Accessories Drive Profit (and Profit is not a Dirty Word)

It has been fascinating to witness the evolution of the technology and accessories industry over the last three decades. This symbiotic relationship is key for retailers, distributors and custom install providers, with accessories delivering the profit for the high-technology products that drive the consumer electronics (CE) industry. From smartphones and digital cameras to DVDs and 4K Ultra HD TVs, the advent of accessories as a major part of the profit picture is indisputable.

Distilled to its basic form, the CE market has evolved so much that innovative, high-tech companies are ever lowering prices. This is the beauty – and bane – of the industry. Every two to three months, CE companies continue to drop prices – even as the technology continues to improve – in a race to win market share. And their race is the accessory market’s gain. Clearly, technology is driving demand, while profitable accessories provide the glue that holds the whole enterprise together.

Electronics continue to race toward zero margins, as seen this past holiday shopping season. Prices for some 4K Ultra HD TVs dropped below $1,000, and 1080p HDTVs dipped under $500 for panel sizes 55 inches and larger. In my opinion, retailers are lucky to make 10 points on TVs from the $1,000 to $2,000 price range. Low-margin, high-value electronics – like TVs – may be “driving the bus” for consumer demand, but they’re not delivering big profits as a percentage of sales. Retailers need high-margin accessories to make selling that kind of technology viable; hence, the evolution of the high-margin, high-value accessories industry.