Accessing accessories: Americans' top 5 handset ornaments

accessories handsetTwo key trends are driving major developments in the market for handset accessories: First, fashion is giving way to function; and second, smartphones are helping to generate massive sales.

The result? Accessory makers "are starting to focus on more quality products," said ABI Research analyst Michael Morgan.

It's a heady time for a market previously dominated by cheap headphones and colored faceplates. During the early part of this decade, cell phones were exclusively gadgets for making and receiving calls, and the accouterments for such devices reflected their single-purpose role in users' lives. Thus, tiger-stripe faceplates and Hello Kitty charms typically were as far as most wireless users invested in phone paraphernalia.

Today, things have changed.

After-market mobile phone accessories--those sold to users after they purchase their phone--produced worldwide revenue of $26.5 billion last year, according to ABI. And that volume is expected to increase to slightly more than $50 billion in 2015-- a compound annual growth rate of 11.4 percent.

ABI Michael MorganABI's Morgan said the growth in the accessories market can be tied directly to the growth in the smartphone market. Indeed, according to research firm Strategy Analytics, global smartphone shipments rose 78 percent annually to 77 million units during the third quarter. Further, smartphones made up 23 percent of total worldwide handset volumes during the quarter, leaping from 20 percent in the prior quarter.

But why have smartphones accelerated the accessories market? Morgan proffered a simple explanation: Smartphones typically cost users in excess of several hundred dollars, so it's no wonder smartphone owners are keen to outfit their shiny new devices with the latest and greatest accessories--largely in a bid to get the most out of their mini-computers.

According to Tim Martin, vice president of sales and marketing at Bluetooth headset company ID8-Mobile, the rise of smartphones has changed users' attitude toward accessories. Users now want "smart accessories," Martin said, garnishes that add value to their prized devices. He pointed to mophie's juice pack (a case that doubles as a spare battery) and ID8-Mobile's MoGo Talk XD (a case that stores and charges a tiny Bluetooth headset) as examples.

And that's just the beginning, Martin said. "There are a lot of accessories that are being released every day."

Henry Penix, chief of Zomm, agreed. Indeed, Zomm sells a Bluetooth keychain gizmo that sounds an alert when a users' phone drops out of range (so the phone isn't misplaced), and it doubles as a speakerphone. The Zomm also can be programmed to dial emergency numbers if a user is unable to reach their phone during a crisis.

It's clear the accessory market is a wide-open industry, but what exactly are cell phone owners spending their hard-earned money on? Here are the top five categories of after-market accessories in 2009, according to a survey of Americans conducted by ABI (with images meant only to exemplify the category rather than indicate top sellers). These figures represent the total money spent by Americans on after-market accessories during the period.

Rank Product Market value Why?

Bluetooth headsets
$920 million ABI's Morgan said the fact that Bluetooth headsets lead the accessories market shouldn't come as a surprise to anyone; Bluetooth headsets are rapidly becoming standard equipment for chatty cell phone owners (at least, ones who don't mind having an electronic flag living in their ear). Morgan said the $920 million figure includes both mono (primarily for talking) and stereo (for talking and listening to music) headsets.

$766 million ABI's Morgan said chargers' (both home and car) position near the top of the accessories pile reflects a basic fact of cell phone life: Those gadgets need juice. Thus, users are keen to supplement the charger that came with their phone with additional mechanisms to power their device, whether it's a spare charger at work or a car charger for the commute.

Memory cards
$529 million ABI's Morgan said the rise of memory cards among popular cell phone accessories helps underscore the popularity of smartphones: Americans keen on storing music and movies on their high-end gadgets need the digital space to do so. Morgan said the most popular size among memory cards is 2 GB--suitable for plenty of tunes and flicks. Most smartphone vendors do ship memory cards with their devices, but in most cases they provide cards with anemic storage capacity--a strategy intended to keep phone prices low while potentially generating after-market sales of memory cards baring that same smartphone vendor's brand.

Protective cases
$520 million Protective cases serve an obvious function: to protect a smartphone owner's substantial investment in their device. ABI's Morgan said the firm found an 80 percent "attach rate" on protective cases for the iPhone, a measurement of how many iPhone owners also purchase a case. Morgan said ABI found a 50 percent attach rate on all smartphones and a 25 percent attach rate for protective cases on feature phones. "By the end of this year I expect it [protective cases] to move into that No. 3 spot," Morgan predicted.

Corded stereo headphones
$308 million Corded stereo headphones are "almost necessary to extract the full value of" a smartphone, Morgan explained, noting that most headphones shipped with smartphones don't do the devices justice, thus forcing smartphone buyers to seek out quality after-market headphones for their auditory pursuits.

Despite the billions of dollars Americans are throwing at the after-market accessory market, it's not a panacea.  

Zomm's Penix said consumer education is his biggest challenge. (Indeed, a full demonstration of the Zomm took 10 minutes.) Further, ID8-Mobile's Martin said his company's major obstacle is guessing which handset and handset vendor to align with.

And what of the future? Martin said he expects the accessories market to break out into industry verticals: healthcare, gaming, enterprise and the like.  Added Martin: tablets. With the success of the iPad and the introduction of Samsung's GalaxyTab, he predicted accessory companies next will turn their eyes to tablets.

Accessing accessories: Americans' top 5 handset ornaments