Tech It to the Bank
Keeping up with Tech
“This is a business that changes quickly-that’s what makes it exciting!” says Mike Mohr, president of Celluphone in Los Angeles, CA, a master agent and distributor for both Verizon and Helio phones, accessories and service for approximately 230 specialty retailers. For example, Bluetooth technology didn’t even exist a few years ago. Now, it’s a whole new category. “All consumer electronics change quickly, making the opportunity bigger,” says Mohr, “but one you also have to stay on top of.” NY-based The NPD Group, a leading provider of consumer and retail information, reported in February that consumer technology sales reached a record $129 billion in 2007, a 6.5 percent increase over the previous year. Cambridge, MA-based market researcher Forrester Research forecasts that cell phones will reach 16 million more households by 2012, camera phones 55 million more and MP3 players 15 million more than today. In addition to consumers buying technology products for the first time, there are countless consumers upgrading their current products. New models continue to hit the market with features easier, faster and cooler than last year’s, or even last month’s, model. Just a few years ago cell phones, three times larger than today’s compact styles, used to just make calls. Now they are multi-tasking apparatuses that can take pictures, play music and video, handle email, surf the Web, maintain calendars, broadcast TV shows-and more.
Now-ubiquitous iPods-Apple sold more than 22 million iPods in the last three months of 2007 (plus 2.3 million iPhones)-also continue to reinvent themselves, with clip-on models, new colors and most recently, double the memory (32GB for the new iPod touch). These changes continue to fuel demand, as tech-savvy consumers scoop up “the next new thing” as soon as it hits the market. All about accessories For specialty retailers, whose bread-and-butter often comes from impulse buys, iPods and cell phones open the door to the huge impulse-propelled tech-accessories market. Not only are accessories just as hot as the equipment they serve, but retailers “can make great margins on accessories,” says Mohr. Who wants to spend a few hundred dollars or more on an iPod or iPhone, and scratch it up the first week?
“It’s terrible to spend $300-$400 on a gadget and cover it up with a case,” says Derek Smith, vice-president of sales for Zagg, Inc. in Salt Lake City, UT, wholesaler of the Invisible Shield gadget protector to 20 independent cart operators in 2007 (with expectations of doubling that figure in 2008). The Invisible Shield is a thin, clear film that protects almost every electronic gadget on the market from scratches and the like. Because the shield is invisible, it doesn’t take away from the beauty of the device it’s protecting, a major selling point especially for Apple product buyers, who like to show off the Apple aesthetics. “We keep it naked, the way nature intended,” says Robert Pedersen II, president and CEO. The Invisible Shield product was originally created to protect the leading edges of helicopter blades, so its strength is unparalleled, and hence the product comes with a lifetime warranty. There are more than 2,000 precut designs to cover approximately 1,500 different devices, with “anything Apple,” being the most requested, says Smith. Coverage can be screen-only or full body, replacing the need for a case.
Zagg started in 2005 as an ecommerce-only business, but quickly realized the many benefits of retailing in the common area. (It also helped that Pedersen has a successful specialty retail history with a line of color-changing T-shirts.) In the common area, unlike the Web, customers have an opportunity to touch the product and interact with a knowledgeable salesperson face-to-face. Plus, when people buy Invisible Shields online, they need to install the product themselves, but at a cart, for an extra fee, customers can have the shield installed for them. “It’s a great additional source of revenue” for operators, says Smith. Today, Zagg’s Web business and cart program work in tandem. If a style isn’t available at the cart, customers can come back at a later date or, “cart owners can give them a card with a 10 percent discount to buy online and the cart owner gets a piece of the revenue on the back end,” says Smith. Zagg offers start-up packages for specialty retailers to get them up-and-running (as do all of the wholesalers/distributors interviewed in this article). Specialty retailers also can offer their customers iPod protection with Gizmobies, an iPod skin just millimeters thick, that “allows iPod owners to protect and customize the look of their iPods while keeping them pocket-able and easy to use,” says Jon Philips, President and CEO of Gizmobis, Gizmobies manufacturer and wholesaler to 105 cart operators in North America, headquartered in Las Vegas, NV. Gizmobies are far from invisible, available in more than 150 bold, colorful patterns. “In May, we will begin to offer Gizmobies for a dozen new cell electronics devices,” including smartphones, handheld gaming devices, cell phones and laptops, Philips says.
