Fashion and Style in the Mobile Handset Industry

Publication Date	June 2005
Publisher	ARCchart
Product Type	Report
Pages	150
ISBN Number	not applicable
Product Code	ARC00030

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Summary

In developed mobile markets, consumers are becoming more sophisticated in their selection of handset, and this is driving a market for stylish and fashionable mobile phones. In this research report, ARCchart shows that there will be sufficient consumer demand to support the sale of 23 million fashion handsets by 2010. There was a time when companies such as Nike, New Balance and Reebok produced 'running shoes'. Now these pieces of footwear sell in fashion boutiques, and vintage lines can trade for huge market premiums. The mobile phone is following a similar path, and fashion boutiques have become the point of sale for handsets from Siemens/ESCADA, Nokia/Versace, Vertu and the now defunct Xelibri. In addition, fashion designers such as Kimora Lee Simmons, Diane Von Furstenberg, Anna Sui and Vivienne Westwood have readily extended their design expertise onto handsets from Motorola and Samsung. The report examines the fashion and style strategies employed by the major handset vendors in the market today. These strategies fall into four groups, consisting of: the incorporation of fashion and styling elements across a handset portfolio; co-branding collaborations with fashion brands; formation of a handset sub-portfolio geared specifically at the fashion and style conscious market; and the establishment of independent, fashion focused handset subsidiaries. Nokia is the only vendor adopting all four strategies, while Sony Ericsson employs just one. A detailed analysis of the opportunity for fashion brands to independently produce their own-designed phones, outside of an operator or handset vendor collaboration, is provided. In addition, specific scenarios for entry into the handset market are described for two brand companies, a global Italian fashion house and a British luxury car manufacturer. The scenarios include concept handset designs created by Swedish design firm, Ocean Observations. This report examines the state of fashion and style in the handset industry, including:

Examination of previous marriages of fashion and technology, including Apple's iPod
Overview of the handset market, examining the platform providers, ODMs, OEMs and the operators
Analysis of the fashion and style strategies currently employed by Tier One handset vendors
Case studies of Xelibri, the Siemens ESCADA venture, Vertu and the Vodafone Ferrari handsets
The opportunities and challenges for operators in distributing fashion and branded handsets
Study of the brand conflict between operator brand, vendor brand and fashion brand
Fashion phones driving the market for multiple handset ownership
Analysis of the handset opportunity for fashion and brand companies
Scenarios of fashion companies entering the handset market, including concept handset designs
Anology between consumer behaviour in the wrist watch and handset market
Forecast of the consumer demand for fashion handsets as the mobile phone market matures

Answers and opinions are provided with respect to the following essential questions:

What are the factors driving fashion onto the mobile handset?
What fashion strategies are helping handset vendors support sales and margins?
Why did Siemens' Xelibri fail and why is Siemens ESCADA more successful?
What are the prospects for Nokia's Vertu?
How can operators benefit from distributing fashion and branded handsets?
What strategy should operators adopt when dealing with fashion handsets?
How will handset subsidies affact the sale of fashion phones
How can the fashion handset GUI drive operator ARPU?
Is there an opportunity for pure fashion companies to independently launch fashion handsets?
What are the benefits and barriers for these companies?
What will be the future consumer demand for fashion phones?

Content

1 INTRODUCTION
- Definition: Fashion Handset
- 1.1 The handset as a canvas for fashion, style and branding
  - A sociological connection between fashion and the mobile handset?
- 1.2 Marriages of fashion and style with technology
  - Apple
  - The iPod
  - The iPod's origins
  - The iPod's impact on Apple
  - The iPod fashion accessory industry
  - The iMac and the importance of portability
  - Sony
  - Nike and Philips: technology and fashion brand co-exist
  - Analysis of the fashion opportunity for Philips
  - Bang and Olufsen: selling style
  - Fashion and the digital camera market
- 1.3 Report summary
2 THE HANDSET MARKET 101
- Regional trends
- 2.1 The mobile operators
  - Handset subsidies
  - Approach #1: No handset subsidies
  - Approach #2: Handset subsidies
  - Approach #3: Handset subsidies and technology control
- 2.2 The handset vendors
  - Component suppliers
  - Hardware reference designers
  - Original Design Engineers (ODE)
  - Original Design Manufacturers (ODM)
  - Original Equipment Manufacturers (OEM)
  - Market share
- 2.3 Dividing the market
  - Product groups
  - The voice phone
  - The feature phone
  - Smartphones
  - Handset bill of material analysis
- 2.4 Handset commoditisation
  - Silicon platforms and reference designs
  - Outsourced manufacture
  - The handset opportunity for non-handset vendors provided by ODMs
- 2.5 Handset replacement cycles
3 FASHION, STYLE AND BRANDING
- 3.1 What is fashion?
