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Despite continued price erosion, shelf-space cutbacks at retail and the growing use of cell phones as primary phones, cordless phone manufacturers aren't yet ready to tap out. Instead, they're fighting back with multiple handset bundles, a migration to higher-priced 5.8MHz frequencies, docking stations that enable interoperability with cellphones and new technologies such as Bluetooth and voice over IP (VoIP).
Still, retail tracking by The NPD Group again indicates the category has experienced double-digit decreases in 2005, with year-to-date point-of-sales data from January through October 2005 showing a decline of 10.7 percent from an earlier period in the year. And few, if any, vendors believe the trend will be reversed, resulting in increased retail competition and declining margins. The fallout is that some brands, such as Audiovox, have exited the business.
As a result, cordless vendors are aggressively innovating both to stem price erosion and to ensure relevance. “We're reinventing what consumers know as the cordless phone by integrating new features [such as] cameras, cellphone docks, Bluetooth modules, instant messaging and voice over IP into the category,” says Bill Taylor, marketing director for Motorola Connected Home Solutions.
Of the several key trends in the category, perhaps the most pervasive is the growing number of “bundled” models.
“Consumers appear to understand the benefits of the bundles and are stepping up to the bundle versus buying the single handset version,” says Brad Pittmon, VTech product development manager.
At Thomson Communications, which markets GE- and RCA-branded cordless phones, Paul Palermo, Americas marketing general manager, has also seen rising demand for cordless bundles, as well as a growth in the 5.8MHz category. “Bundles have become a significant and growing subcategory. The consumer is very comfortable with purchasing a complete package, and they like the fact that there is no question that the handsets are all compatible,” he says.
Wider feature sets are also drawing consumers. “Years of cellphone experience have taught consumers the value of some key features, such as caller ID, automatic phone books and received/dialed calls [stored in memory],” says Comtrek's CEO Robert Giordano. “Retailers who merchandise features, combined with other enhancements such as visual ringers, enhanced sound performance and higher value appearance, will offset continuing price erosion and declining sales in 2006.”
Both Comtrek and Panasonic offer models with features that target specific customer niches, such as large easy-to-read buttons for seniors. Carlos Hernandez, communications product manager at Panasonic, mentions voice enhancements, shock and splash [protection] and talking caller ID as other differentiating features.
That said, it's a given that the category remains under severe pressure, with prices continuing to erode and retailers stocking fewer cordless SKUS. “Overall pricing continues to erode rapidly in the cordless phone category in 2005,” Pittmon acknowledges, saying 900MHz models have been hardest hit.
“Many retailers are choosing to eliminate this frequency and are dedicating the space to 2.4GHz analog products because the price delta between 900MHz and 2.4GHz is so low they can't justify having similarly featured products for both frequencies,” Pittmon added.
Thomson's Palermo believes the mainstream consumer is still feature/benefit-driven. “The features [enabled by] these technologies, such as [multiple handsets] or speakerphones built into the handset, offer the consumer the trade-up value proposition that drives our business.”
A variety of manufacturers now offer cell docks that allow interoperability between cordless and cellular phones. Palermo says RCA will expand its hybrid offerings, but admits that accommodating the various types of cellphones with a single product remains challenging. “There is no single standardized connection method that suits all cellphones.”
That's one reason why Bluetooth is increasingly being adopted by cordless companies, particularly as the number of Bluetooth-enabled cellphones continues to climb.
At Uniden America, president Rich Tosi says Bluetooth is a more effective way to marry landline and cellphones, “as it syncs the two products via a wireless connection without the need for a device that physically links the two products, and configures them to work with one another.”
While an increasing number of consumers are opting to solely use their cellphones, most cordless vendors believe a market for landline phones remains. “The long-term value and convenience of phones around the home with by-room functionality and design will continue,” Giordano says. Adds Pittmon: “We don't see the rate of consumers eliminating landline service in favor of cellular increasing compared to previous years; our data shows that the rate is gradually increasing by low single digits.”
In fact, Palermo says, many younger users have only ever owned a cellphone. “When these same consumers start to settle down, many can be expected to return to being [both] cellular and landline users.”
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.