Although gadget covers, or skins, are big sellers from carts and kiosks, they’re not the only tech products that shoppers snatch up day after day. In addition to MP3 and MP4 players, Accessories 2000 in Atlanta, GA wholesales earphones, chargers, speakers, remote controls, FM transmitters, cables and more to approximately 120 specialty retailers during the holiday season. FM transmitters that allow customers to transmit iPod (or any other MP3/4 player) tunes through their home or car stereo top the list of bestsellers, says owner Shay Lahav. “Any accessory” for the iPhone and iPod is on the bestseller list, he says, and he predicts this trend will continue “through the 2008 holiday season-and much longer!” Because malls offer so much visibility for cart retailers, tech products “sell very easily,” Lahav says. He predicts technology carts will become like sunglass carts, with at least one in every mall. Cellularum in Margate, NJ, also wholesales a bevy of MP3 and MP4 accessories to 25 specialty retailers. “Everything is wireless now,” says owner Morris Carrasso, making products with Bluetooth technology particularly hot sellers at Cellularum. The market for Bluetooth digital personal media players is expected to top $5 million in 2007, and more than double that this year, reports Bluetooth.com.
The “key to success” in this business, says cart retailer Tomer Shahamorov, owner of iStation in Miami Beach, FL (formerly iPod World), is “variety of product.” Shahamorov carries between 120-130 products on his two carts (one in Dadeland mall and one in Miami International Mall), with an average ticket price of approximately $25, including chargers, cables, covers, speakers, remote controls, transmitters, waterproof cases and MP3 and MP4 players. The tech accessories business is hot in the Miami area, Shahamorov says. “There is no recession in Miami,” he says point-blank. Scores of his customers are tourists who are on a bit of a spending spree thanks to favorable exchange rates.
In addition to tourists loading up on the hottest new products, Shahamorov explains there is an iPod accessory lifecycle that specialty retailers can anticipate to boost sales. New iPod owners desire skin cases and covers, he says. After two to three months, they are interested in the tools that allow them to play their iPod 24/7, so they need home chargers and car chargers. Seven to eight months down the line, they’re likely to need replacement parts, like new headphones or earbuds. Retailers who work hard to create a long-term relationship with their customers can benefit from a healthy repeat customer base for years to come. Of course, an eye-catching display is also important, he adds. In addition to “very, very colorful carts that are attractive,” Shahamorov displays a bubbling water tank with an iPod cover submerged inside, which not only grabs customers’ attention but significantly boosts his sales of waterproof cases.
Tech chameleon: The cell phone
According to The NPD Group, cell phone sales to US consumers reached 38 million units in the third quarter of 2007. According to Mohr of Celluphone, agent and distributor for Verizon and Helio phones and service, 260 million people in the US have a cell phone. “That’s a penetration rate of over 80 percent,” he says. And unlike products consumers might not have a use for, “you’re selling something someone’s using every day,” says Mohr. Innovation is what it’s all about in the cell phone industry, providing the catalyst for consumers to upgrade again and again. “It’s amazing how much more phones do every year,” says Mohr. There are touch screens, larger keyboards for email, GPS capability that hooked up to a particular Verizon service will, for example, send a parent a text message if their child has gone out of geographical boundaries, the list goes on. Today’s cell phone owner upgrades their phone an average of every 18 months, says Mohr. When selling cell phones and the service packages that go with them, training is particularly important. For this reason, Celluphone offers “U of C,” or “University of Celluphone,” where retailers can request in-store workshops or attend offsite seminars for training, as well as have access to an extensive website where “every single brochure can be downloaded,” says Mohr.
Knowledge key to big sales
To successfully sell tech products, you need to be tech-savvy, period. That’s why at Micro Boutique, an in-line in The Montreal Eaton Centre in Montreal, Quebec, all sales reps are certified Apple professionals. Not only have they had Apple training, they are passionate Apple users and own Apple products at home. “When it comes to service, [knowledge] shows,” says Naji Chalhoub, general manager. The shopping experience becomes “more personalized because you talk the same language as your customers.” This is especially important for Micro Boutique, which in addition to iPods and iPhones, sells many high-ticket computers such as the new MacAir. James Gilland, owner of Tricked Out Accessories, headquartered in Ogden, Utah owns 10 techno-concept locations: three perm in-lines, two temp in-lines and five kiosks. “We go through a lot of training with our employees. New phones come out every two to three weeks,” so associates need to know what accessories are compatible, says Gilland. Even if customers are simply buying a headset, there are at least 10 different kinds from which to choose. Sometimes shoppers have a hard time finding products on their own when the choices are so vast, so they rely on the sales associates’ knowledge bank. “You don’t want to sell the wrong set,” he adds. “You need to hire good people” and “have them know what they’re talking about,” he says. “These days anyone can open a cell accessories cart, so the competitive advantage is to have knowledgeable employees who really know how to sell the product they’re selling,” says David Dorris, specialty leasing manager for the South Towne Center in Sandy, UT. Dorris notes this is one of the reasons for Gilland’s success. “‚Ä¶[Gilland] is a great operator who has A+ employees and great managers who really know a lot about their products.”
