Study: Media Category Tops Accessories Dollar Business

By Jeff Malester On Apr 29 2002 - 6:00am

CD-R, CD-RW and 3.5-inch disks have helped push the media category to the top of the non-electronic accessories business.

Media has become the largest dollar volume category in non-electronic computer accessories, followed by storage solutions for these media, according to a report prepared by Natick, Mass.-based Venture Development Corp. (VDC).

CD-R labels, CD-R labeling kits and computer starter kits are expected to be the fastest-growing non-electronic computer accessory products, although these remain comparatively small in dollar volume, according to VDC. The fastest-growing large category in the coming years, in terms of dollar volume, is expected to be notebook personal computer carrying cases and security devices.

Aftermarket shipments of non-electronic computer accessories reached slightly over $1 billion in 2001, and this figure is expected to rise to $1.74 billion in 2006. The compound annual growth rate for this business between 2001 and 2006 is forecast at 11.5 percent, said VDC.

The Top 10 non-electronic computer accessory categories are media, media storage, notebook PC carrying cases, cleaning kits, mouse pads, security devices, keyboard drawers/holders, monitor overlays, CD-R labels and wrist rests.

VDC's forecast for CD-R labeling kits, labels, media and media storage is based on the rapid growth of CD-R and CD-RW drives. Prices for CD-R drives, CD-R media and the popularity of music downloads have made these some of the largest and fastest-growing categories among non-electronic computer accessories.

As background to ongoing trends in this business, VDC pinpoints some factors that are expected to play a significant expansion role in the next five years.

For one, while absolute numbers continue to increase, growth in the number of computers — both in the home and small office — is slowing, as the market nears saturation.

Growth of first-time computer owners is slowing due to the shrinking pool of potential first-time purchasers, which has come about in part from the continued decline of retail PC price points that have encouraged PC purchases. Lower prices have resulted in households with more than one computer, thus the increase in accessories. However, this trend is slowing.

For another, channel consolidation has increased price pressure on computer accessories suppliers. At the same time, accessories continue to deliver higher margins than PCs.

End users view accessories as an inexpensive way to improve the function of their PCs. These are often seen as low-cost insurance for PCs — providing maintenance, cleaning and protection.

Lastly, the continuing trend toward telecommuting and the growth of the small office/home office (SO/HO) environment has bolstered the need for some categories of computer accessories in the home that traditionally were predominantly found only in the office.

VDC's forecast of notebook PC carrying cases and security devices is greatly affected by the ongoing trends toward mobile computing and notebook computers. Notebooks, which are more susceptible to theft, are increasing as a percentage of all computers sold.

Companies and consumers are becoming more aware of the need for security devices to protect their investments in hardware, software and data, which has resulted in the fast growth of the assurance category. In addition, although many notebooks are sold with a basic carrying case, about half the notebook owners upgrade their carrying case within a year of purchase, according to VDC.

Office superstores remain the largest channel for non-electronic computer accessories, and have made gains since the last VDC study. Mass merchants, such as Wal-Mart, have entered the aftermarket business in a significant way. In addition e-commerce has greatly expanded as a distribution channel for these accessories, with growth concentrated on sites of national retailers.

Suppliers cite retail consolidation as a major concern, with national chains driving regional chains out of business. Thus, the number of significant retail accounts for computer accessories continues to shrink.

Contract manufacturing remains the preferred method of product sourcing for non-electronic computer accessories, said VDC. Contract manufacturing is up 8 percent from VDC's previous study, and continues a decade-long trend. The Asia-Pacific area remains the preferred location for contract manufacturing due to low costs, while a significant amount of contract manufacturing is also sourced from Mexico.

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