Demand is at an all time high with margins of up to 50 per cent per product, Padraig McGarrigle looks at why there has never been a better time to push accessories
With the advancements in technology and ever-growing demand for smartphones, sales opportunities for mobile phone accessories have never been greater.
The days of shelves being stacked with cheap looking leather cases, headphones and dodgy car chargers, have been replaced with fitness bands, smartwatches, wireless chargers, power banks and screen protectors capable of withstanding the force of hammer, to name but a few.
The stats make for incredible reading. Last year alone, the mobile phone accessory market was valued at more than £34 billion globally, a staggering £20 billion more than in 2012 (ABI Research). And with smartphone sales set to double to more than 2.35 billion by 2019, and accessory margins as high as 50 per cent, the market can not be ignored.
“Any reseller that is not involved in accessories is basically giving the cash to their competition,” says Joe Officer, head of Exertis’ accessories division, Attach. “I don’t know anybody that doesn’t buy an accessory for a device. Whether that’s a charger for their car, an additional charger for the home or a screen protector and case. If they are not focused on it, they’re giving that money to someone else.”
Genuine Solutions, a distributor with more than 600 resellers in the UK and across Europe, goes even further. The firm’s managing director Bav Majithia believes that in addition to missing out on high margin incremental revenue, resellers could also be opening the door to the competition when resigning, say, airtime deals, should their demands or needs not be met.
“Everyone who has a mobile phone at one stage or another will use a type of accessory,” said Majithia. “You are missing out on selling those accessories and being their point of contact. If your customer has to go to Carphone or another retailer to buy their accessories then you are risking losing them as a customer because they are speaking to another salesperson who will be trying to convince them to switch.
“Why not provide a complete solution to your customers rather than them buying accessories and handsets from someone else. We have a great variety of products and we make it very easy and we are competitive.”
However, despite evidential growth, the B2B market in particular is still showing poor levels of attachment rates – thus, missed opportunities to boost revenues for resellers.
Ingram Micro Mobility senior manager companion products – Accessories Europe Brian Windsor, claims attachments rates are still in their “low tens”, with around four in five end customers in the channel going on to make their accessory purchase elsewhere.
Ingram, which offers accessories from a number of major brands, including Krusell and Samsung, described it as “an easy sell” but suggests there is still a fear factor in the channel to be overcome.
He explains: “The more products that you introduce, the more likely you are to get an objection from the customer. It’s about being confident in selling the accessories and also selling the benefits of them. I know if a customer buys a new device, they will buy an extra charger within four weeks – so why not lock that customer down today.”
Got the Power
Hard stats on the UK accessories market are difficult to come by, with only GfK willing to share any market analysis. Its figures excluded one of the biggest channels, eBay, but it says that power made up 40 per cent of the UK market last year.
It however refused to give actual figures but said that lightning cables for syncing and charging increased 150 per cent year-on-year and chargers by 30 per cent.
This was driven by the reuse of devices in the UK mobile phone market last year. With charging cables, particularly those used for the iPhone, typically experiencing heavy wear and tear and requiring replacing.
According to CCS Insight, UK mobile phone sales fell last year b
y 11 per cent to 27 million.
“Lightning cables and chargers are more necessity products than other categories,” said GfK analyst Hussein Elsheibani. “One of the reasons these categories grew I think is the large amount of smartphones reused (handed down to family or friends or sold as second hand) after a new phone is purchased. These are necessity products and you don’t buy them with a handset, you buy them when you need them.”
Bluechipworld (BcW) has a wide range of power-based products which appear in stores including Tesco, Sainsbury’s, Argos, Maplin, Vodafone, Carphone Warehouse and describes power as “key” in the accessories market and the one constant over the past few years. It has a range of power products which extend from old-style Apple chargers to car chargers, power banks and micro USBs.
“Power is key whether it is a micro USB or whether it’s the new lightning cables they always seem to sell over time,” said BcW executive director John Barton.
“We do like to cover all of the price points and make sure that everything is accredited and able to be sold in a country like the UK that is getting increasingly more regulated. It has to tick all of the boxes when you’re making sure a product is fully specced and has all of the certification it needs.”
