Record Technology Sales Expected This Holiday Season

By Markets

Drones are predicted to be one of the hot technology items this holiday season. Image source: Pete, Flickr.

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In some ways, the annual September release of the newApple (NASDAQ: AAPL) iPhone actually kicks off the holiday shopping season.

Though an iPhone 7 might not be wrapped and placed under a tree, many of the devices will be an early Christmas or Hanukkah present people give themselves or someone important to them. But it's not just the new iPhone that will be on gift lists this year. A record number of consumers plan to buy technology gifts this holiday season, according to the Consumer Technology Association's (CTA) 23rd Annual Consumer Technology Holiday Purchase Patterns Study.

The report shows that 68% of American consumers, roughly 170 million people, plan to buy technology gifts during the 2016 holiday season. That's up 6% from last year, driven partly by emerging technology including drones, virtual reality devices, and wearables.

"The 2016 holiday season looks to be the biggest on record for the tech sector, thanks to fresh and innovative products on the market such as wearable tech, VR headsets, drones and digital assistant devices," said CTA Chief Economist Shawn DuBravac in a press release. "Our research also finds that most Americans are now using tech devices to help them research and buy tech gifts, a key driver of tech spending this holiday."

People are going to spend more, too

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In addition to more people buying technology, they will also be spending more money, according to CTA. The trade association, which surveyed 1,005 adults in the United States in September to create the report, found that tech spending will increase by 3.1% to $36.05 billion during the 2016 holiday season.

CTA also found that overall retail sales in November and December, excluding gas and restaurant sales, should increase by 3.8% to $824.8 billion. The group also estimates that total online holiday sales will grow by 16.4% to $84.2 billion, while online sales through mobile devices should climb by 45.2% to $20.1 billion.

What are Americans buying?

While traditional holiday gifts like televisions and the aforementioned iPhone will grace shopping lists this year, CTA also found that "record-high numbers of consumers" plan to buy an emerging technology product as a gift. The most popular of those items will be wearables, which CTA expects 27% of consumers to buy, with 17% purchasing smartwatches while 15% buy fitness trackers.

After that, smart-home devices will be a big seller with 24% of shoppers expected to buy them. Ten percent plan to pick up a smart thermostat while 6% plan to buy a smart digital assistant like Amazon's Echo. The survey also shows that a number of other emerging technology categories will be well-represented as people hand out gifts this year:

  • Connected or digital toys (11%)
  • VR headsets (10%)
  • Drones (9%)

CTA projects that VR headsets will move about 700,000 units this year, driven by a number of new players releasing devices. As far as drones are concerned, the trade association projects sales of about 1.2 million units this holiday season, a 112% increase over 2015.

Beware the election?

While CTA has forecast higher spending levels, it does see that the upcoming presidential election has caused apprehension with some shoppers. Among those who plan to spend less this holiday season, 60% cited not having the money, 57% named an increased cost of living, 54% chose being on a fixed income, and 38% said they were worried about the presidential election.

"The holiday shopping season has been steadily creeping earlier and earlier into the year, but we expect to see a delay in the barrage of holiday promotions this year until after the presidential election," said DuBravac. "Given uncertainty among voters, this election will impact not only when consumers begin to shop but, potentially, how much they spend."

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Daniel Kline owns shares of AAPL. He hopes to get a technology gift this holiday season (if his wife is reading this). The Motley Fool owns shares of and recommends AMZN and AAPL. The Motley Fool has the following options: long January 2018 $90 calls on AAPL and short January 2018 $95 calls on AAPL. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.