  - The fashion industry and fashion brands
  - Where does fashion come from?
  - The fashion forecasters
  - Fashion forward
  - Fashion design vs. industrial design vs. product design
  - What does fashion mean for the mobile handset vendors?
- 3.2 What is style?
  - Designing in style
  - What is styling?
- 3.3 The importance of brands for fashion and style
  - Brand power
  - Handset vendors lack fashion credentials
4 FASHION AND STYLE IN THE HANDSET MARKET TODAY
- 4.1 Factors driving handset vendors towards fashion
  - Commoditisation of the mobile handset
  - The challenge to differentiate
- 4.2 Fashion and style strategies in the handset industry
- 4.3 Handset vendor strategies
  - Nokia
  - The 8XXX range
  - The 7XXX range
  - Promoting fashion over form
  - Fashion co-branding
  - Motorola
  - Focusing on style
  - Fashion co-branding
  - Samsung
  - Fashion co-branding
  - Siemens
  - Fashion co-branding
  - The outlook for Siemens' handset division
  - Sony Ericsson
  - The design context behind Sony Ericsson
  - Design success
- 4.4 Smaller handset vendors - diamonds are an ODM's best friend
- 4.5 Handset fashion objectives
  - The fashion premium
  - The objective behind co-branding
5 CASE STUDY I: SIEMENS' XELIBRI
- 5.1 The Xelibri story
  - Setting out the brand strategy
  - Launch and innovation
  - Department store and boutique distribution
  - No operator involvement - no subsidy
  - Multiple devices
  - Busting the replacement cycle - two "collections" a year
  - Xelibri in the market
  - Markets
  - Pricing
  - Logistics and merchandising
  - The Xelibri collections
  - An incongruous end
- 5.2 Lessons from the Xelibri experience
  - What Siemens did right
  - A diverse design team and third party product design
  - Logistics and technical support
  - Differentiated design
  - Where did Siemens go wrong?
  - Getting the technology right
  - Getting the product finish right
  - Matching design with demographic
  - Selling unsubsidised handsets in operator subsidised markets
  - Technology association
  - Timing
6 CASE STUDY II: SIEMENS ESCADA
- 6.1 Handset fashion co-branding
  - Insight from Siemens and ESCADA
  - Choosing the brand - the brand fit matrix
  - Fashion and Style in the Mobile Handset Industry
- 6.2 The fashion brand
  - The ESCADA brand
  - The fit
- 6.3 Siemens ESCADA in the market
  - Pricing and value perception
  - Lesson learnt
  - The relative cost
- 6.4 Conclusions
7 CASE STUDY III: NOKIA'S VERTU
- 7.1 Building a super luxury brand
  - The Vertu value proposition
  - Luxury and fashion
- 7.2 Vertu in the market
  - Quintessentially
  - Accessories and a new range
  - The Ascent collection
- 7.3 Vertu challenges
  - Handset design
  - Marrying luxury and technology
  - Limited functionality
- 7.4 Nokia's future strategy for Vertu
8 STYLING THE USER INTERFACE
- Driving sales
- 8.1 Analysis of the UI
  - Branding
- 8.2 The handset UI today
  - The handset vendors
  - The mobile operators
  - Case study: Hutchison's 3
- 8.3 Summary
9 HANDSET FASHION AND THE MOBILE OPERATOR
- 9.1 The operator quest for ARPU
  - Handset fashion and ARPU?
- 9.2 Case Study IV: Vodafone Ferrari
  - The Ferrari handsets
  - Vodafone facts
  - Vodafone and Formula One
  - Ferrari and Formula One
  - What's in it for Vodafone?
