Americans love the $50 clamshell, but a small, growing number of wealthy people are paying astronomical prices for feature phones that often sport a cachet-laden brand name or are slathered in gems.
That trend – pursued by the top-tier handset vendors as well as obscure boutique brands – is likely to continue, due to demand and the potential for profits and glory, according to ABI Research.
The market research firm has forecasted that the luxury phone segment’s annual, global revenue will exceed $11 billion next year and surpass $43 billion by 2013. This year, some 5.7 million handsets that fit the “luxury” category are expected to be sold. Western Europe leads demand (1.9 million units), trailed by North America (1.7 million) and Asia (1.3 million).
Those volumes, accompanied by attractive margins, are expected to remain low to maintain the exclusive cachet that goes along with this market segment.
And the traditional players – carriers, vendors and retailers – all benefit, as do the luxury brands themselves, according to ABI Research analyst Kevin Burden. The LG Prada phone, for example, allows Prada – with its traditionally female customer base – to extend its appeal to men as well.
Halo products
How crazy does it get? The Web is littered with examples.
The current record for a single handset appeared to be dated references to a $1.3 million smartphone from Swiss firm Crypto Telecommunications encased in platinum and blanketed in gems by jeweler Peter Aloisson for Russian firm JSC Ancort. Another Russian company, Gresso, touted its handsets made of “rare” African blackwood studded with white diamonds, priced at $50,000. (Gresso’s Web site said its mobile phones “are not sold on the Internet Network.”)
Despite the temptation to lump all such offers under “crazy,” three categories of luxury phones exist, some quite familiar to the casual observer, Burden said.
The first is the fashion phone that “borrows” a luxury brand, such as Motorola Inc.’s Dolce & Gabbana Razr v3i ($300 at the height of Razr-mania) and Alcatel’s Playboy phone ($300 at Buy.com), pre-loaded with tiny pictures of Playmates.
“The ‘brand borrowing’ lends the appearance of an elite product, but typically the technology is not very interesting,” Burden said.
The second category of luxury phones are genuine, collaborative efforts between a phone vendor and a luxury brand. The LG Prada, for example, stemmed from Prada’s insistence that if it lent its name, the phone itself should reflect its brand, according to the analyst. The result was LG Electronics Co.’s first touchscreen handset, which uses Prada’s signature color palette on the homescreen; it has been successful in its initial European launch at around $350. Another example: the Bang & Olufsen phone from Samsung Electronics Co. Ltd., which will run you $1,275.
Over the top
The last category is the most likely to produce lust or disdain, depending on your income – the so-called “ultra-luxury” phone, those encased in precious metals or diamonds and sapphires. Prices hit five, six, even seven figures for these intentionally low-volume products, Burden said, based not on technology but on the degree of “encrustment,” if you will.
One exception to this general picture is Nokia’s independently run, wholly owned subsidiary, Vertu, which may sell about 10,000 units per year, the analyst said. The Signature Diamond model has sold at $88,000; the Signature Cobra carried a $310,000 price tag. Vertu retails in its own flagship stores and high-end department stores.
In all three categories, Burden said, the luxury consumer brand sees an opportunity in the mobile phone – now the most personal and ubiquitous consumer electronic device – to extend their brand presence and round out their own product lines. Dolce & Gabbana’s customer base for its line of clothing, footwear and handbags may well throw a handset into their gilded shopping cart.
Who are these people?
Vendors are understandably reluctant to produce demographic data, Burden said. But at the high-end they are “people you’d expect would have other people making their phone calls for them,” he said.
Whither the luxury handset market?
Its prodigious revenue growth will be accompanied by shifts in product offerings.
“Brand-borrowing kick-started this market segment, but that slice will shrink over time,” Burden said. “We’re already seeing that segment head down-market to include non-luxury brands. The collaborative-brand category calls more attention to the product and how that reflects on both brands. We’ll see more of that.”
And, as long as the super-rich continue to shop, the jewel-encrusted feature phone will continue to confound the common sense of those whose incomes are more down-to-earth.
