The Digital Decade: Where Are Consumers Going?

North American consumers are gobbling up new technology at an unprecedented rate. Starting with access to the Web in 1994, North America entered the Digital Decade -- a 10-year period during which 50% of consumers will adopt a digital lifestyle (see Figure). By 2003, these households will weave critical technologies -- PCs, cellular phones, and the Net -- into their lives. The remainder of the Digital Decade will be marked by five trends:

1) The Consumer PC Market Matures

The consumer PC industry will continue to boom in 1999. We expect PC makers to sell 13.2 million units -- nearly 4.5 million households will purchase their first computer. But household PC penetration will grow more slowly in the next five years due to market saturation in key segments -- high-income optimists -- and stabilizing PC prices.

2) Cellular Also Loses Momentum

During the last five years, North American cellular penetration skyrocketed from 15.6% to 42% of households. Like PCs, we expect that growth will slow in this market during the next five years. By 2003, we estimate that nearly 57% of all North American households will be cellular subscribers. Cost, not technology optimism, drives adoption due to the simplicity of the technology, yet 30% of consumers say they will not purchase a cell phone at any price.

3) The Internet Shows Meteoric Growth

Media hype and positive word of mouth propelled on-line penetration to 33% of North American households in 1998. We predict that the Internet will reach 38% of households by the end of 1999. On-line penetration will slow by 2001 but will still reach 56% of households by 2003.

4) The Retail Power Shift Begins

Retailing and investing came to the Net in a big way last year. Ten percent of North American households now use the new channel to bank, invest, or purchase products. On-line retail revenue totaled $8 billion in 1998, but the real story lies in the profound change in consumer attitudes, expectations, and behavior.

5) The Digital Divide

By 2003, consumers will bifurcate by technology attitude, income, education, and digital lifestyle. One group will constantly turn to the Net from multiple platforms to meet an ever-increasing variety of needs -- shopping, banking, investing, education, entertainment, and work. The other group will grudgingly adopt technology when necessary. This divide will exist for 10 years -- until Generation Next begins to form new households.