- 9.3 Fashion benefits for the MNO
  - Exclusivity
  - Customer retention
  - Customer acquisition
  - ARPU growth
  - Enhancement of brand values
  - Subsidy removal
  - Tactical move against Tier One handset vendors
- 9.4 Issues for the MNO
  - Operator brand building
  - Branded handsets
  - Barriers to fashion
- 9.5 Summary
10 SECONDARY HANDSETS
- 10.1 Fashion as a driver for secondary handsets
- 10.2 Technology issues
11 THE HANDSET OPPORTUNITY FOR FASHION AND BRANDS
- Market size
- 11.1 Lessons from the wrist watch market
  - Market size and companies
  - Market segmentation and pricing
- 11.2 Fashion handset market segmentation and pricing
- 11.3 What can fashion and brands deliver?
  - Design
  - Branding
  - Fashion forward styling
- 11.4 New market entrants - fashion firms and brands
  - Skills which can be leveraged in handsets
- 11.5 The drivers for new entrants
  - Revenue
  - Revenue case for ESCADA
  - Revenue case for Gucci
  - Access to new high volume market segment
  - Attractive margins
  - Commoditisation drives fashion margins
  - A new luxury goods item
  - Launch pad into technology market
- 11.6 The barriers to fashion and brand entrants
  - Operator resistance
  - Handset blocking
  - Possible solutions
  - Pricing
  - Handset-only retailers
  - Solutions
  - Design and manufacture
  - Volumes
  - Possible solutions
  - Distribution
  - Possible solutions
  - Phone connection and staff training
  - Possible solutions
  - After sales support
  - Possible solutions
  - Lack of technology kudos
  - Possible solutions
12 FASHION HANDSET EXAMPLES
- 12.1 Introduction
  - Ocean Observations
- 12.2 Diesel
  - The brand
  - Concept handset design
  - The design process
  - GUI Design
  - Iconography
  - Colours
  - Font
  - Distribution and pricing
- 12.3 Jaguar
  - The brand
  - Concept handset design
  - The design process
  - GUI Design
  - Iconography
  - Colours
  - Font
  - Distribution and pricing
  - The Jaguar Collection
13 FORECASTS
- Fashion handset forecast
- 13.1 Methodology
  - Definition: Fashion Handset
  - Market segmentation
  - Sources
- 13.2 Analysis
  - Handset shipment forecast
  - Watch market segmentation
- 13.3 Results
  - Market size
  - Regional breakdown
  - Market value
- 13.4 Summary
List of Figures
- Figure 1 - Breakdown of handset retail sales if fashion phone demand is satisfied: 2010
- Figure 2 - iPod sales growth: 2001 - 2004
- Figure 3 - Global handset shipment: 2003/2004
- Figure 4 - Global handset shipment forecast: 2002 - 2008
- Figure 5 - Summary of the handset retail experience under subsidy and no subsidy models
- Figure 6 - Operator/Handset vendor value-chain schematic: no subsidy
- Figure 7 - Operator/Handset vendor value-chain schematic: with subsidy
- Figure 8 - Operator/Handset vendor value-chain schematic: with subsidy and technology control
- Figure 9 - Cost of the Sony Ericsson s700i under various operator plans
- Figure 10 - The handset value-chain
- Figure 11 - Handset vendor market shares: 2002 - 2004
- Figure 12 - Breakdown of the mobile handset pyramid by device type: 2004
- Figure 13 - BOM estimates for the three handset types
- Figure 14 - The commoditized handset value-chain
- Figure 15 - EMS and ODM outsourced handset manufacture market share
- Figure 16 - Handset replacements as a percentage of total sales: 2004 - 2009
- Figure 17 - Advice on this season's fabrics from Promostyl
- Figure 18 - The diminishing ROI of handset advancements
- Figure 19 - The premium added by a fashion brand
- Figure 20 - The brand suitability test matrix
