By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Sales of 2.4GHz Digital Spread Spectrum (DSS) cordless phones are growing at a healthy rate, spurred in part by increased consumer awareness, lower prices, and more value, suppliers said.
Nonetheless, manufacturers report that confusion still lingers among consumers navigating the labyrinth of cordless phone options, and retailers get mixed grades when it comes to communicating the value of 2.4GHz DSS over 900MHz digital and analog phones.
Isaac Levy, GM of Siemens' cordless product division, said his company has experienced a 25 percent increase in 2.4GHz DSS sales, in large part because "we also sell a concept of expandable extensions." The penetration of cordless phones in the market is very high, he explained, "so when consumers are making that second purchase, they're looking for homogeneity in the user interface," and that's what the Siemens' line offers.
"When you consider the business climate today, our growth is good," he said.
Stacy Hamilton, Uniden's cordless product manager, echoed Levy's optimism. "It has been a good year for us," said Hamilton. "2.4GHz has grown, and our 900MHz lines have been steady."
Les Burger, Sony's senior marketing manager telecommunications, also cited 2.4GHz growth, but he noted that "from an industry standpoint, we're experiencing some price erosion. The average price is down 10 percent, which is a natural occurrence for new technologies, but I also think it's because big retailers are seeing decreased foot traffic in their stores because of the soft economy."
As to what has spurred sales of the more expensive cordless products, there was little consensus. But they said consumer adoption of 2.4GHz DSS has been brisk even though the benefits have not always been spelled out to consumers.
"It's a mutual challenge for manufacturers and retailers to improve the way we're educating the consumer in the choices they have in cordless today," said John McNenney, Panasonic's assistant telecom GM. Much of that challenge results from the nature of the product itself.
"Compared with other [consumer electronics] categories, phones are tough. You can't compare them against each other on a sales floor like a TV or stereo that's plugged in. We are limited to sample tags on the product and point of purchase material on the boxes," he explained.
"People hear 2.4GHz and immediately think longer range phone," said Burger. "But what 2.4GHz DSS really does is allow you to have multiple handsets. I think they're also confused by the introduction of 2.4GHz analog."
Levy, on the other hand, said he believes "consumers have been doing their homework and know 2.4GHz DSS is the better product," but he said "some retailers have done a better job than others in communicating the benefits of 2.4GHz DSS versus 900MHz and even 2.4GHz analog. The simple thing to communicate is range, but I think ultimately what the customer wants is voice quality — which 2.4GHz DSS gives them."
"It's a numbers game with consumers," said Hamilton. "People see 2.4GHz versus 900MHz and assume bigger is better." Nonetheless, he added, "I also think that retailers are really embracing the product and making it easier for the end user to understand."
Explaining the category is important for retailers, said McNenney, because of the variety of options that consumers confront. "We have categories within categories," said McNenney. "You have two types of 900MHz, and you have 2.4GHz DSS, frequency hopping DSS and analog. Consumers have a lot to sort out."
Sony, Panasonic, Siemens and Uniden currently offer 2.4GHz product only in DSS form, and all but Uniden stated that it will remain that way for the near term. Uniden's Hamilton, however, indicated the company will launch a 2.4GHz analog product later in the year.
"I don't think anyone can completely shut the door on 2.4GHz analog, and I think you'll see more movement there by the end of the year from other companies. It's a price issue," Hamilton said. 2.4GHz analog is cheaper and thus more appealing to mass merchandisers, he said.
Looking ahead, manufacturers are confident that 2.4GHz will start to edge out 900MHz digital and analog as the cordless product of choice for consumers by the end of 2001. While still supporting current 900MHz models, they noted that the real drive is toward 2.4GHz.
"I foresee a shift at the end of 2001," said Burger. "I think 2.4GHz will represent 50 percent of the dollar share in the total cordless market by year's end, but that is also a function of their higher cost. Also, we're not seeing a big push across the industry for new 900MHz models, we're still behind the product but the shift is definitely toward 2.4GHz."
McNenney predicts that unit share for 2.4GHz (both analog and digital) will double from its current 10 percent of the total cordless market to 20 percent by the first quarter 2002.
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