Accessories Execs Point To Overall 2nd Half Strength

Optimistic vendors cite plenty of opportunity in add-on sales

By Jeff Malester -- TWICE, 7/12/2004

Accessories continue to be a key force within the consumer electronics products family — counted on to help drive healthy, overall retail profit margins in the face of eroding video price points and continued slowing audio sales.

Made up of some 10 individual categories — ranging from headsets and remote controls to home theater furniture and portable storage bags — accessories should remain a vigorous source of retail business in the second half of 2004, vendor executives generally agree.

"Overall, we are seeing strong growth in the accessory business, and we anticipate this trend to continue," said Mark Martin, VP/general manager for mobile technology accessories at Itasca, Ill.-based Fellowes.

"Key trends that are contributing to this are the proliferation and churn of cellphones, increasing interest on the part of consumers to transporting and personalizing their electronics, and new consumers entering the market. Specifically, the teen, female and Hispanic consumers are increasingly interested in accessories.

"In addition, mobile headsets are increasingly sought out by the consumer due to 'safety while driving' concerns — and many states are considering, or have already enacted, legislation requiring use of hands-free devices while driving," continued Martin.

"In addition, the consolidation of technologies represent both a challenge and an opportunity. As we see PDA accessory sales falter, we see smartphone sales increase. The challenge is to keep up with consumers and their preferences.

Named "big products" for second-half 2004 sales at Fellowes are the Earglove BlueVoice headset; Fusion cellsuits, which are targeted toward teens; Camera skins; Scuba II CD wallet line; and MP3 cases.

Clear trends for second-half business increases, within the GE-brand accessories line, from Oklahoma City-based Jasco Products, show categories gaining momentum include computer accessories, surge protection and audio/video products.

The computer accessories "category, in general, is very hot and is no doubt benefiting from the surge in PC sales," said Kent Shiplet, executive VP/marketing and sales. "Our design team has identified a growing demand for brightly colored metallic accessories. A fall launch is planned for this dynamic new line that will include mice, keyboards, PC cams and multimedia speakers.

"The launch of our new proprietary GE-branded surge protection line has been well received and is resulting in record sales," continued Shiplet. "Jasco capitalized on the trend for higher joule ratings, additional outlets for AC adapters and cord management. The dynamic new line is very 'consumer friendly' and incorporates color-coding to clarify the good vs. better and best. The sales results, thus far, validate the trend for increased demand for higher-end surge protection products.

"The clear and unmistakable trend in the audio/video category continues to be home theater," said Shiplet. "Jasco launched a complete new concept for home theater accessories at CES. The GE-brand line includes proprietarily designed connecting cables, universal remote controls, TV antennas, speaker stands and others.

"The reception and initial sell-through of this line has well exceeded our expectations. All models have colorful movie theme graphics and are in clamshell packaging to further enhance the perceived value."

Thomson, maker of the RCA brand of CE products, is "optimistic and excited about opportunities for the second half of 2004," according to David Geise, VP worldwide consumer solutions, at the Indianapolis-based company.

"With strong sales projected in a wide range of hardware categories — including HDTV, digital audio/video and DVD products — there is a huge opportunity at retail to drive consumers to accessories that will enhance these new digital products.

"Key product categories that enhance the performance capabilities of digital televisions, including reception and digital connectivity products, will be strong performers in the second half," continued Geise.

More specifically, Geise said HDMI, DVI, component and optical cables — along with adapters that help ensure compatibility with components with DVI and/or HDMI inputs — will be major product categories to watch. In addition, antenna products made by French giant Thomson, also will be strong performers to provide reception of over-the-air HDTV signals, he said.

"With the growing popularity of portable entertainment products — ranging from digital audio and portable DVD players to laptop computers — accessories solutions such as PC accessories, headphones and mobile storage will create additional profit opportunities for retailers.

"With the addition of the Recoton-brand portfolio," he noted, "Thomson has experienced increased brand presence in reception and connectivity products, with solid growth in the first half of 2004. We expect this upward trend to continue for the remainder of the year."

Thomson, which offers a line of RCA and Acoustic Research-branded digital connectivity products, as well as new indoor amplified and passive antennas that enhance the HDTV viewing experience, said it is very excited about its new Ambico Mobile Media Storage products and RCA and Jensen-brand headphones. It said the same about M3 and wireless products designed to enhance digital audio/video and DVD products.

Thomson, also plans a second-half introduction of RCA PC Stuff, a new line of computer connectivity products.

Traditionally, the world of CE accessories gadgets has been marketed toward a predominantly male demographic. Yet, in recent months and ongoing into the second half of 2004, women and teens are more and more becoming targeted beneficiaries of a major accessories product push, especially in the portable bags and cases category, in an effort to reap the benefits of certain gender and age interests.

For example, Soundkase, the Oxnard, Calif.-based division of Scosche Industries, will be distributing new lines of storage products geared to key demographic groups in the second half, according to Kas Alves, VP/sales and marketing.

"In line and in trend with the female demographic that now holds 50 percent of the consumer electronics market, Soundkase will be introducing a new SK Girl line [of portable storage]," said Alves. "This new 'lifestyle' line of accessories targets the female population with unique style, material and colors popular with today's females."

Scosche, which sells into the auto audio accessories aftermarket, is looking toward a "second half of 2004, even more exciting, with new products being introduced and targeted products for key demographics," continued Alves.

For one, following market interest in high-end spinner wheels, Scosche will bring the new Spinner Grille to the market. This product emulates the popular "spinner" wheels for custom SUVs, and brings that look inside the vehicle for subwoofers, said Alves.