- Figure 21 - Relationship between exclusivity and overall market size
- Figure 22 - Example of Nokia's Series 40 UI
- Figure 23 - GUI similarity between Sony Ericsson and Siemens handsets
- Figure 24 - Vodafone's handset iconography
- Figure 25 - First evolution in 3's icon design
- Figure 26 - Second evolution in 3's icon design
- Figure 27 - Other services on 3 handsets with same styling as iconography
- Figure 28 - Operator ARPU growth: 2001 - 2007
- Figure 29 - Mobile service decision drivers for US consumers
- Figure 30 - Global mobile phone subscriber forecast: 2004 - 2009
- Figure 31 - Fashion handset brand matrix
- Figure 32 - Global handset shipment forecast: 2003 - 2009
- Figure 33 - Handset ASP erosion: 2000 - 2005
- Figure 34 - Global luxury goods product market share: 2003
- Figure 39 - Global handset shipment forecast: 2005 - 2010
- Figure 40 - Watch unit sales by market segment for selected regions: 2005
- Figure 41 - Handset fashion demand units by market segment: 2010
- Figure 42 - Regional breakdown of fashion handsets: 2010
- Figure 43 - Handset fashion sales breakdown: 2010
List of Tables
- Table 1 - Typical feature sets of voice, feature and smartphone devices
- Table 2 - Top 5 global brands by value
- Table 3 - Top 5 global handset brands by value
- Table 4 - Top 5 global fashion and luxury goods brands by value
- Table 5 - Summary of the Tier One vendors' handset fashion strategies
- Table 6 - How Nokia classifies its handset portfolio
- Table 7 - Average premium available for the four handset fashion strategies
- Table 8 - F1 team share of TV coverage: 2004
- Table 9 - Significant MNO brand changes since 2000
- Table 10 - Sales revenue of selected fashion/luxury watch brands: 2004
- Table 11 - Segmentation of the watch market
- Table 12 - Retail pricing for selected fashion watches
- Table 13 - Selected companies in the top-end watch market segments
- Table 14 - Market and pricing segments for handsets
- Table 15 - Handset retail margins
- Table 16 - Handset design and production management firms
- Table 17 - Market, pricing and purchase driver segments for watches
- Table 18 - Market, pricing and purchase driver segments for handsets
List of Images
- Image 1 - A boxed Siemens ESCADA SL65 handset
- Image 2 - Gucci mobile phone luxury lanyards
- Image 3 - Apple's iPod portable music player
- Image 4 - Nokia's Neo music phone
- Image 5 - Siemens' SF65 iPod clamshell look-a-like
- Image 6 - Siemens' SF65 [OPEN]
- Image 7 - The Burton Amp iPod jacket [1]
- Image 8 - Louis Vuitton, Gucci and Dunhill iPod cases
- Image 9 - The Burton Amp iPod jacket [2]
- Image 10 - Sony QUALIA 016 ultra-compact digital camera
- Image 11 - Sony QUALIA 006 SXRD TV and 007 Super Audio CD Player
- Image 12 - Nike Philips headphones, MP3 player and FM radio
- Image 13 - B&O's BeoVision 5 plasma TV and BeoSound 2 MP3 player
- Image 14 - HP Photosmart R607 designed by Gwen Stefani
- Image 15 - The Nokia Versace 7270
- Image 16 - The Jaguar concept handset
- Image 17 - The vanilla phone
- Image 18 - The feature phone
- Image 19 - The smart- phone
- Image 20 - A Kelly bag
- Image 21 - An Eames chair
- Image 22 - The Mini emblem
- Image 24 - The Nokia 8810, introduced in 1998
- Image 25 - The Nokia 8890
- Image 26 - The Nokia 8310
- Image 27 - The Nokia 8800
- Image 28 - The Nokia 8910i
- Image 29 - The Nokia 7250
- Image 30 - The colourway variety of Nokia's 7210 range
- Image 31 - Nokia 7270, 7260 and 7280
- Image 32 - The Nokia 7610
- Image 33 - Art-nouveau swooshes on the rear of the Nokia 7610
- Image 34 - Nokia Versace 7270, with Swarovski crystal lanyard
