Investor's Business Daily, October 4th, 2007
For today's savvy dialers, it's not enough just to own a cell phone. Many want enhanced features, more convenience -- and a dose of pizzazz.
Gadget makers are answering the call, creating a huge, growing market for all kinds of accessories.
ABI Research expects users to spend $32 billion on cell phone add-ons this year and projects that the number will pass the $80 billion mark in 2012.
The idea of embellishing a handset is hardly new. For years people have been buying add-on items such as memory cards and battery chargers.
What has shifted recently is a new emphasis on consumer accessories such as elaborate carrying cases and fancy jewelry. Handset vendors are even hiring famous fashion designers to make sure that their products look hip.
"Cell phone accessories are a market that really picked up steam in the past 12 to 18 months," said Shailendra Pandey, an ABI analyst.
Cell phones as fashion statements arguably started with Motorola's MOT sleek RAZR V3 handset, released in 2004.
The RAZR proved that customers put a premium on design -- and are willing to pay a premium price.
That's why Nokia NOK turned to noted fashion designer Giambattista Valli for help building its 7373 handset.
That fashion sense extends far beyond the phone itself.
Vendors now offer pants, shirts, and jackets designed to hold cell phones and their accessories.
On its Web site, Motorola sells a Bluetooth-enabled cargo jacket for about $100. Likewise, Sprint Nextel S teamed with Dooney & Bourke to make slinky purses for carrying cell phones.
Bluetooth, a short-range wireless data technology, is spurring all sorts of cord-free accessories such as headsets and in-car speakerphones.
There are cheaper ways to customize cell phones. By paying a few bucks, a consumer can buy stick-on charms featuring Hello Kitty, SpongeBob Square Pants and Supergirl.
Claire's Stores, which caters to teen girls, is among the many retailers selling cell-phone charms.
Music often is linked with fashion, and Apple's AAPL iPhone success underscores the blurring line between cell phones and MP3 players.
Consumer accessories might be garnering most of the attention, but the bulk of add-on revenue stems from productivity boosters such as data storage media and power adapters.
To keep upfront costs low, cell-phone makers usually skimp on data storage media. As businesspeople deal with more information, they need more memory.
Other popular add-ons for business-minded cell phone users include data adapters that link mobile phones to their laptop computers. This makes it easy to transfer data between the devices and share the phone's Internet connection.
Other devices make it simpler for users to make calls while driving. Special cradles hold the phone upright, while Bluetooth-connected speakers deliver clear conversations so drivers can keep their hands on the steering wheel and eyes on the road.
The upside for vendors is obvious, says Current Analysis' Greengart. With profit margins of up to 80%, "they are real moneymakers," he said.
