November 15, 2006 1:04 PM PST
GPS finding its way to the mainstream
While portable global positioning system (GPS) devices are hardly as ubiquitous as iPods, dropping prices and new features are starting to win over customers, from weekend hikers to people who are just tired of their lousy sense of direction.
The average selling price of portable GPS systems in the third quarter of this year was $616, according to data compiled by the NPD Group. While that still may be a little steep for some, consider that just a year earlier the average selling price was $863, reflecting an almost 30-percent drop. And that's just the average price--half the handheld navigation gadgets sold last quarter cost less than $500.
Lower prices are translating to higher sales. Third quarter revenue of $100 million is expected to double in the fourth quarter of this year, making personal navigation "one of the fastest growing categories of any size," according to Stephen Baker, NPD's vice president of industry analysis. The Consumer Electronics Association, an industry group, predicts that 2.3 million GPS units will ship in the U.S. this year.
Why the sudden popularity of GPS systems? We're not just getting lost more often, said Steve Koenig, an analyst with the CEA. Rather, as GPS devices come down to the sub-$500 level, he said, "there's a whole strata of consumers who will say, 'Yeah, that's a good service.'" And, Koenig added, it's one of those services that once experienced, many wonder how they ever did without.
Of course, it's inevitable that technologies will become cheaper over time as manufacturers discover more cost-efficient ways to produce them. Portable consumer GPS systems have been around for more than 15 years, but are only now starting to become affordable. And NPD's Baker said he expects the already diminished prices to drop even lower come Black Friday, the U.S. retail industry's nickname for the day after Thanksgiving.
"Capabilities are going to go up, and pricing has really come down pretty dramatically," Baker said.
The GPS market is dominated by companies many people have never heard of. Garmin, a company based in Olathe, Kan., leads in retail unit volume with a 57 percent share, followed by Dutch GPS maker TomTom with 21 percent. Traditional consumer electronics makers are getting in on the navigation game too, or at least talking about it. Those companies include Pioneer, Sony, Alpine, Delphi, Hewlett-Packard and Sanyo.
"It's a hot category, and we're seeing a lot of companies trying to take advantage of it," said Baker.
Though the technology has been around for almost two decades, personal navigation hasn't enjoyed the same popularity in the U.S. as in Europe and Asia. North American consumers are about two to three years behind their European and Asian counterparts in terms of adoption, according to Kiyoshi Hamai, director of sales for Mio Technology, which makes navigation units for all three markets. "This seems to be holding true. Consider that in the U.K. adoption is around 80 percent and in the 70 percent range in Germany," Hamai said.
The challenge in the U.S. is convincing people to move beyond a Thomas Guide or a printed out Google Map. It's "purely conjecture, but it could very well be that the adoption in (North America) may never reach the same level as that of the EU or Asia because of the grid-like road network, and predictable addressing makes finding locations and navigating fairly straightforward even with just a paper map," he added.
Approximately 6 percent of North American drivers currently use personal navigation devices, according to Hamai. That's another reason why whiz-bang features--Bluetooth support, FM transmission, expandable memory card slots to play movies, music and display photos, traffic information and touch-screen navigation--play an important part in differentiating products.
Trend toward all-in-one devices
But multifunctional devices are also part of a larger trend in consumer electronics in general. Personal navigation devices from Garmin, TomTom, HP, Pharos and many others exhibit the blurring of the line between devices used in the home and those made for the car.
"That would be one natural way to connect those two areas together, through a navigation system," said Baker. "It's portable, relatively easy to move back and forth. The features that are being added, like Bluetooth and music playing, are features that make sense that are needed in the car. So, they're not just adding features for the sake of adding features."
But not everyone wants an all-in-one, converged device, said the CEA's Koenig. "Some people think it will work better if (a device) just does one thing; it might be more reliable."
Many portable GPS-makers offer tiers of products aimed at both the GPS novice and the early adopter. Besides the customer who just wants basic navigation, there is also an ample market for "the customer that maybe is more of the techno-geek that wants the Bluetooth, and the traffic and all the other kinds of things the fancier units deliver," Hamai said.
"I think the early adopters have been more prone toward the technical side, but as the industry tries to reach the everyday user, there maybe more appeal (in) the basic-type device."
Hamai said he, too, is anticipating a busy holiday sales season for portable GPS.
"It looks like there will be quite a bit of product under $299. It will be an exciting time," he laughed. "We'll all be running very hard and very fast, and looking over our shoulder."
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