PC Growth Boosts Accessories' Profit Opportunity

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The one-two punch of lower PC pricing and increased household penetration is spawning a booming market for computer accessories, and as a result, retailers who have been dismayed by sinking hardware prices and slim to nonexistent margins are turning to accessories to make up the difference.

One market research firm, Venture Development, has estimated that total computer accessory shipments to dealers will reach almost $4 billion by 2001. This figure includes both non-electronic accessories, which are seen reaching $1.287 billion in 2001, and electronic accessories such as surge protectors, keyboards and speakers, where factory shipments are projected to reach $2.5 billion in 2001.

While the iMac has spawned a number of accessories lines, another trend fueling the growth in computer accessories is the arrival of USB, creating a new category and a demand for accessories ranging from cables to peripherals.

"The computer accessories market is extremely healthy," said Mark Naidoff, VP/general manager of computer accessories for Fellowes. "We are benefiting from the fact that you can buy an Internet-ready system for about $500, and from the increasing household penetration rate for PCs. Retailers are getting hit hard on margins on both PCs and printers, so they are turning to accessories for margins."

Naidoff pointed out that he expects Fellowes' computer accessories sales to reach or surpass $200 million in 1999 and that the company is planning to introduce about 200 new SKUs this year.

Fellowes is announcing an exclusive worldwide agreement with Neato to market Fellowes/Neato co-branded media-labeling products. Naidoff estimates the installed base of CD recorders will hit 30 million this year, creating a huge market for labelers.

The new Fellowes/Neato CD $29.99 labeling kit will include labels, software, and the applicator. It can also make jewel case inserts. The line will include replacement labels for other media, such as VCR tape, audio tape and Zip disks.

Fellowes is also announcing the Gel Mouse, a $34.95 scrolling mouse with the top portion made of gel to provide a comfortable feel for the hand.

Also new is the $24.95-suggested-retail Easy Glide, a floating gel wristrest that is attached to a mousepad.

Similar estimates come from Belkin's Eric Tong, director of marketing, who puts non-electronic accessories sales in the year 2000 at $1.09 billion, up from $950 million in 1999.

"We see the computer accessories category growing at a rate of 12% to 20% this year, depending on the product mix," said Tong, noting that companies are coming out with more unique products that "have some human touch, versus general me-too type products."

Belkin is featuring its new PalmPilot and PDA cases.

A new entry to the market is the IBM line that is being distributed by Woods Industries.

"The relationship is more than just a licensee," said Scott Ireland, director of product marketing for electronic accessories at Woods. "The beauty of it is there is a sharing of information and technology, which generates opportunities. It's a give-and-take relationship."

Woods is rolling out a total of 250 IBM SKUs this year. Plans call for many of them to hit retail shelves on May 1 and the rest to follow by mid-May.

"The initial launch includes surge protection, printer cables and USB cables," said Ireland. "Networking products and multi-line phone accessories will follow quickly."

"USB is coming to retail now and is really going to make a difference," he continued. "Retailers should carry cables and hubs. USB will cannibalize the business as we know it today, because consumers won't need different keyboard and monitor cables anymore. They will buy USB for everything."

Ireland noted that IEEE 1394, also known as FireWire, is an up-and-coming category: "It is a step or two behind USB, but it is coming next."

Networking is also an emerging category, he said, as it migrates from the office to the home. "With the trend to more than one PC in the home, there is a need to connect them. We see that coming to retail."

Two other trends that will affect computer accessories are ISDN and cable modems. "Both are digital connections to the Internet, with speeds 10 to 100 times faster than over the phone line," Ireland said. "We are working on developing IBM-branded cable modems now."

Woods is featuring certain items in its IBM line, such as a four-port USB hub for a suggested retail price of $99.99; a 6-foot USB cable for $19.99; a 6-foot IEEE printer cable for $29.99; and an eight-outlet surge protector with fax and modem protection at $29.99.

At Interex, president/CEO Lance Chastain said the market is growing 10% to 20% a year. "PC unit sales continue upward, primarily in the sub-$1,000 category, and household penetration is increasing. All of these drive our product line."

