Portable GPS sales explode and returns start to come down – a wonderful combination.

Implications: In Q2 the global GPS market more than doubled, and in the U.S. the mobile GPS market grew by almost 300%. As prices come down and portable GPS systems become less of a considered purchase and more of an impulse purchase, sales will continue to grow at an outstanding rate. On the flipside of this explosive growth has been returns as high as 20-30%.

Analysis: While lower ASP (average selling prices) are helping fuel demand in this category, it’s a great sign of health that it is not the super low price models that are dominating.  In a category where you clearly get what you pay for, Garmin’s best-in-class functionality and idiot-proof interface earned them 49% share of unit sales and 55% share of dollar sales in the U.S. in Q2, giving Garmin the enviable position of dominating the category, with more premium price points and features. As prices continue to come down and fuel demand, simplicity and ease of use will rule the day, both in the initial selection and in making the sale stick.

The darker side of this bright category has been returns.  Driven in part by the “free rentals” and in part by very legitimate frustrations with clunky and complicated interfaces, returns have traditionally been very high on portable GPS units.  Just like in the early days of other fun, new CE categories that everyone wants  –  digital cameras, camcorders, portable DVD players, even macbooks –  they can be really fun, impressive and useful for a short period of time, like a vacation  -- If I can buy it, use it and return it all within the allowed return policy – is that wrong?  Retailers have dealt with this by adding a restocking fee (generally 15%) to these categories, which now include GPS in most stores, so  least if they are rented, it’s for a more reasonable price. This deterrent combined with the more positive progress in the category of more accessible price points, and in Garmin’s case in particular, smarter and easier interfaces that work right out- of- the- box, are providing buyers with a great experience, and returns are coming down and sales are going up... A wonderful combination for everyone involved.