2. Uncovering Retail Accessory Opportunities 2018
Stephen Baker
Vice President, Industry Analysis
NPD Group
Tessco
April 10 , 2018

3. Agenda CE Industry Overview Category Overviews Headphones Smart Home
Mobile Accessories
Mobile Power
Cases

4. CE Industry Overview Breaking into the Mass Market
Premium Economy is the new entry-level
Category growth drives new products into a mass market environment
Better mix creates better revenue opportunities
Pace of Technology Change accelerating
Disruptive change begins to impact products and categories, vendors and retailers alike
Broadening scope and impact of tech across all consumer products landscape
Monetizing ownership
New opportunities inside rapidly transforming installed bases
Hardware grows as the gateway to expanded value creation
Positive Holiday/Q sets stage for 2018 growth

5. 2017 was best year out of last 5 for revenue growth
Source: The NPD Group, Inc./Retail Tracking Service,
Data doesn’t include mobile phones, VG HW, Amazon Brand HW Devices, Surface (from MS stores), Apple Watch

6. 2017 Top 4 Growth Categories vs. Top 4 Decline Categories
Source: The NPD Group, Inc./Retail Tracking Service,

7. Stronger results at flat
Source: The NPD Group, Inc./Weekly Retail Tracking Service, 9 week holiday period
Data doesn’t include mobile phones, VG HW, Amazon Brand HW Devices, Surface (from MS stores), Apple Watch, Drones, VR

8. Winning categories have more future potential than losers do Winners grew $2.3b 2013 to Losers fell $3.2b
Source: The NPD Group, Inc./Weekly Retail Tracking Service, 9 week holiday period, All Categories generated $750m minimum between 2013 and 2017
Data doesn’t include Amazon Brand HW Devices, Surface (from MS stores), Apple Watch, Drones, VR

9. Largest 3 categories all lost revenue share in Holiday 2017 to rest of market
Source: The NPD Group, Inc./Weekly Retail Tracking Service, 9 week holiday period
Data doesn’t include mobile phones, VG HW, Amazon Brand HW Devices, Surface (from MS stores), Apple Watch, Drones, VR

10. Cyber Week 2017 saw the biggest sales gain in three years as more retailers extended Thanksgiving weekend into online opportunities
Source: The NPD Group, Inc./Weekly Retail Tracking Service, 8 week holiday period
Data doesn’t include mobile phones, VG HW, Amazon Brand HW Devices, Surface (from MS stores), Apple Watch, Drones, VR

11. .com Share Continues to Grow
eCommerce Dollar Share of Consumer Technology
($%)
Source: The NPD Group / Consumer Tracking Service

12. Online market still grows as Amazon dominates but things are slowly changing
Overall Online sales grew 15% to $40.1b in 2017
Best Buy was the fastest growing retailer online in CE
Only 23% of online sales dollars come from PCs and TVs
Source: The NPD Group / Checkout, Amazon includes 3rd Party Marketplace

13. Amazon has a business that looks very different than most CE businesses
Source: The NPD Group / Checkout, Amazon includes 3rd Party Marketplace

14. 2018 Forecast calls for a second straight year of overall revenue growth
Source: The NPD Group, Inc./Future of Tech

15. Headphones

16. Headphones overview Poised to become a $5b category in 2018
Unit volume, ownership levels and customer interest creates a very high profile category
Usage tracks to changes in media consumption and device ownership helping to drive volumes and varying platform demand
One of the few categories in tech to deliver demand on a style and technology platform
Also building into broader technology as part of “wearables,” “hearables,” “voice controls,” and health and fitness tech opportunity

17. Wireless headphones have grown over 20% YoY for 3 years straight
Source: The NPD Group, Inc./Retail Tracking Service

18. Very little competition for AirPods yet
2017 Share
Source: The NPD Group/ Retail Tracking Service

19. Bluetooth unit volume larger at $100+ than <$25
Bluetooth Headphones
Unit Volume by Price Segment
Source: The NPD Group, Inc./Retail Tracking Service

20. The top premium brands are driving category growth
Bluetooth Headphones
Revenue Growth YOY
Source: The NPD Group, Inc./Retail Tracking Service

21. Largest retailers gain share in the shift to wireless
Stereo Headphones
Dollar Sales by Outlet
Stereo Headphones
Dollar Share- Ecommerce vs Retail
Source: The NPD Group/Consumer Tracking Service; *Includes online nameplate

22. Paid music streaming continues to grow
Source: NPD Entertainment Trends in America, August 2017
Q6 Please tell us all the ways you listened to music in the past 3 months.

