CES’ Back Halls: Shenzhen Inc. is Evolving, Rapidly

I wrote last year (and the year before that, and the year before ….) about the growing number of China companies at CES. Last year, in particular, I noted the transition of many companies from the back halls with the component suppliers to the main convention center halls with the bigger branded, product companies.

I like to walk among the companies in the back halls though. They offer a preview of what to expect to see next year – the first time I saw a “selfie stick” was at one of these booths a few years ago. Before we called them that, and I have to admit I did not see one and predict the heights to which it would reach.

This area of the show highlights that unsung but still surprisingly large segment of the “electronics” market – portable speakers, alarm clocks, toothbrushes. I wrote several years ago that Walgreen’s pharmacy is something like the eleventh largest Consumer Electronics (CE) retailer in the US. Add Duane Reade and CVS, and we are probably talking about 10% of CE sales in the US. Prepaid phones, alarm clocks and accessories. Not glamorous, but still a big business. And while they do not buy directly from the Shenzhen companies, the people they buy from do.

What stood out this year was the growing diversification of products. Past years, there was a notable homogeneity of products on sale. Fifty booths showing Bluetooth speakers, or 40 showing smartphone cases in every color combination possible. There is still a lot of overlap, but it has harder to pick out one bandwagon that everyone has jumped on. For instance, in one aisle, I saw a vendor of suitcases with batteries, a seller of a variety of wireless speakers, a booth of water fountains that synchronized movement to your music, and a “healthy lifestyle” provider of bamboo home décor products, electric ‘candles’ and scent generators. There were probably five booths of each at show, but the fact that I was not facing entire aisles of identical products speaks to something.

What that something is may be less clear. Certainly, the old ways were never sustainable. The hundreds of design shops and factories in South China needed to diversify. So it is encouraging to see a much wider range of products. What is less clear is how sustainable this will be. Smartphones and their accessories have now been ubiquitous in the US for many years. The easy growth in these categories is behind us. There is no obvious replacement for these growth avenues. So I expect to see a lot more experimentation.

Taking this a step further, this is pretty clearly a trend for the whole industry. The entire CES show has gotten a lot more diverse in recent years. There are all kinds of things on display that either never came to the show before or were only in one or two booths.

Even without generalizing about the whole show, I think there developments within the China factory booths says something important about their future. Many of these companies are written off as copycats or low-margin manufacturers. Instead, I think there are signs of real creativity on the horizon. The China domestic market is mature enough to drive many of these companies to innovate at a much more rapid clip. In a few years, I think we may start to see some really interesting, original products, designs and whole categories emerge from the denizens of these back reaches of the show.

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