Since 1967, the Consumer Electronics Association (CEA) has been hosting the International Consumer Electronics Show (CES), a global trade show that highlights innovation in consumer technologies. Beyond this annual event, taking place this week in Las Vegas, the CEA plays a crucial role in the industry, sharing market research, forecasts, legislative news, and more. Helping guide these efforts is Shawn DuBravac, the CEA's chief economist and senior director of research. If you want to know what's happening in technology and consumer behavior (and what marketer doesn't?), DuBravac is your man. He spoke to us about the impactful trends he's watching, including the explosion of sensors, the digitization of information, mass customization, and the "third industrial revolution."

January 2014

Part of your job is directing market research initiatives for the CEA. What are the big trends you'€™re seeing among your 2,000 member companies?

One of the most impactful trends I'€™m seeing right now is the digitization of everything. This trend is being empowered by the sensorization of consumer technology. History shows us, when things move from scarcity to surplus, we begin to waste those resources. This is especially true in technology.

Take computing power, for example. In the late 1970s, computer processing power was considered a scarcity, something we rented or borrowed from computer labs. Then, beginning in the 1980s, computing power began to move from scarcity to surplus. In 1981, Xerox introduced the first graphical user interface, and three years later, Apple brought the Macintosh to market, the first commercially successful computer to utilize a graphical user interface. Prior to this, we never would have wasted computing power on rendering graphics for things such as folders or mouse icons.

Today, a similar evolution is underway with sensors. Prices have dropped significantly and as a result, we are now wasting them by including them in a host of devices and applications. Take, for example, camera sensors. Ten years ago, camera sensors were expensive and used sparingly. But as they moved from scarcity to abundance, we began to embed camera sensors into phones. Today, it'€™s common to see multiple camera lenses embedded in devices like your smartphone. In 2006, we began to see the first smartphones with embedded accelerometers. Today, your smartphone probably has an accelerometer, gyroscope. and multiple cameras, along with a digital microphone. We are now seeing this trend expand to biometric sensors, as we add even more sensors to these devices. Each of these sensors gathers contextual data, an important element of the sensorization of consumer tech. We'€™re at a point, technologically, where everything is measurable; everything around us can be turned into data. Harnessing the usefulness from data and implementing its power into our daily lives is the next wave of technological application and innovation.

These trends will have a profound impact on the way we live, on the way we interact and certainly, on the way we shop.

What impact is this sensorization having on retailers and the retail shopping experience for consumers?

Now that sensors are becoming ubiquitous in consumer electronics, we'€™re starting to sensorize and, ultimately, digitize the retail experience. Tech companies are working on communication protocols that enable retailers to engage in new ways with consumers through their smartphones. For example, a retailer could pull contextual sensor data from a smartphone and use that data to push appropriate content back to a consumer.

I also think we'€™re at a really interesting point when it comes to the digitization and sensorization of everyday objects. These trends will have a profound impact on the way we live, on the way we interact and certainly, on the way we shop. The ways in which we experience things will forever be changed as information becomes more and more digitized.

You mentioned pushing relevant content to shoppers'€™ smartphones. How else could retailers use this digitized information?

An easy application would be the digitizing of stores'€™ glass cases—€”convenience or grocery store refrigerators, for example—€”with transparent LCD screens. The shopper still has a traditional shopping experience of looking through the glass and browsing the shelves, but now the retailer has the ability to display information on that glass case.

Manufacturers and service providers who sell online tell me that their prices adjust multiple, sometimes hundreds of, times in a given week based on market dynamics, promotions, and supply and demand. But the process is quite different—€”almost static or certainly less frequent—€”in a traditional brick-and-mortar store because it takes time and resources to physically change prices in-store. But, if the glass case in front of a product was a digital display, prices could change in a physical store like they change online. Price changes could be driven by local consumer preferences or the inventory levels of a specific store location. New advertising and promotional campaigns could be deployed to stores in seconds or minutes instead of weeks or months. When aspects of the physical store experience are digitized, information can be deployed and updated faster.

Whether information like this is related to product pricing, inventory levels, advertising campaigns, or other product specs, it creates an improved shopping experience for the consumer. I used a store'€™s glass cases as an example, but ultimately, this innovation could extend to smartphones as well.

Could that information then be used by consumers to make smarter purchase decisions and, perhaps, power things like recommendation algorithms?

Yes, exactly. Digitization opens up opportunities for both retailers and consumers. Both parties benefit. Look at Netflix and how it uses a series of algorithms to make user recommendations based on the digital information it collects. Netflix knows what you and I are watching and what we like. Based on that data, its algorithms can make movie recommendations to someone based on shared traits that have been teased out of the data.

Let'€™s look at how this could work on the retail side. An algorithm looks through your historical fitness data and sees that you do a lot of running. The algorithm then infers that because you'€™re active, you may like a certain type of outfit or shoes. And if you like those shoes, you'€™ll like this song and this magazine and this sports drink.

That level of personalization is a win for both buyers and sellers, right?

Right. I refer to this trend as "€œmass customization,"€ which sounds contradictory but is a new frontier for retailers. It'€™s one of the trends I see playing out in the years to come—€”and I mean as soon as this year.

I see us entering an interesting time that I refer to as the "€œthird industrial revolution."€ The first industrial revolution was about taking small, independent factories and consolidating them and then trying to create economies of scale for production. The original model of apprenticeships had the apprentice making or buying a set of his own tools as his final assignment. In the first industrial revolution, we produced some of these economies of scale by simply sharing tools across workers.

The second industrial revolution was largely about applying new technologies to that structure to achieve mass production. We added electricity, more advanced machinery and telecommunications.

I see the third industrial revolution building on the mass production processes of the past 250 years and then adding the ability to customize for individual consumers. Mass customization takes all of the things we'€™ve learned about mass production and adds this boutique element, allowing us to get exactly what we want. That'€™s largely possible because of the digitization of information. Today we can customize our Moto X smartphone, personalize postage stamps, or design our own unique pair of sneakers.

What does this third industrial revolution mean for retailers? How would multichannel retailers take advantage of this digital information boom?

The retail environment is competitive. Consumers have more choices than ever. And it'€™s important to recognize that you'€™re trying to satisfy a relatively fickle consumer—one who can easily shift purchase patterns and preferred vendors. In our research, we'€™re finding that consumers are going online before they make a purchase. Interestingly, they'€™re not just going to a manufacturer'€™s website but to retailers'€™ websites as well. They'€™re visiting, shopping and researching all aspects of the purchase, not just the actual logistics of picking out the product. They want to learn about the product, and they want to have a rich experience. And this is great for retailers because they can deliver that rich experience. They are able to give every consumer a personalized shopping experience thanks to the infusion of digital information, much of which comes directly from the consumers'€™ own shopping habits.

Therefore, multichannel retailers should think about the consumer in a holistic sense and curate an experience—€”including postpurchase—€”that ties together and even transcends all of the channels.

But this is by no means easy to do, given all the variables at play. If you look at the online platforms that have been successful, it'€™s because they'€™ve removed friction from a particular market. For instance, LinkedIn removed friction from the process of keeping in touch with people you'€™ve met at conferences or used to work with. Netflix removed the friction from finding the perfect movie to watch. Google removed the friction from finding relevant information online. There'€™s a huge opportunity for retailers to remove friction from the shopping experience and to harness digitized information to deliver the right product and the right experience at the right time.