October 18, 2011
It's hard to imagine that Legos, Tron and a Brachiosaurus could have anything in common. And yet they do: They're all variations of an Apple iPhone dock. Since the iPod was introduced in 2001, accessory makers have been looking for ways to capitalize on Apple’s devices, and it’s easy to see why. In 2011 the global market for mobile phone accessories will rake in an estimated $34 billion in revenue. Apple-approved products—accessories made by Apple or branded by Apple—make up about $2 to $3 billion of that. Apple's share may not be the largest, but according to Michael Morgan, senior analyst for mobile devices at ABI Research, there's a reason iPhone 5 accessories were popping up online in anticipation that the phone would be released this month (it wasn’t).
Unlike with other companies, the makers of accessories for Apple’s iPod, iPhone and iPad don't have to worry about whether the devices will sell or if consumers will want accessories for them. In other words, Apple’s recent lineup has become the equivalent of a sure thing. Four years ago, in the pre-iPhone era, the accessories market—while not small—was certainly more fractured. This was due, in part, to industry issues, such as the number of different-shaped devices, mobile vendors who created their own accessories, and low attach rates, meaning the number of accessories and related products sold for each phone was not high.
Then the iPhone happened, and unlike other tech manufacturers who were trying to make their own accessories, Apple didn't really bother with that market. Instead, it developed a branding program, which meant third-party makers would create the accessory. If it met Apple's standards, the product would receive a “made for iPhone” label, and Apple would take a percentage of a product's wholesale cost. Apple wasn't the first to try this approach, but the unique success of its products created a “halo effect” for related accessories. The iPhone, like the iPod before it, was a singular model that sold incredibly well. Also, the high value of the gadget has driven consumers to accessorize or protect it. This made for an ideal scenario for, say, a case maker. “Before the iPhone, on a smartphone you might only see a 30 to 40 percent attach rate on protective covers,” says Morgan. “On the other hand, after the first couple of years, iPhone was seeing 60 to 70 percent attach rate for protective covers.”
Of course, being a part of Apple’s branding program leads to a particular boost, especially when new products—like the iPad 2 or iPhone 4S are released. “Those that are part of the Apple family have the advantage of having something on the shelf at the time of release,” Morgan says. “And of course they're chosen based on not just a product that meets Apple's quality standards, but on who meets the proper merchandising arrangements and can handle mass volume.”
Whether or not businesses have taken part in Apple's branding program, many have built their fortunes on making accessories for the company’s products. Griffin Technology, an early entrant into the market, is now a top accessory maker in the U.S. Even smaller companies, like Forward Industries, have gotten an iPhone bump. When the antenna became an issue on the iPhone 4, Forward Industries made some of the first bumper cases to fix it.
Morgan says such accessory market success may have well gotten Apple's attention, pointing out that the company decided to make its own cover for the iPad2. “So it's possible,” he says, “that those who have made billions off cases may soon be in direct competition with Apple itself.”
It wouldn't be the worst move by Apple. Global revenue for the accessories market will hit an estimated $50.2 billion by 2015. Apple-related products will make up between $5 billion and $6 billion of that.
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