Power banks highlighted
EE has looked to address customer’s power requirements by offering a free 2
500mAH ‘Power Bar’ – enough to charge the average smartphone once – for free to their customers.
A YouGov survey of 2,000 people commissioned by the operator found that 60 per cent of people claim they have a smartphone battery that doesn’t last a day and that more than half of smartphone users wish they had a way to charge their phone in public places.
Customers can get the power bar by texting ‘POWER’ to 365 and then attending any EE store. Bars can be replaced at any time for a fully-charged one at any of the company’s 700 nationwide stores as many times as they want.
But there are still opportunities out there with many end customers having the requirement for power banks with more juice. The summer festival season is almost upon us and GfK says that last year’s summer season saw a real spike in sales.
STK Accessories head of sales Deborshi Sarkar noted that power is now a “key focus” for the company and it has launched a number of power banks, including a rugged version and one boasting 10,000 mAh, enough to charge the latest iPhone almost six times.
“We always have the ethos of launching products by looking at the consumer needs that are required,” explains Sarkar.
“We’ve just launched the Mammoth power bank which provides users with the possibility of having on the go both your smartphone and tablet in one day and being able to recharge them on the go rather than being stuck outside without any power. The way we designed it is that we minimalise the design and concentrated just on achieving power in order to just achieve a very aggressive price point. It’s £39.99 where similar products would retail at £59 or £69.”
STK has also launched an Active iteration which is IP67 rated for dust, splash and waterproofing.
ABI Research estimates that there were 557 million protective cases shipped last year worth a total of $13 billion, making it the biggest single category in accessories globally.
Despite a year-on-year fall of 10 per cent in the UK in 2014, protective cases are the largest accessories category after power banks making up 15 per cent of the market according to Gfk. In 2013 alone, there were five million iPhone cases sold with an estimated value of some £67 million. Recent years have seen a definite trend according to Genuine Solutions where people are willing to pay more to protect their expensive devices.
“The cost of handsets have gone up and people want to pay a little bit more,” said Majithia. “When it was a free phone and a free connection five years ago and they just paid £20 per month, people didn’t care that much. People are now educated and know the true value of the handset, they want to protect that asset.”
Ingram Micro Mobility also claims that cases are a key tenet of any accessories play for any reseller. Since it launched the division in 2009, under BrightPoint with just two brands (BlackBerry and HTC) it now boasts hundreds of product lines from different manufacturers.
Windsor agrees with Genuine Solutions and says it has seen good traction, particularly in the B2B channel, in more rugged style cases which afford more protection. To this end, it has recently added the CAT range of rugged handset cases which are manufactured and distributed by UK-based company Bullitt Group. This is in addition to other well-known rugged case manufacturers Otterbox and Trident.
“We are seeing big traction in rugged cases because the cost of the device is very expensive and some of the resellers that we are working with closely have very large corporate accounts and they want to protect their investment,” he said.
“Otterbox and Trident are doing very well and we have just added CAT protection into our portfolio. It’s a great brand name and is well-known throughout the world. That works very well, not only for our retail base, but B2B customers as well.
“It almost moves away from the traditional perception of rugged where you have a bulky case to something slightly slimmer and more consumer orientated. It’s all about protecting the investment, so we’ve also seen the growth of screen protectors rocket in the past three years and the emergence of glass screen protectors has helped rejuvenate the market”
Protection extends beyond simply putting a case around the phone and one of the most important areas is screen protection. There were eight million screen protectors sold in the UK in 2012 according to Gfk, a number that is only likely to have grown since then.
There is a huge demand for it but despite this it is estimated that as much as a quarter of iPhone owners have a cracked screen.
There are a number of screen protection brands such as Panzer Glass, which offers “ultimate protection” and has been tested against attacks on it by a hammer. It is only 0.4mm thick and will absorb most if the impact from a phone being dropped. It is available through Ingram Micro.
