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First off let’s take a walk around the traps to see how this category – seen by many as a welcome refuge from the low margin zones populated by products like TVs and laptops – is paying off for New Zealand’s main players.
Pudney & Lee has made a name for itself over the years in the accessories business and, while business has been healthy, Hamish Andrews reports the category is as fast moving, high pressure and as competitive as ever.
“It used to be that after the end of the financial year the pressure would be off and we could continue like normal but now it seems every month is just kabang, kabang, kabang!” he says.
“And for us it’s always a changing game where, if you snooze for five minutes, you miss out on an opportunity. So there’s a lot of pressure to release something quickly but if you do so before it’s ready you can take two steps back and that’s dangerous, especially in today’s market where competition is hard core.”
Steve Ford, Country Manager for Belkin, feels that retailers are definitely cottoning on to the importance of selling accessories in light of the dramatic drop-off in margins on some bigger ticket items but he too reports the category has been quite aggressive in the past year.
“It’s been challenging with lots of competition coming into the market particularly in the areas that Belkin has been fairly dominant in for a number of years now. And we are seeing a lot of cheap no-brand, no-name stuff appearing both on shelves and online, which presents its own challenges.” (There will be more on own brand accessories later in this article.)
Stuart Bulcraig from AV Supply points out one of the obvious pitfalls of being in a market that in many respects depends on the performance of products that you have no control over: “Our business really mirrors the unit sales of TVs and in the last two years this has been in decline so it’s been a challenge in that respect,” he explains.
Still unlike TVs, smartphone and tablet accessories have been showing consistent growth as the penetration of these devices continues to mature worldwide. “It’s a good space to be in,” says Cellnet’s Dave Clark. “With the growth in smartphones tablets and ultrabooks it’s a category that the retailers are focusing on with high consumer demand. And everybody in retail is looking to invest more real estate in store to focus on accessories.”
The growth of Amber Technology in New Zealand in recent years is another indicator of the potential within the accessories and add-ons category. Led by the One for All brand, Amber’s offering of complementary brands and products has provided the distributor with a not just a toe, but a foot in the door from the almost standing start of a couple of years ago.
“Our business has grown substantially and continues to evolve and change and develop – we’re seeing some clear opportunities to innovate and engage and become more meaningful with our customers,” says Amber Technology Group Brand Manager Brent Malone who, along with Nigel Lee, has been driving the Amber brand and its products hard in recent months.
As well as high brand awareness around One For All – with its universal remotes (especially Samsung and Sky replacement models), panel TV wall mounts, antennae (outdoors and indoor options thanks to the digital switchover) – Amber’s brand arsenal also includes Energizer (mobile device chargers) while the agency for Urbanears headphones has also seen the company expand into fashion-conscious markets.
IN SEARCH OF HEALTHY MARGINS
Mark Sole at Uniden is another to report good business in the last year, particularly in accessories for surveillance systems, baby monitors and assisted listening devices: “Surveillance globally is growing exponentially as a category, so adding on additional cameras and so forth is lucrative as they get hooked on the system then add another camera as needed. And the cameras do have a good margin on them,” he says.
As mentioned earlier, one of the key factors that has encouraged a shift in store priorities towards accessories has been the comparatively high margin they offer – especially when compared to heavily discounted big ticket items. But is this always the case?
One player I spoke to was candid about how, when taken far enough, the practice of aggressive discounting can eventually be to the detriment of even add-ons and accessories. For example many TV wall mounts have almost halved in price as they have become an increasingly uncomfortable portion of the overall sale as TV prices have plummeted.
This has created a distorted view in the eyes of consumers where paying $200 for a high quality add-on seems too much (especially if the TV’s price is down to $1,000). The moral of this story is that aggressive discounting has wider implications than just the product that’s being offered at 50% off.
OWN BRAND OR KNOWN BRAND?
Another issue that can affect margins and overall profits is the decision whether to go with own brand products. Denise Horne, International Sales Director of One for All UK, is particularly well placed to offer some global perspective on this. Horne talks of a period a decade ago now in Europe when the major retailers were plumbing the depths with low-end, own brand accessories (mainly remotes) and suffering “horrendous” return rates to boot.
These days, One For All not only does very well with these same retailers through its premium OFA branded products, but also supplies many key retailers’ own brand product via Universal Electronics, One For All’s owner. OFA is the classic “step-up brand” in this context.
After all, says Denise Horne, when there is just a 5% difference between the margin on a low-cost own brand product from a no-name supplier and an own brand product from a reputable source, the choice is clear, isn’t it?
But say a retailer is making 60-70% margin on a low-cost house brand and only 45-50% on a promoted premium brand – is the choice as cut and dried? Actually yes, says Denise Horne, the margin is less but the risk is also less and the selling price is higher.