23. Significant growth in older, higher income demographics
Stereo Headphones
Unit Sales- Primary Users by Age
Units (000)
Source: The NPD Group/Consumer Tracking Service

24. Current Headphone Owners Headphone Purchase Intenders
The next wave of wireless headphone adopters will be younger than current owners
Current Headphone Owners
Headphone Purchase Intenders
Mean
47 years
40 years
42 years
Mean
47 years
34 years
33 years
Q3. Please indicate which of these products you own. For those items you currently own, please indicate when they were purchased.
Source: The NPD Group, Inc./Future of Tech Report

25. Smart Home

26. Smart Home Review
Fastest growing large category in 2017 and will continue in 2018
Millennials are driving interest but broader consumer interaction needed to accelerate growth
Halo effect of voice is key in driving adoption outside of tech enthusiasts
Retail still struggles with displays and merchandising while consumers struggle about where and how to buy
Channel purchase patterns very much tied to specific products. Consumers don’t appear to recognize it as a category yet. Still, opportunity for new channels to disrupt established consumer patterns

27. Smart Home revenues continuing to explode
Source: The NPD Group, Inc./Retail Tracking Service, Data doesn’t include, Amazon Branded Products or Google Home

28. Security & Monitoring accounts for nearly two-thirds of category sales
Home Automation Categories
Dollar Volume ($ Millions); 2017
Source: The NPD Group/ Retail Tracking Service

29. Home Automation Categories
Lighting and Entry are large categories seeing significant unit and revenue growth
Home Automation Categories
2017 YoY Growth
Unit & Revenue Growth; (Jul ’16- Jun ’17 vs. Prior Year)
Source: The NPD Group, Inc./Retail Tracking Service

30. Home Automation categories are gaining retail distribution
Distribution by Subcategory
% of Stores Carrying
Source: The NPD Group US SLE POS Monthly Retail Tracking Service

31. Where Purchased- Security & Monitoring (Among Current Owners)
Most owners of security & monitoring devices purchase from online only retailers
Where Purchased- Security & Monitoring
(Among Current Owners)
Source: Connected Intelligence, Connected Home Automation Report, Q4’17
Base: Security & Monitoring owners

32. Smart home ownership continues to scale
Smart Home Device Ownership*
(Among Internet HHs)
Source: Connected Intelligence, Connected Home Automation Report, Q4 ’17
Base: Internet Households
*Ownership of at least one of security & monitoring, power & sensors, smart lighting, system controllers, smart entry,. Excludes smart speakers

33. Voice Activated Speaker Ownership
Ownership of voice activated speakers has grown to 15% of internet enabled households
Voice Activated Speaker Ownership
Source: Connected Intelligence, Connected Home Automation Report, Q2 ’16, Q2 ’17, Q4 ’17

34. Activities Echo Used For
Music continues to be a top task for Echo users
Activities Echo Used For
Source: Connected Intelligence, Connected Home Automation Report, Q2 ‘17

35. Amazon and Google owners look very different
Voice Speaker Usage
(Among Owners)
Source: Connected Intelligence, Connected Home Automation Report, Q4‘17

36. Speakers are most commonly placed in living rooms and kitchens
Placement of Voice Speakers in Home
Source: The NPD Group/Connected Intelligence, Connected Home Automation Report, Q4 ’17
Base: Voice Activated Speaker Owners
Q. Thinking about the voice-activated digital speaker(s) in your household, where is it placed in your household?
*includes multiple placements and multiple speakers

37. Mobile Accessories Overview

38. Key Accessory Strategies for 2018
Focus less on phone attach – less lucrative, lower dollars, much harder competition
Focus more on aftermarket –
Bigger opportunity (installed base vs. purchase cycle)
More traffic opportunity
More ASP upside opportunity
More branding upside opportunity
More technology upside opportunity
More aligned with future usage of mobile than at point of purchase

