Portable Navigation Could Hit 2 Million Units

Monday, February 27, 2006

The sales of U.S. portable navigation are expected to double this year, as are the number of suppliers entering the category, laying the groundwork for what could become a volatile market.

Industry members predict 100 percent growth in portable navigation this year, with sales expected to hit 1.5 million to 2 million units, up from approximately 750,000 to 800,000 in 2005. Audiovox estimates sales could reach 2.5 million to 3 million in 2007.

But with so many suppliers entering the market, is the industry heading for a quick shakeout? And what will be the role of the 12-volt independent retailer who specializes in installation when navigation shifts to a predominantly portable market? New suppliers entering portable GPS for the first time this year include Alpine, Audiovox, Blaupunkt, Clarion, Directed, JVC, Navmax, Sony and Xact. Three or four years ago, the market consisted of mainly Garmin and Magellan. Since then other names including Cobra, Dual, Lowrance, Mio Navman and TomTom have also entered the fray.

Advances in portable navigation have come at a rapid-fire pace (preloaded maps, battery operation) and prices have fallen just as precipitously. Six month ago, a low-priced model with built-in maps sold for more than $1,000. Now sales are at a low of $499. At least two suppliers say the fourth quarter could see prices on flash-based GPS hitting $300 and hard-drive-based units reaching $500.

But both Garmin and Magellan say they are taking the influx of new competitors in stride.

"There are still only a few major new and existing players with enough presence in distribution channels to really have any affect on the market, and while the number of competitors is growing, demand is also growing," said a Thales Navigation spokesperson.

Garmin noted there are a lot of "me too" products coming to market but that consumers want products that are easy to use. A spokesman claimed that Garmin supplies GPS to pilots and mariners "whose lives depend on us. The money we spend on R&D in aviation and marine, we can bring that rapidly to market. Integration and ease of use will make the difference, and also integrating with traffic." Cobra likened the market to that of two-way FRS radios about five or six years ago. "There were maybe 100 vendors. There are a half dozen now. And the navigation business will see the same kind of fallout," said sales and marketing senior VP, Tony Mirabelli.

Alpine marketing VP Steve Witt said it's too early to tell if the market is overcrowded, but noted, "It'll probably get more crowded before the shakeout begins." Some retailers say the price competition and portability of the product makes it a less attractive item for a 12-volt specialty retailer, whose expertise is in installation.

Audio Express, Scottsdale, Ariz., believes that consumers will tend to go to a Best Buy or Circuit City for a portable navigation device since it requires no installation, "so for me to carry portables is a waste," said purchasing manager Paul Gosswiller. The chain is however, looking at a few brands, including Alpine, which offers the Blackbird portable that docks in a fixed navigation device, creating a best-of-both-worlds situation for installer specialists.

Others say there is room for installation, even in portable GPS, because many consumers are willing to pay a professional installer to tuck away loose wires, just as they do for portable satellite radio products.

"Most people who buy it like the portability but don't necessarily like the ugliness of the wiring. So they still need the wiring grouped. So we're finding some success in offering it. And the Alpine piece and Clarion piece is mainly distributed through 12 volt," said Harvey Wright CEO of Autosound of Lexington, Lexington, Ky.

Al & Ed's Autosound, Van Nuys, Calif., agreed, claiming, "As long as the retailers adhere to MAP policies, we're on a level playing field. It's not a great margin product, so it's important to tie it into installation of some sort to make it profitable. Many people want it hardwired, so it's more sleek looking," noted product manager John Haynes.

Another retailer said more pointedly, "Do you want a box with a suction cup and antenna sitting on your dash with a plug running into the cigarette lighter? If you have a nice car, probably not," said Steve Medeiros, owner of Sound FX, W. Warwick, R.I.

Several retailers mentioned that portable navigation poses the same inherent drawback as radar detectors. Both products encourage what some refer to as product "renting." "I think it's a difficult product for the 12-volt specialist because people want to buy them and then return them after they've gone on a trip. They come in and claim they are unhappy with it," noted Gary Balding, GM for Freeman's Stereo Video, Charlotte, N.C.

Some industry members say in-car navigation remains the more profitable segment of the GPS market.

Circuit City mobile electronics senior buyer David Dowdy ventured that in-car navigation will become the key aftermarket source unit in the coming years. "Clearly the installed navigation product is the future of the installed car stereo business The CD business is declining at a very rapid rate From a functionality and a feature perspective, consumers today are choosing navigation products and because of the fit and finish of an installed product, we believe it's very attractive to a segment of the population. It's still expensive now the point of entry is $1,500 on the low end but as with most new technology products, the price will drop." At present, however, the fixed in-car navigation market remains small, with Pioneer estimating that 110,000 units sold in 2005 with a 35 percent increase expected in 2006.

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