The retailer may be making fewer percentage points but they’re making more money by going with a branded product that can command a premium: “People nowadays want to buy a reliable product; they want to buy something that is going to work and is going to be quality,” she believes.
This may well resonate with New Zealand’s FMCG operators, some of whom will have caught a cold with unreliable own branded electrical products in recent times.
LOST POTENTIAL – COULD DO BETTER?
If we take a look at trends overseas we can see that it’s not just the appliance retailers or online players who are working at mining the accessories & add-ons market. What’s more, they’re not just plugging away in the low-cost, high returns area of the market.
Can we quantify any of this? Looking at the Argos website, you can see there are remote controls for as little as £6.99, mainly own brand product, but there are also products from brands like One For All at around the £24.99 mark.
More and more retailers in the UK are devoting increasing space to accessories, purely because of the margins they are making. Accessories may return a 50-70% margin as opposed to 10-12% on a panel TV for example and this is so attractive that even FMCG players like Tesco and Asda are getting in on the act.
Still, One For All’s Jonathan Hooker, former Sales Director UK and now VP Worldwide Sales, believes that there’s more to come for the category, in the UK at least. He says a fair target for accessory attachments would be 10%, however in reality the majority of UK retailers are achieving just 2-3%.
This is usually due to poorly trained sales assistants not offering accessories at all, or customers buying them at a later date (and not necessarily from the original retailer to boot). “Increasing attachments is a huge focus area, but still has a long way to go,” he says.
We’re sure that Kiwi retailers aren’t ignoring this rich vein but their rate of change and/or expansion does seem in some cases to have been painfully slow and it’s a safe bet that there’s more to be mined than is currently the case.
Belkin’s Steve Ford also suggests that retailers may be missing obvious opportunities: “The feedback we are getting out of the US is that someone buying a smartphone is likely to buy around 12 accessories during the life of that product.
“But, if you actually spoke to the retailers, they are probably selling less than half of that, certainly on first purchase and the customers are probably buying it from another retailer or online.”
GETTING SMARTER WITH SMARTPHONES
There are more stats that support smartphone accessories as a massive an area of growth. A recent report from forecaster Canalys estimates that almost 1 billion smartphones were shipped in 2013, a 44% increase on 2012. So clearly this is an area that has massive potential and opens up several different sets of opportunities for accessories and add-ons.
However, as these devices have become more a part of our lives in recent years, it’s clear that having a few black or clear cases and some basic cables just isn’t enough anymore.
“Smartphone and tablet accessories have really matured as a category so we now see a variety of colours and fashion elements that are coming into the mix but also ruggedised and waterproofed sub-categories that have come in as the penetration of smart phones grows and the need to protect those high end devices increases,” says Cellnet’s Dave Clark.
Hamish Andrew reports that Pudney & Lee will also increase its offering in this area in the coming months, providing a service where consumers can order a high quality, personalised phone case in “an exclusive deal with a major retailer that is very exciting”.
Pudney & Lee will also offer a screen protector application service to these stores that will give customers a perfect, automated fit every time, a suggestion that Andrew says has been met with a very warm response from retailers.
WHAT ON EARCH IS AN “APPCESSORY”?
Smart device saturation has done more than open up the market for cases and cords however. These are basically small computers after all, and the growing mobile application software industry has also led to the development of some exciting new hardware.
If you haven’t heard the word “appcessory” before (I hadn’t before researching this piece), it may be an important one to add to your vocabulary in the years to come. “Appcessory” (APPlication acCESSORY) is described by pcmag.com as “An app in a mobile device that activates something in the physical world. It can use Wi-Fi or Bluetooth, or it may require a device that plugs into the charging/data transfer port.”
For those in the retail game, the potential for sales is in that extra device which creates a bridge between an app on a smartphone and the consumer’s existing hardware, whether it’s a home entertainment system, a light switch, a kitchen appliance, a heater, or even the front door.
Belkin’s Steve Ford sees excellent potential for appcessories, particularly in the growing area of home automation, and reports that Belkin is currently developing a range of products in its Wemo line, including a collaboration with slow cooker manufacturer Jardin.
“The combination of hardware and software that appcessories offer is something that’s really starting to catch hold in the marketplace,” says Ford , who adds that Belkin also has a suite of Wemo products coming based around simple home automation allowing consumers to activate devices and things like lights very cheaply. “So, rather than rip out cables and tear down walls for refit, these are very modular and simple and are controlled with smartphones or tablets,” he says.
Amber Technology is another player that has entered the appcessory area with the One For All Nevo Tablet Remote and Wi-Fi bridge which turns a tablet into an advanced remote control for home theatre systems.