39. Case revenue weakens some as rest of market moves higher
Source: The NPD Group, Inc./ Retail Sales Tracking ,

40. Apple attaches more and has fewer people attach nothing— screen protectors moving up rapidly
Source: The NPD Group, Inc./Checkout

41. Mobile accessories have a key role to play in online purchasing9%
30%
31%
Buyer share
Share of Spend
Buyer Share
Percent of online consumers that bought a mobile phone in 2017
30% of spend for mobile accessories online purchases came from buyers who purchased a mobile phone online in 2017
Percent of consumers that bought something online bought a mobile phone accessory in 2017
Categories = mobile power, cases, headphones, streaming audio, screen protection
Source: The NPD Group/ Checkout E-commerce: 12ME December 2017

42. Amazon Cell Accessory Share of Wallet by Cell Accessory Buyer Base
85%
29%
41%
Amazon
Cell Carrier
All Other
Buyers who buy a cell accessory on Amazon spend 85% of their cell accessory wallet on Amazon
Buyers who buy a cell accessory on a cell carrier site spend 29% of their cell accessory wallet at Amazon
Buyers who buy a cell accessory at non Amazon/cell carrier sites spend 41% of their cell accessory wallet at Amazon
Categories = mobile power, cases, headphones, streaming audio, screen protection
Source: The NPD Group/ Checkout E-commerce: 12ME December 2017

43. Mobile Power

44. Mobile power
Growth of at-home usage (and Wi-Fi) diminishes value of mobile power banks
However, use cases over time continue to migrate towards mobile high battery usage activities
As important as mobile power banks are, charging equipment much more valuable
More at-home use means more need for charging equipment in multiple places in home, in car, in work
Wireless charging beginning to accelerate, potentially changing some levels of demand

45. Cables are leading revenue for power-related mobile accessories
Source: The NPD Group, Inc./Retail Tracking Service,Battery Pack Revenue includes Charging Cases

46. Market for charging equipment shifting towards home/stationary use models
Source: The NPD Group, Inc./Retail Tracking Service

47. USB-C revenue moving quickly upwards Wireless charging finally stimulated by iPhone
Source: The NPD Group, Inc./Retail Tracking Service, Does not include Battery Packs,

48. Wireless Charging Beginning to Gain among Younger Consumer
Source: The NPD Group, Inc./Omnibus Consumer Survey February 2018

49. Portable power revenue grows as batteries get bigger and pricing moves higher
Source: The NPD Group, Inc./Retail Tracking Service,

50. Cable market increasingly Private Label but “branded” cables remain a strong force
Source: The NPD Group, Inc./Retail Tracking Service

51. While biggest brands have higher ASPs the price differential between Private Label and smaller brands is minimal
Source: The NPD Group, Inc./Retail Tracking Service

52. 60% of Amazon/Marketplace Mobile Power unit sales unidentifiable
Source: The NPD Group, Inc./Checkout

53. Cases

54. Phone Case Market
Brands in retail channels are gaining share, especially the top non-OEM brands
ASPs are steady (despite declines in 2 highest ASP brands) as consumers shift out of secondary brands and into more established brands – across phones and channels
Retail and store volumes more concentrated in easy to sell cases for established brands-online/marketplace moving more to support long-tail buying
Volumes not likely to move much regardless of phone product changes
At least some seasonality seems to have left the market during product launches – in periods with “upgrades” consumers less likely to buy cases
New form factors drive new case purchases (obviously) – Galaxy launch proves points

55. Poor launch results created some market pressures in Q4 2017 and into 2018
Source: The NPD Group, Inc./Retail Tracking Service,

56. Top brand ASPs are falling as mix and price shifts in the marketplace
Source: The NPD Group, Inc./Retail Tracking Service, top 15 brands all sold 2m units in 49m ending Jan 2018

57. Top brand ASPs are falling as mix and price shifts in the marketplace
Source: The NPD Group, Inc./Retail Tracking Service, top 15 brands all sold 2m units in 49m ending Jan 2018

58. Top brands account for less than 40% of online sales volume
Source: The NPD Group, Inc./Checkout (inc Amazon Marketplace sales)

59. Results of a Hit Accessory
Source: The NPD Group, Inc./Retail Tracking Service,