Interex offers computer accessories in four segments: connectivity, USB/ FireWire, power protection, and performance enhancement.

"We are adding more and more unique technical features incorporated into our products," Chastain said, noting that Interex has tripled its market share in the past two years. "We make sure that our products are priced competitively and that they provide margins to augment slim hardware margins. We also offer after-sale support through our Interex Solution Center, which allows consumers and channel customers to call or e-mail us at any time."

Interex is highlighting its new USB hub for notebook PCs along with other USB products.

Allsop marketing director Jim Hassi stated that "computer accessories is without a doubt a growing business." However, he continued, "As the price of computers and hardware in general has come down, retailers are making up profits with accessories, so that is increasing pressure on [accessory] margins, that continues to be a challenge."

One area where Allsop sees an opportunity is in its new iMac products. Its iAccessory line offers eight SKUs at prices ranging from $4.99 to $14.99, for storage products, a mousepad and a wristrest, in the new blueberry color.

Allsop offers more than 100 computer accessories, in categories such as workstation ergonomic, maintenance, storage, and portable accessories such as laptop bags. "Keyboard drawers and ergonomic accessories continue as strong categories for us," Hassi said.

Products in Allsop's iAccessory line include the Disk File 30 ($11.99 suggested retail price) that holds up to 30 3.5-inch disks, LS-120s or Zip disks; the $13.99 StaggerStack that holds up to 16 CDs; the 4Media Organizer at $16.99 that organizes up to 36 CDs, DVDs, 3.5-inch disks, LS-120s and Zip disks; the $7.99 TwinPack that holds two 3.5-inch disks; the Zip TwinPack at $9.99; the Raindrop Mousepad at $8.99; the $14.99 Raindrop wrist support; and a $9.99 impact-resistant CD Transit case.

Allsop's Fighter Pilot impact-resistant case for PalmPilot or Palm III PDAs has a suggested retail price of $29.99 and includes a sunshade for outdoor use.

The company's Natural Elements line features products made of recycled pine.

Some highlights of new computer accessories from other suppliers follow:

Computer Expressions of Philadelphia is adding Bubble, Hemp and Leather CD wallets, as well as wallets featuring masterpiece paintings. Suggested retail prices range from $8 for the Bubble wallets (made of a tinted clear plastic molded into puffy air-filled pockets) to $17.50 for the leather cases.

Entrega of Lake Forest, Calif., is announcing a number of new USB products, including USB-to-serial converters in two configurations to work with the Macintosh or PCs. The street price is $59.99 for both models.

Two USBnet adapters allow computers to share information without using a network interface card (NIC). Entrega's USBnet has an estimated street price of $79.95, while the USB-to-Ethernet converter is $69.95.

Also new is the Virtual COM Port software designed to solve limited COM port availability by duplicating and reassigning USB COM port addresses for a maximum of 99 installed serial devices. It will be packaged with all Entrega multifunction hubs and serial converters.

Laserline is offering a line of seven accessories to coordinate with the iMac, including two CD-ROM wallets to hold 12 or 24 CD-ROMs; an ergonomic keyboard wristrest and mousepad; a desktop mini-tower to hold 20 CD-ROMs or Zips; a 90-capacity CD-ROM desktop organizer; and a hard-sided drive and accessories carrying case. Suggested retail prices range from $3.99 to $24.99.

Logitech is introducing a force-feedback mouse for PC gaming, using FEELit technology from Immersion, at a street price under $150. The mouse is also designed to enhance web browsing.

"Developers have been extremely enthusiastic about adding support, and eager to try out the mouse with their favorite games," said Fred Swan, Logitech director of WingMan marketing. The three-button mouse includes a USB interface for easy plug-and-play.

Logitech is also launching the $39.95 WingMan mouse specifically for games, which features a very fast report rate for immediate onscreen response.

Kensington is featuring its WebRacer Internet-input device with 13 Internet-specific buttons and a touchpad.

The company is also highlighting its new family of InSight paper-managing software, designed to help people tame the increasing volume of paper that crosses their desks.

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