Exertis’ Officer agrees that screen protectors are beginning to catch on with the price of devices showing no sign of slowing down. However, he says that price is key in the UK market for anyone looking to ship any significant volumes of screen protectors.
“Cracked screens are a big problem, so working with Belkin and Tech 21, we have very strong impact and screen protection and if there is anything that anyone buys as an accessory it is a screen protector and a case. Just doing that, a £2030 spend protects your mobile phone.
“What we find across Europe is where people have to physically buy their handsets then the average selling price goes much higher, they are much more inclined to buy a product for €40, the main thing about accessories and the message that we are giving customers is that there is a fashion statement, but the biggest thing is protection.”
“The UK market is very different to a lot of the other markets, especially Europe. We put it down to the whole subsidy model, in the UK where people are more focused on a value proposition. You see that the majority of the market is going out at sub £20, if you go to a mass merchant you would be surprised to see something that costs more than £14.99 – so there is an element of sweet spot (to that price).”
Exertis distributes more than two million accessories to retailers such as John Lewis and Argos in the UK every year. One way it tries to differentiate itself from the market is by only working with top manufacturers. He says that it has the advantage of avoiding poor quality products being pumped out by Chinese factories but also the increased marketing that larger brands do around their products.
“You see loads of stuff that comes out of China but our proposition is always working with tier 1 manufacturers because you are guaranteed that they are massively invested in the market, they are going to create brand awareness and you can trust that the product is being built to a very specific standard.”
All the companies involved in the accessories space are under huge pressure to find the next big thing and to constantly not just react to consumer trends but be in front of them – witness the explosion in selfie sticks this year.
But there are numerous other innovative products that are classed are in the accessories market such as tablet stands, lightbulbs that double as a bluetooth speaker. That’s before we even come to wearables which will feature extensively in May’s Mobile News.
A base in China and/or regular trips to the Far East are essential to meet the ever increasing demands of the general public and retail partners. Bluechipworld’s John Barton, speaking to Mobile News the day before a 10-day trip to Hong Kong and China, said: “If you look at Tesco, they are constantly wanting to know that we are on the front foot when it comes to suggesting new products, accessories and add ons that will suit their customers.
“You have to be doing that and you have got to keep the picture in mind, develop new products and hopefully be first to market, to be able to meet the needs of people wanting something new and fresh.
If you take the larger range that we have in places like that it means you are covering an awful lot of accessories requirements from car, bluetooth, cases and selfie poles.
“All are things which add to a smartphone and you have to be thinking about the next thing. One of the reasons we go to factories in HK and China is because you need to keep abreast of what’s coming.”
One of those things that is coming and was name checked by every interviewee Mobile News spoke to is wireless charging. First integrated by Nokia/Microsoft into its Lumia handsets and LG into its flagship G range, Samsung is taking it mainstream with the Galaxy S6 and S6 edge. It is estimated it will be worth $13.8 billion by 2020.
“It has been around for a few years in one form or another,” said Exertis’ Officer. “If you look at the new Samsung range it has wireless charging, Nokia were ahead of the game, and then you have the likes of LG.
“We are seeing a lot of that come through and a lot of aftermarket manufacturers who are bringing out a whole suite of wireless charging products – that’s gaining a lot of attention.”
Bluechipworld’s Barton adds: “That’s going to be a key element in the same way that we’re trying to take the wired element away from headphones with bluetooth. The same will apply to chargers as well, so we will see a big growth in different solutions and styles of mats for phones and tablets, that’s self-evident.”
It appears that there are less reasons than ever not to get involved in the accessories market. There are literally millions of products that are available in the marketplace currently and if the airtime and handset resellers are not shipping accessories someone else will.
Low minimum order quantities are helping to break down the barriers to entry and with high margins available it should be enticing to resellers who are looking to bring a little extra money into the business.”
Ingram Micro director of sales and marketing Richard Wills said: “I honestly believe resellers leave money on the table by allowing their customers to cruise off to accessories stores. Yes it can be a speciality but with a small bit of effort they can really provide their own alternatives. Accessories are now a forethought in helping stimulate the margins to support an ever-increasing marketplace for the devices.”