Booming iPod Biz Broadens Accessories Opportunities

By Michelle Zenner Kohler On Jul 25 2005 - 6:00am

Who could have predicted the incredible boom spurred by those groundbreaking little white boxes of plastic?

Well, if you were watching the quick-growing popularity of MP3s and the incredible boom in music-sharing applications, like Napster, it probably wasn't such a surprise when Apple's iPod, combined with the iTunes application, sent the consumer electronics industry scrambling to cash in on the “iPod economy.”

Already, accessories providers have flooded consumers with over 400 accessories for portable music — everything from designer cases to high-end earphone providers are vying for consumer cash. In fact, the accessories market is actually outpacing the market for players, with the number of available add-ons doubling since 2004. And even more important for retailers, accessories are pulling in more revenue with even more attractive margins.

This leaves our industry with some questions to answer as we move forward. Beyond the creation of hundreds of ways for iPod owners to dress up their favorite device, what can we, as accessories manufacturers and retailers, learn from this massive boom?

It's no secret CE consumers are greedy for gadgets that offer more and more functionality and style in smaller and smaller packages. So why did the iPod become so popular?

Like most successes, it was a combination of excellent product design, smart marketing and great timing. The product itself boasted an unprecedented amount of memory, a simple interface and an elegant design. Just as important, iTunes was launched as a vast source for legal, accessible digital music content. Add to this plentiful and compelling advertising.

Finally, top this all off with one important and often-overlooked fact — the iPod had, and continues to have, an ever-growing roster of complementary accessories that personalize the iPod experience. And, with a shift in the consumption of music already underway, Apple was able to take all of this and transform digital music from a format into a lifestyle.

With the most prevalent electronics, including cameras and cellphones, consumers are spending an average of 10 percent of the cost of the appliance on additional accessories (source: CNetNews.com, Jan. 31, 2005, Ina Fried, “Boom of the iPod Add-Ons”). Some argue that iPod accessories spending easily matches the dollar amount spent on the MP3 player itself. With more than 10 million units sold to date, at an average of $300, this pushes the iPod add-on market into the billion-dollar range.

Obviously, the precedent set here has more to it than just functionality. The iPod has style — it makes a statement that people are willing to pay for. Thanks to slick design, smart well-designed marketing campaigns and plenty of advertising, consumers are lusting after all things iPod. Accessories to this market aren't just about functionality — it's about self-expression. Millions of dollars are being spent on iPod “cosmetic upgrades,” such as designer cases and even sticker coverings for the iPod shuffle.

Even in the world of consumer electronics, consumers are looking for something that looks just as good as it works.

With all of this pull, what does this mean to those of us hoping to catch a little profit of our own on the next wave of consumer demand? Well, whether you are considering the latest, hot MP3 player, convergence device, cellphone, laptop or portable-gaming device, take a look at the iPod recipe — and don't hold the accessories.

Beyond the profits that will make you smile, accessories that are truly in sync with consumer needs make the experience. Whether it's a pair of high-quality earphones that allow you to listen to the hundreds of hours of music that you have loaded onto your iPod or a keyboard that attaches to your PDA, offering quality accessories allows consumers to personalize their devices to their individual lifestyles.

Just remember to keep it easy for the consumer. Merchandise the accessories near the devices they attach to. Studies have shown that simply placing them in the right spot can have a huge impact on your success.

It's not just Silicon Valley techies who are spending their money on hot devices anymore. These days, hot electronic gadgets are becoming more and more mainstream. Manufacturers and marketers have to think about how we are feeding the new market — a generation of consumers who view their CE purchases as a lifestyle choice, more than a convenience or quirk.

Look for ways to contribute to the entire experience. As the iPod wave continues, consider how to make use of that model. It may open the door to both profits and consumer satisfaction like never before.