With music and imaging an increasing aspect of mobile phones’ feature sets-the engines driving network operators’ ARPU growth-more than 50% of this year’s $32 billion in worldwide accessory revenue will come from multimedia-related memory cards, headsets and data connection kits, according to data from ABI Research.
Network operators and handset vendors have been bundling more of these accessories with handsets at the point of purchase to provide a satisfactory out-of-box experience-a boon to ARPU and a hedge against churn, according to analysts.
One might capture the carriers’ high hopes with “out-of-the-box bundling means an out-of-this-world experience”-leading, presumably, to astronomical ARPU.
“Expanded multimedia features in handsets is the most important factor contributing to the growth of the mobile-phone accessories market,” said Shailendra Pandey, analyst at ABI.
The simple logic is inescapable, according to another analyst.
“Multimedia devices obviously don’t work without these accessories,” said Miro Kazakoff, analyst at Compete Inc., which studies consumers’ online shopping habits. “And carriers have improved their skills in this area because their ARPU increasingly depends on multimedia uptake. There are good margins in both handsets and accessories.”
Retailers, Internet source of sales
Kazakoff said the bundling trend among carriers and the primacy of their retail, brick-and-mortar presence poses a threat to third-party retailers. Still, online, after-market accessory shopping is increasing by 5% to 6% per year, he said.
“Retail outlets in general are responsible for the major proportion of sales compared to Internet retailers,” Pandey agreed. “In Western Europe and the U.S., an increasing proportion of customers are buying from Internet retailers. In developing markets, after-market accessory sales typically take place through retail stores and small shops.”
Despite carriers’ presumed advantage in the U.S. with their bundling strategies, after-market accessory sales by revenue worldwide are growing beyond last year’s 75% of the accessory market, Pandey said. This is due, in part, to a surge in the number of new companies chasing after the high-margin accessory market, both in high-tech accessories as well as in carrying cases and personalization offerings.
Therein lies a distinction in the accessories market. According to Pandey, purveyors of memory cards, Bluetooth headsets and data connection kits must typically wield product design capabilities, technical expertise and pay IP license royalties. For instance, five companies-Motorola Inc., GN, Plantronics, Nokia and Sony Ericsson Mobile Communications-hold more than 85% of the Bluetooth headset market, the analyst said. In contrast, a much larger number of companies offer the chargers, carrying cases and other items that in the pre-mobile multimedia age represented the key accessories.
New competitors
“The challenge for a new player is not just to compete with Nokia and Motorola, but also to compete with a large number of other companies that are already in the market and selling accessories at much lower prices than Nokia and Motorola,” said Pandey. “For players wanting to market under their own brand, the main challenge is product differentiation-and convincing consumers of the product’s reliability at competitive prices.”
One example of the sort of company plying the choppy waters of the 15% Bluetooth market beyond the behemoths, Pandey said, is Bluetrek.
Bluetrek is a subsidiary of Modelabs Group, a French firm that also makes specialty handsets in partnership with the likes of Levi and Hummer. Hong Kong-based Bluetrek has used eye-catching-some would say risqu