BIGGER TVs CREATE OPPORTUNITIES
While the TV market is a tougher area to be in than smart devices at the moment, the trend toward even bigger TVs may be opening up new avenues for value added or add-on sales.
“The decline in TV sales is set to flatten out this year and large panel TV sales are actually going to increase. So the move from smaller or medium sized TVs to larger ones means that more people want to attach them to a wall and the demand for wall mounts increases, which is obviously beneficial for us,” explains AV Supply’s Stuart Bulcraig.
The steady upsizing of TVs may also bring safety issues, rather than just price, to the top of the consumer’s list of priorities when considering accessories and add-ons for a new TV purchase.
Bulcraig points to a recent report from the US that may be opening people’s eyes to the importance of having their TV secured correctly: “The stats make pretty grim reading from a US perspective,” he explains. “ A report from the US Consumer Product Safety Commission found that over a 10-year period there were actually 17,000 emergency reports on TVs tipping and injuries related to TVs increased 31% in that period.
"And that’s one of the reasons we are partnering with some reputable New Zealand retailers and Safekids Aotearoa to provide some information to the consumers on how to prevent injury from TVs.”
FROM THE SHOP FLOOR: ADVICE FOR SELLING ADD-ONS
So there are opportunities out there in new and older categories if you know your market and the customer well enough. However, despite the best intentions of suppliers and anyone else with a vested interest in selling accessories add-ons, it comes down to a few minutes in the shop floor.
To get a report from the coal face on making the most of this lucrative category we talked to seasoned industry pro John Feron, co-owner of Betta Electrical Alexandra.
As well as knowing your products and getting to know your customers Feron has found that offering as standard a home delivery, installation and tutoring service – particularly for larger items like TVs – has opened up new business avenues once sales staff are in the customer’s home.
“Often the customer will say ‘by the way, would you have a look at my TV, I don’t think it’s right’ or they are considering getting a new one and ask us to look at their situation and recommend something for their home,” Feron explains “It always surprises me when other retailers outsource delivery – we prefer to do that ourselves as it leads to more sales.”
Whether it’s batteries for cameras and remotes, or formulas for wet and dry vacuums, consumables can offer good margins and are often seen as a great way to get people in the shop floor on a regular basis, opening up chances to create repeat business and build trusted relationships with consumers.
“One thing that works great for us is vacuum bags,” says John Feron. “And we have a little coffee card so all they have to do is come in, say their name and we have it all on record and we get an awful lot of praise from our customers for that simple little thing.
"So we tell them ‘next time you come in, you remember your name and we will remember your vacuum bag’’ – it’s just a simple thing that looks after the customer and gets them back in the door every month or 6 weeks and often turns into sales.”
Barnaby Thompson, Sales & Marketing manager for Parex, also stresses the importance of having a good supply of the right consumables – particularly for larger systems such as steam mops – to match the products that are in-store.
“Sales people should always mention any deals and tell customers that they always have full stock and then back that up,” says Thompson. “There is nothing worse than a customer going to a retailer and they don’t have any consumables as that’s probably one of the reasons they go in in the first place.”
THE FINAL WORD: ASK QUESTIONS!
This could be the most important piece of advice of all. Every player we talked to stressed that asking questions and listening to what the customer’s wider needs may be is crucial to getting the right products and the best value into the hands of consumers.
John Feron continues: “Asking questions is the key. You can’t sell somebody something and be absolutely confident that they got what they want unless you ask them questions. It’s so easy to say ‘I’ll take $300 of this’ but what else? Is that going to be right for my needs? Is that a help?”
Feron has found that dealing on price alone doesn’t make for happy customers in his experience and that a crucial part of making his customers happy is ensuring they have the right accessories to get the best experience out of any given product. After all there is no bigger let down than getting an exciting new purchase home only to find that you don’t have the right cable or battery to make it work.
Uniden’s Mark Sole is another who feels that asking even the most basic questions should be absolutely standard practice for every retail staff member (as well as having a good knowledge of stock!): “It’s important to make sure staff are educated on what the up sale for each SKU is and training them in the ‘would you like fries with that?’ style response as it costs nothing to ask that question when closing the sale.”
When you’re making a sale on a big ticket item there is a very short but very crucial window of opportunity that Belkin’s Steve Ford believes retail staff need to take more advantage of: “They really have to try to maximise the opportunity with the customer in-store there and then. So if a customer is buying a $1,000 tablet you need to be talking to them about how to protect it, how to provide additional power and charge to it – you can never have enough cables!
“So you have a short amount of time to really work with the customer and get them to understand how they can get the best possible experience out of the product they are buying – with the aid of accessories.”
I couldn’t have said it better myself.