenge in planning for the 2008 holiday season and industry players invested heavily to ensure that they would have products on shelves through the end of the year. Instead, the economic collapse that took place in late 2008 pulled the rug right out from under the digital frame industry, creating a severe glut across component supply and distribution channels and essentially eliminating most sell-in opportunities for the forthcoming Moms, Dads and Grads season.
As the 2009 holiday season approaches and remaining 2008 inventories finally subside, it appears that the digital frame market has followed the lead of other more established categories with its own version of new normal positioning. Now more than ever, digital frame manufacturers are embracing a value and benefit-based strategy that Balmer would be proud of. Meanwhile, changes that have taken place on the digital frame aisle and to the category’s product cycle come right from Walmart’s revised playbook.
Due to a combination of retailer consolidation and a channel-wide adoption of Walmart’s aforementioned assortment strategy, the number of shelf slots devoted to the category has fallen nearly 40 percent year-over year to 217 placements. However, the effects of the category’s reduced shelf space and extended inventory glut actually benefited most top tier players. Many of the relatively obscure manufacturers that once dominated the digital frame market have either been forced to exit due to inventory losses or have been unable to secure placements within retailers’ smaller and more exclusive digital frame assortments. A remarkable 74 percent of this month’s placements came from major brands, while 19 percent of new frames were supplied by retailers’ private labels, leaving tier two and three players with just 7 percent of initial holiday 2009 placements. This time last year, lower tier manufacturers claimed a 52 percent share of the retail shelf.
Meanwhile, technological advances and component price erosion have allowed vendors to offer a new level of value and innovation. Most major manufacturers have added new entry level options, while reducing pricing and significantly expanding functionality across existing lines. Resolution and panel quality continue to improve, multimedia functionality is becoming increasingly standard, and the abundance of low cost memory has propelled common capacity levels from 256MB to 1GB. Additionally, new functions and applications are beginning to emerge as manufacturers experiment with aesthetics and test the boundaries of connectivity and content.
Similar changes have occurred across countless maturing categories in the past, regardless of economic climates, and these same events would have eventually occurred within the digital frame market without a downturn. In fact, the effects of the recession and any manifestation of new normal consumerism only hastened the maturation of the digital frame market and may actually serve to benefit its manufacturers- at least those in the top tier. Although the category still faces numerous challenges and most industry players would have preferred a continuation of previous growth rates, the effects of the recent maturation will immediately benefit each of the major manufacturers’ shelf share, while improving the category’s long-term image. As vendor consolidation continues, the digital frame market will be limited to a handful of well equipped manufacturers that are devoted to driving product evolution, maintaining price stability, and ensuring the long term success of the category.
Comedian Joe Ancis once said, “The only normal people are the ones you don’t know very well.” Well the same can be said for markets, especially the digital frame market before September 2008. So welcome to being normal digital frames, not sure if it’s new or old, but at least you’re there.
Joe Ancis on right, Lenny Bruce on left
Not to be confused with Joe Francis, Joe Ancis was a very funny comedian, who could reportedly out-drink Rodney Dangerfield and received the honor of being called the “funniest man in America” by the immortal .