U.S. consumers will be shopping for high-tech phones to take advantage of new high-speed networks this holiday season, according to a new study from Boston-based research firm Compete Inc..
Instead of bargain-basement voice-only phones, users are shopping for gadgets with Bluetooth technology, MP3 capability and other multimedia features. Compete’s study, which tracked shopping patterns on major carriers’ Web sites, found that consumers were most interested in Motorola Inc.’s Razr and Danger Inc.’s Sidekick II-two handsets that feature plenty of bells and whistles.
“What we found is that price isn’t a primary shopping influence this season,” Compete’s Miro Kazakoff and Ryan Burke wrote. “Surprisingly, the top 10 list of most popular phones does not include any free phones, in sharp contrast to prior months. Consumers are evaluating Bluetooth and music capabilities even if these advanced features drive up the phone’s cost.”
Online cell-phone retailer LetsTalk.com also reported the Razr as its top-selling model. The handset is available through a number of GSM operators and a CDMA version has recently been launched by Verizon Wireless and Alltel Corp.
It appears consumers are clamoring for diverse features when phone shopping. As the handset market begins to fragment, users are becoming interested in a vast array of specialty phones. Retailers are hoping for a sales boost in traditional business-friendly handsets, music devices, phones that double as camcorders and video-friendly TV gadgets.
And while U.S. carriers continue to subsidize handsets to lock in customers with long-term contracts, consumers increasingly are paying a premium by buying phones before their contract expires, according to Mark Howell, president of handset distributor Brightpoint Inc. Many are upgrading handsets to take advantage of new network capabilities and buying more expensive phones without subsidies.
“I think consumers are willing to spend more for the device because the device is becoming more valuable to them,” said Howell. “I think there is increased demand for full-featured devices that can be media-savvy phones.”
A solid holiday season could cap a stellar year for the mobile-phone industry. Worldwide handset sales totaled 205.4 million units in the third quarter of 2005, according to Gartner, marking a 22-percent increase from the same period last year. North America accounted for 36.3 million units during the third quarter.
The period was the biggest quarter since Gartner started tracking the market four years ago, and it prompted the research firm to boost its full-year sales forecasts to 810 million units.
With wireless handsets having become such a personal item-and because many users still enter service contracts at the point of purchase-handsets are not a typical holiday gift for others. But there’s no doubt that an increase in traffic at shopping malls and department stores helps boost phone sales as the year comes to a close.
“I think when people are out in a retail environment, they have an opportunity to see deals and services” they may not have known about otherwise, Howell said. “I think that’s a great time for a network operator to bring attention to their offering.”
The window for holiday shoppers is getting smaller even as consumers shell out more money more often for phones, Howell said. Analysts will have to wait for the dust to settle before making any accurate estimates of how well Santa treated carriers, retailers and handset makers.
“For the last few years, we’ve seen seasonal spikes in demand associated with the holiday season,” said Howell. “Each of the last two years, that demand has come later in the quarter. I think the real holiday season has grown in terms of demand but shrunk in terms of time.”