The Spinner Wheel, which spins as the car audio system plays, is finished in chrome to match custom wheels. It has a metal mounting ring, which will "easily" secure the spinner grill to a subwoofer unit. The Spinner Grille is a 12-volt motorized system that takes power from a 12-volt power source, making it a simple installation, said Alves.

The year's second six months, and especially the holiday quarter, should mirror the positive accessories business climate of the first half, which benefited early on from solid economic news and climbing corporate earnings. Despite the ongoing Iraq crisis and rising oil prices affecting second-quarter confidence, the CE business generally maintained solid gains throughout the period.

"Business in the consumer electronics industry has shown steady — if intermittent — improvement during the first half of 2004. And with prices on some very attractive product categories, such as large-screen TVs, home theater and recordable DVD, falling, it can only get markedly better," said Don Patrican, executive VP of Fair Lawn, N.J.-based Maxell Corporation of America.

"I also believe that if the overall economy cools, as appears likely, due to escalating oil prices, people will opt to stay home more and trade a trip to the beach for a new DVD recorder or camcorder, large-screen TV or home theater system.

"The most dramatic sales growth in the back half, however, will come from recordable DVD — home recorders, camcorders and media — as people begin to transfer their favorite movies, television shows and personal memories from VHS and VHS-C to DVD," Patrican added.

"We believe that as people realize the versatility of DVD, along with its superior ability for archiving and the video editing and creativity that are possible with the format's computer applications, sales will accelerate throughout the second half of the year.

"Continued price decreases on those items — especially large-screen television and recordable DVD — will bring new people into the game who couldn't afford to be in the game last [year], adding more fuel to sales growth," he said.

"Products that fall under the halo of large-screen television, home theater and recordable DVD," Patrican continued, "will also benefit from their popularity." This includes LCD plasma screen cleaning products and DVD care and maintenance items, along with other accessories, he said.

"We also expect the continuation of the dramatic sales increases in digital cameras. That means the rechargeable and branded dedicated battery business will also show very strong sales gains throughout the period."

Looking at the battery category at midyear, Panasonic reports it is very optimistic about sales, particularly with the introductions of the hottest CE technologies that depend on battery power. The company remains positive, despite the April A.C. Nielsen report that U.S. battery-dollar-sales and unit sales are down -7.6 percent and -6.9 percent, respectively.

On the brighter side, "the nickel metal hydride (NiMH) rechargeable battery segment has experienced 17 percent growth in unit sales since last year," said Christine Denning, marketing communications specialist for Secaucus, N.J.-based Panasonic.

"This is due to consumers who recognize the value of reusing batteries in digital electronics. They understand the value that rechargeables offer, and are more accepting of rechargeable price points than a decade ago," continued Denning. "We expect sales of battery-operated products — such as digital still cameras, handheld games and MP3 players — to invigorate battery growth in the fourth quarter. Our goal is to provide consumers with disposable and rechargeable battery options to power their electronics as well as suit their lifestyles."

Experiencing healthy growth currently at Panasonic battery, said Denning, are PowerEdge For Digital Still Cameras and Panasonic Alkaline for Digital Electronics, both disposable batteries. She also included high on the sales chart the up-to-2100 mAh NiMH rechargeable battery system with worldwide voltage Quick Charger for digital still cameras and portable audio and alkaline AA or AAA 10-packs.

As for what can be expected during the year's second half, Denning said, "Back-to-school is now regarded as an important season, and retailers will introduce it earlier to capture additional sales. That is followed by hurricane season, which represents increased C and D size battery growth. The all-important holiday sales spike continues through the January post-holiday period."

In the second half, Panasonic will ship a modular merchandising system that is three displays in one and affords retailers optimum flexibility. Shipping in the second half is a new 2300mAh NiMH battery system that offers different battery and charger combinations for every price point. Also shipping, in August, is a 16-pack of Panasonic Alkaline Batteries for Digital Electronics in a recloseable paper box.

Digital convergence continues to be a positive theme throughout the CE industry, as consumers remain fascinated and intrigued with digital convergence of CE and computers, said Marc Sculler, executive VP at Bell'O International, the Morganville, N.J.-based maker of home theater furniture.

Along with convergence is increased demand for digital micro displays, and CE manufacturers are increasing capacity to support the demand. Through the first 18 weeks of 2004, Sculler notes that digital TV unit sales have increased 83.2 percent over the prior year, and, "as with all great technology, the volume will grow in multiples as price points move down.

"At Bell'O International, we are continuing to introduce new and exciting furniture for digital TVs. In the second half of 2004, we are increasing our offerings of furniture to accommodate 42-inch through 70-inch [units]. As consumers purchase their new digital TVs, they will be looking for uniquely designed and high-quality furniture," said Sculler.

Headsets continue to benefit from the increasing awareness of hands-free driving and the wireless revolution, with "2004 accelerating into an excellent year" for this accessories category, according to Ken Kannappan, CEO for Santa Cruz, Calif.-based Plantronics. "Headsets are becoming a lifestyle accessory in all of our markets.

"In cellular, headsets now mean a lot more than safety, comfort and convenience. New wireless headsets are high-tech and high-fashion," said Kannappan.

"At home, consumer VoIP (voice over Internet protocol) is starting to take off, and PC headsets provide the audio quality and privacy people need when using their computer. Cordless headsets provide mobility as well. interactive gaming is also growing and headsets are an essential part of a gamer's equipment.

"Over the next 12 months, we will be bringing more products to market than we ever have, and supporting them with increased marketing," said Kannappan.