It's the height of summer and much of the country is baking in an unrelenting heat wave. Of course that means it must be time to start talking about the holidays--the winter holidays that is. Back-to-school shopping has barely begun, but with the most important quarter just around the bend, it's a good time to look ahead.

The star of last year's holiday season, the iPod, is set to have some competition in 2005. Although the popular device makes up the largest percentage of digital audio players sold, mainstream consumers coming into the market this year might be drawn to products with added features at lower price points from companies like Creative, Sony and others. "The biggest thing with digital audio players is they're being worn as accessories," said a spokeswoman for Samsung. "People are conscious about how digital technology looks on them--it's 'wearable tech.'"

Look for more wearable tech from satellite radio providers as well, as that category continues to provide a much needed boost to audio sales. "Sirius as a giftable during the holiday period is [going to be] huge, because of the low entry cost and low monthly charges," said Charles Hodges, spokesman for Radio-Shack. "It really speaks to families."

Portable audio products are expected to fuel sales across multiple retail channels especially discount department stores, where the units are olden easy to use, require little explanation and aren't tied to services. But specialists such as Best Buy, Circuit City and RadioShack are hoping to take advantage of more complicated technology to drive traffic, even in such mature categories as digital imaging where consumers are increasingly upgrading to more advanced cameras and looking for print options.

"Yes, it's mainstream and yes, you can buy digital cameras at Sam's Club, but there's still a bunch of people out there that don't have a clue about digital imaging," said Hodges. "We're trying to simplify things."

Smart retailers will be stocking bundled product from companies like Kodak and HP that offer a camera, printer and paper all in one simple-to-use package. And as gift options for current digital camera owners, higher-resolution models and digital SLRs are expected to be popular.

Of course digital TV will continue its upward momentum through the holidays. "We know DTV will definitely continue to be hot," said Jeff Joseph, vp communications for the Consumer Electronics Association. "Average prices in 2005 are expected to be approximately $1,400, or $200 lower than last year, with an increasing amount of product available around the $500 price point; that's one hot category."

If there's to be any breakout star this year, it will likely be Microsoft's third version of the Xbox gaming system. "With that comes great opportunity for retailers, in not just the device but the software as well," Joseph said.

And there's still product waiting to be released. HD DVD players may drive interest into the now flat market for DVD hardware, Voice Over IP (VOIP) is picking up steam, and Motorola and Apple may yet release the much-anticipated iPhone. According to Joseph, the portable video category is ripe for product innovation that could ignite sales. "We are still looking to get the video equivalent of the iPod," he said. "It's just not quite there yet."

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