- Image 35 - The Motorola V70
- Image 36 - The Motorola V80
- Image 37 - Motorola's super-thin V3 RAZR
- Image 38 - Motorola handsets co-branded with Phat Farm
- Image 39 - Motorola's V600 with exterior designed by Vivienne Westwood (insert: photo of Westwood)
- Image 40 - Samsung's SGH-E720
- Image 41 - The Samsung A500
- Image 42 - Samsung's E315 with exterior designed by Anna Sui (insert: photo of Sui)
- Image 43 - Samsung's SPH-A680 with exterior designed by Diane Furstenberg (insert: photo of Furstenberg)
- Image 44 - The Siemens SL55
- Image 45 - The SL55: Mrs. Beckham's phone of choice
- Image 46 - The Siemens SL65
- Image 47 - A boxed Siemens ESCADA SL65 handset
- Image 48 - The Sony Ericsson T610
- Image 49 - The Sony Ericsson K700i
- Image 50 - The Sony Ericsson S700
- Image 51 - The Sony Ericsson V800
- Image 52 - Hilton, Lohan and Hawk with their diamante-encrusted Sidekick
- Image 53 - DBTel's diamond studded fashion handset range
- Image 54 - Xelibri 1: The Retro-Futuristic Classic
- Image 55 - Xelibri 2: The Alien Beauty
- Image 56 - Xelibri 3: The Mini-Pendant
- Image 57 - Xelibri 4: The Dark Hero
- Image 58 - Xelibri 5
- Image 59 - Xelibri 6
- Image 60 - Xelibri 7
- Image 61 - Xelibri 8
- Image 62 - The ESCADA experience
- Image 63 - The Siemens ESCADA SL55
- Image 64 - The Siemens ESCADA SL65: 'Diamonds and Diamantes'
- Image 65 - The Siemens ESCADA SL65: Rockin' Rio
- Image 66 - Audemars Piaget luxury watches
- Image 67 - The Vertu Signature polished yellow gold
- Image 68 - The Vertu Signature platinum
- Image 69 - The Vertu Ascent Red
- Image 70 - The Vertu Ascent Black
- Image 71 - Nokia's 7260 with uninspiring UI
- Image 72 - Formula 1 iconography on Vodafone's Sharp 902 Ferrari handset
- Image 73 - The Vodafone Ferrari Sharp 902 handset
- Image 74 - The Vodafone Ferrari Sharp GX-25 with box
- Image 75 - Ferrari iconography on the Sharp 902 Ferrari handset
- Image 76 - The Vodafone brand on chaises, shields and Schumacher
- Image 77 - Diesel handset concept design: aspect 1
- Image 78 - Diesel handset concept design: aspect 2
- Image 79 - Diesel handset concept design: aspect 3
- Image 80 - Diesel handset concept design: aspect 4 & 5
- Image 81 - Diesel handset concept user interface
- Image 82 - Jaguar's crafted and refined interiors
- Image 83 - Jaguar concept handset: aspect 1
- Image 84 - Jaguar concept handset design: aspects 2, 3 & 4
- Image 85 - Jaguar concept handset user interface design
- Image 86 - Jaguar's merchandise collection
- Image 87 - Jaguar concept handset design: colour samples
List of Promotions
- Promotion 1 - We are all the same; your iPod is unique
- Promotion 2 - Vamping Canon's IXUS i5
- Promotion 3 - Images of fun and youth associated with the Nokia 3220
- Promotion 4 - The Nokia 7260, 7270 and 7280 appearing in a premium fashion magazine
- Promotion 5 - Flash promotion for the Nokia 7260, 7270 and 7280 appearing on the Nokia website
- Promotion 6 - Motorola's 'Moto' campaign for the V70
- Promotion 7 - 'DigitALL' from Samsung - Let it move you
- Promotion 8 - The SL55 in the hands of those who are fashion aware
- Promotion 9 - How do you measure style on the S65?
- Promotion 10 - Aguilera appears at the London launch of Xelibri
- Promotion 11 - The utterly bizarre Xelibri 'Dancing is illegal' television advertisement
- Promotion 12 - Xelibri targeted as street fashion
- Promotion 13 - Graff diamond jewellery
- Promotion 14 - Diesel: WORK HARD
- Promotion 15 - 'Successful Living' according to Diesel
- Promotion 16 - Jaguar's combination of style and contemporary luxury