img credit: HowStuffWorks.com
Smartphones are expensive and we like spending on cases and accessories that protect them, sometimes enhance them, and to customize them with our unique identity.
I personally have three for my Nexus 4, a plastic shell with a retractable stand to watch movies on the move, a soft shell rubbery case which is great to hold, and an armband for the occasional run. An ABI Research estimates that a smartphone owner will spend on an average $56.18 on accessories per device. Amazon's accessory cases and covers page contains a whopping 7.9 Million items.
ABI also estimates that smartphones drove $20 billion in aftermarket accessory revenues in 2012, and is expected to reach $38 billion by 2017. That's a Billion with a 'B' if you didn't notice.
Why are cases so popular?
Look around and you'll notice smartphones are getting slimmer designs, and are made of glass and plastic to reduce their bulk. Every new smartphone launch highlights the thinness and lightness of a modern smartphone. Hence protection has become an absolute necessity.
According to NPD’s “Mobile Phone Accessories Attach Rate Study,” recent mobile phone case buyers cited protection and durability (86 percent) as the top purchase influencers, followed by quality materials (73 percent), and minimal bulkiness (66 percent). Aesthetics and price play a lesser role in the purchasing decision, with just under half of recent case buyers considering these attributes important.
The study also found an interesting purchasing behavior among consumers. Nearly half of all consumers purchased an accessory at the time of purchase, in a retail store, spending nearly 3X compared to consumers who bought their phones through online or over-the-phone channels. After the initial purchase, 4 out of 5 consumers reported purchasing their subsequent after market accessory through different retailers, which offered them better choice and value, like Amazon and eBay.
img credit: cnet.com
Apple, obviously has always been aware of the huge opportunity here and has been selling bumpers and cases for its iPhone lineup. Currently it sells a $29 and $39 case in multiple colors for both the 5c and 5s line of devices. The cost of mass producing these cases is estimated to be roughly around $1 a case. Apple generated $1.38 Billion just from accessories in 2013 Q2, a slow quarter considering they then hadn't announced their new line up. In the grand scheme of things, it's just 3% of the overall revenue, but has already surpassed their iPod sales.
According to NPD, the US market is dominated by 5 companies - Otter, Liverproof (now with Otter) Belkin, Speck and Incipio. Each of them are trying hard to differentiate themselves from what Apple or other OEMs offer, in terms of more choice, better protection, designs, utility (like battery packs) etc. However, this category is evolving quite rapidly. The 7.9 Million listings in Amazon that we talked earlier contains thousands of small players, mostly from cheap Chinese vendors, offering similar features at a fraction of cost.
The accessory business is indeed lucrative offering generous margins, however is also increasingly crowded. Growing competition should help consumers in driving down prices and offering more choice. As smartphones become more pervasive, will be interesting to see for how long such exorbitant profit margins can be maintained.
So how much have you already splurged on an accessory for your smartphone. And which is your favorite one. Do drop your comments below.