Many accessory wholesaler start-ups offer training as part of their package, and this is something technology retailers need to look for.
Cutting-edge kids (and women)
In the tech category, kids rule. Tech devices and their accessories are not only used by teens and tweens, but have trickled down to even younger ages. The NPD Group reports that the average age at which children begin using consumer electronic devices has declined from 8.1 years in 2005 to 6.7 years in 2007, an observation that’s proven every day in retailers’ stores. “If there are three kids [in a household], there are three iPods,” says Chalhoub.
Not only are kids tech-savvy, they’re tech-trendy. For this group, cell phones and their digital cousins are fashion items. And based on how fast fashion changes, if a child has a phone for a year and a half, it’s totally not cool, says Mohr. “Cell phones are a central part of every kid’s life, an extension of their personality,” he says. They research phones on the Internet, spend time talking about technology and, “they go to look at the new cell phones in the mall. It’s a great opportunity” to sell, says Mohr. Tech retailers also cater to women. Of the roughly $200 billion spent at retail on CE [consumer electronic] products by consumers in 2007, $90 billion, or 45 percent, were made by women at the checkout counter, either in person or online, says Steve Kidera, communications coordinator for the Consumer Electronics Association in Arlington, VA. Tech retailers can capitalize on this demographic with many types of accessories, such as pink-patterned Gizmobies, a best seller among women.
Although the children and women demographics are important to take note of, technology concepts appear to hit everyone out there, according to the retailers and wholesalers serving them. “It’s a grandfather and it’s a six-year-old kid,” says Lahav. “It’s unbelievable. It’s everyone.” The younger set may be “early-adopters,” but as products become well known, the market opens up to include everyone else, says Smith. For specialty retailers, techno-concepts may be the ultimate offerings. These products are the ones Americans, both young and old, use and need, every day. And for the tech-trendy, they have become a status symbol to love, protect and show off. As Chalhoub says, “Tell me what [tech gadgets] you have and I’ll tell you who you are.” LOL
School Spirit Sells at iFanatic
iFanatic marries consumers’ love of technology with their love of sports in a new line of officially licensed iPod protectors bearing the logos, mascot images or trademarks of approximately 100 universities and colleges. GameFacez, iFanatic’s signature line, are made from “cashmere” silicone, to fit (and protect!) all iPod nanos, shuffles and videos. Each Gamefacez is packaged with a screen protector, micro-fiber cleaning cloth and matching earcaps. “Retailers love the packaging and shoppers like the fact that our cases are [available in] their schools colors-and everyone loves the feel our product,” says Rod Marshburn, vice-president of marketing for the Apex, NC-based manufacturer, wholesaler and as of 2007, specialty retailer. iFanatic launched its first retail location in Crabtree Valley Mall in Raleigh, NC, this past holiday season. The retail test “went extremely well,” Marshburn says. “In fact, we did better than expected and plan to open three to five more [locations] this holiday season.”
The company is also rolling out a new start-up package for independent specialty retailers. Retailers pay a licensing fee of $2,500, for training, support, the right to use the iFanatic trademarks, and an exclusive selling territory. In addition to the GameFacez line, other iFanatic products include Sleevz, a laptop protector with a plush-lined fabric compartment; Cordnatz, a storage unit for digital earphones to eliminate tangling and knotting; and the Grillz Speaker System, a speaker system charges all dockable iPods plus a variety of MP3 players. Marshburn says he sees a great deal of opportunity for iFanatic sales this coming holiday season based shopper response to the Crabtree Valley test cart, which drew fans of all kinds to the products’ “extreme graphics, colors and classic styles.” Everyone at iFanatic is “inspired by our customers’ pride and passion for their favorite schools, artists, professional drivers and professional sports teams,” he says. “We strive to reflect that enthusiasm in each of our products. Our goal is to not only help our customers protect their investments but to also allow them to show their spirit.”
Consumer Electronics Association
Tricked Out Accessories
Zagg, Inc./Invisible Shield
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Rochester Spy Shop
Spinning Disc Entertainment