CES 2016

It is that time of year again. The annual technology conference which everyone loves to hate. Last year I laid out my strategy for approaching mega trade shows like CES. That boils down to picking three or four themes to focus on. This year my themes were:

• Wireless charging
• The Reality Multiverse – AR, VR and more
• Drones
• A wild card – Smart Home

The last one I always leave open for serendipitous findings on the show floor. This year circumstances led me to the smart home. I also had a lot of other random observations about the state of consumer technologies.

CES in Perspective

First, A couple of high level observations. Trying to generalize about the show is impossible, and frankly, counter productive. I saw many tweets from analysts I respect saying that this year the theme of CES seemed to be one thing or another. I used to think of such comments as the proverbial blind men groping an elephant, each grasping some small part of a large monstrosity. This year, I started to think that CES is like a Rorschach test for analysts. We tend to express reflections of our own thoughts in what we see from CES. Of course, that applies to others, this analyst could not possibly be guilty of such a crime…

Quantitatively, the show was less crowded. The number of attendees came in at 176,000 roughly the same as last year. The organizers had stated publicly that they were going to keep a lid on numbers this year to keep it from getting too crowded. And they seemed to have accomplished that. At the same time, the exhibits were spread out over a larger number of venues. Pretty much every large conference area in Las Vegas had official show exhibitions and multiple hotel towers were jam-packed with private meeting rooms.

Anecdotally, the show did not feel as crowded as last year. One gambler I see regularly at the show was really happy about how empty the casinos were this year as it gave him a lot more flexibility to choose where to take his chances.

That being said, the show was still crowded by any reasonable metric. Feel free to insert the story of your choice about long taxi waits, the traffic, lines for Starbucks or other CES horror story. It is still a hard show to attend, or at least an inefficient one.

I also noticed that many people I spoke to seemed to be trying to be pessimistic. From the perspective of CES, the US economy seems to be in healthy shape. The investors and finance people I hang out with all seemed preoccupied by the stock market, the Middle East, China and the US Presidential race. However, talk to companies, and business is good.

Conclusion

To close, I want to touch on the structure of the consumer electronics (CE) industry. One of the odd things about CES is the huge number of vendors displaying nearly identical products.

For many of us, the focus of CES is technology. But for most of the attendees, the real focus is retail. The whole point of the show is for retailers to come and choose the goods they will buy through the rest of the year. There is a lot going on at CES that is much more mundane, but also much more meaningful to most people.

One good example of this is the number of ‘accessories’ vendors. There is a staggering number of companies selling near-look-alike phone cases, radios, backpacks, batteries and power banks, chargers, cables, earbuds and headphones, skins and more such items. These companies are mostly value-added middlemen targeting specific niche markets and demographics.

Every year, these vendors, and the Asia-based companies that supply them seem to have a particular favorite device. This year it was battery backs and power banks. Last year it was selfie sticks. The year before it was Bluetooth speakers. The year before that was digital picture frames. The list goes on. And as much as we are tempted to look down on these as low-margin commodity products, they are still good business for many.

By contrast, I think some of the more interesting technologies are not going to be good businesses. Take 3D printing – there are some incredible 3D printers out there, capable of making all kinds of incredibly complex structures. But only a small number of people are going to ever buy them. This is another product, like drones, that holds strong appeal to a small group of enthusiasts.

My sense is that the entire CE industry is moving along similar lines. There are lots of interesting new product categories out there, but most them are searching for a good niche rather than mass market appeal. And the mass market items either have to have incredible differentiation (aka iPhone) or struggle with low product margins and most of the value going to the retail channel. This is not a bad thing, but it does put a lot of CES in a new light.