If you think you’re seeing Bluetooth headset advertisements everywhere, offering a bewildering array of styles and functionality from innumerable companies, you’re spot on.
The growth of mobile multimedia – driven in part by a shift in emphasis by network operators’ pursuit of data-related revenues – is also driving related accessory sales.
That has been a boon for Bluetooth headsets in particular.
The growth in this slice of the accessory market is such that there’s room for growth for many scrappy newcomers – despite the market dominance exerted by a handful of brands, including the major handset vendors.
$3.5B industry
According to ABI Research, handset accessories in general will fetch $40 billion in global revenue this year and that will double to $80 billion in four years – a forecast some vendors find conservative. Bluetooth headsets will contribute 8% to 10% of that total this year, or about $3.5 billion, according to analyst Shailendra Pandey at Informa Telecoms & Media. Vendors say that number is conservative, too.
In the United States, last year’s 14.5 million Bluetooth headset units shipped are expected to grow to 18 million this year and more than 20 million next year, also according to ABI Research.
Despite the fact that Motorola Inc., GN/Jabra, Plantronics, Nokia Corp. and Sony Ericsson Mobile Communications hold as much as 85% of the market – ABI Research data, disputed by smaller players – that market is burgeoning and a mere 15% slice apparently can sustain numerous contenders.
“There are opportunities in this market for smaller players as this market expands,” Pandey said. “It will be interesting to see how they impact the larger players. But there’s so much growth opportunity, the larger players still will grow their revenues.”
Bluetooth functionality on the handset itself is still accelerating and it may be three or four years before it reaches saturation, the analyst said.
Pandey added that, while some shakeout among Bluetooth vendors is inevitable, these years of growth will pass before winnowing begins in earnest.
The Bluetooth Special Interest Group Inc. product directory reflects well over a thousand different products on the market, with a long list of vendors with names both familiar and utterly unknown. As in any hot market, some will rise, some will fall, the analyst said. One alternative to exiting the market will be to morph into an original device manufacturer (ODM) that can serve the larger brands’ needs for excess capacity, Pandey said.
Partnerships are paramount
The key challenge for the contenders, particularly in the United States market?
Securing deals with handset vendors and/or network operators who control the bulk of the retail channel is important, Pandey said. The fact that the top-tier handset makers also make their own Bluetooth headsets means that they have a leg up when it comes to bundling their headsets with their handsets in the trend towards “in-box” sales.
Increasingly, carriers are bundling accessories with handsets so that consumers make one purchase to obtain a multimedia handset and the headset that provides complete functionality. The trend also provides carriers with an up-selling opportunity, as it raises the average transaction price.
Challengers, then, must increasingly ply after-market sales in alternative channels, which will slow somewhat as bundling becomes even more prevalent, Pandey said.
Feature flash
Thus the contenders must standout on price, functionality or style and fashion, several vendors and the analyst agreed.
For instance, noise cancellation technology developed for handsets is now making its way into Bluetooth headsets, Pandey pointed out. Design and style elements also are paramount as vendors seek out specific demographic groups, such as women, who’ve been slower to adopt headsets in general, the analyst said.
Swedish firm CellPoint Inc. has recently moved into the Bluetooth headset space with its acquisition of Canadian firm Gennum Corp. last year. Kristian Gjerding, CEO of CellPoint Americas, said that “the merger between music and voice challenged headset design.”
That has led CellPoint to focus on comfort – as well as design and functionality – in its Flamingo Classic earpiece.
“Comfy fit is the trend for 2008-2009,” Gjerding said.
Thus the Flamingo fits into the contours of the ear in a way that no longer requires a support element to encircle the ear.
In terms of functionality, Gjerding said, stereo headsets that can deliver audio while also delivering what he calls “extreme noise cancellation” for voice will be trends avidly pursued by his company. Advancements from semiconductor companies will keep retail Bluetooth products at an attractive price point, he said.
“This year, the business person is looking for mature noise cancellation technology,” Gjerding added.
CellPoint works with Sprint Nextel Corp. in the U.S. as well as big box retailers in its quest for market traction.
“We’re a small player, so we need to create pull among consumers based on superior design and technology,” Gjerding said. “As we pursue retail channels, viral marketing stemming from design awards is also helping us.”
BlueAnt, a five-year-old Australian firm with two years in the North American market, is also pursuing differentiation to stand out. Its “size does matter” campaign for its Z9 mono headset emphasizes smallness and lightness along with its trademarked Voice Isolation Technology, which depends on software and dual microphones to screen out background noise for its voice-centric earpieces.
“Everyone wants to use these devices without standing out,” said Peter George, a BlueAnt senior VP.
Target market
One unexploited demographic: females who’ve been slower to adopt Bluetooth, perhaps for appearance reasons.
George said that his company’s X3 model last year offered six colors. The most popular was black, followed by pink. That told the company that females indeed would purchase a Bluetooth headset, if it met certain criteria. BlueAnt is expected to launch another product later this year that George said will address those criteria. Meanwhile, Bluetooth usage continues to be the province of young males and commuters, he said.
George said that BlueAnt has built its distribution and retail channels in the U.S. from the ground up, first targeting small independent dealers, then big box retailers such as Best Buy and Radio Shack and, finally, making inroads with T-Mobile USA Inc. while landing discussions with other leading carriers.
“Yes there is room for companies with good products, but the barriers to entry remain high,” George said.
One differentiator for BlueAnt: a live call center for consumers to help with any issues. In defining the company’s approach, George reflected the scrappiness of the Bluetooth newcomers facing the market’s goliaths.
“We stand by our products,” George said. “That has allowed us to grow share here over the last two years. We’ve grown quickly and significantly. We’re playing with the big boys now.”
