“Small is big” – Accessories and add-ons pick up where big-ticket products leave off

In a recent query of The NPD Group’s team of Industry Experts, a common theme emerged – when sales of certain big-ticket items are on the down-turn, money can still be made in the accessories and add-ons side of the retail continuum.

Stephen Baker
NPD Techworld Director of Industry Analysis

In times of rapid price deflation and increased competition for sales of big ticket items, the opportunity to sell add-ons, accessories and consumables should never go unexplored. As they often fly below the consumer’s price radar, these lower ticket items almost always deliver higher margins than the primary sale. It should also be remembered that the little accessories, add-ons and consumables often are what makes the product usable, add tremendously to the enjoyment of the product or are really the end manifestation of the function of the product. From the consumer’s standpoint, these products are the necessary evil of many big ticket purchases. They often appear to be too expensive relative to the primary device, but they are almost absolutely essential from a usage, comfort or product satisfaction standpoint.

We can point out myriad products for which accessories are a key piece of the overall category. In fact whole new product segments often arise out of the need to accessorize. Some examples of new segments that have done just that include the following:

• PDA accessories, which include everything from specialized keyboards to cases, styluses and chargers.
• Cellular phones accessories include handsets, extra chargers, extra batteries, cases, clips and so on, which can often exceed the price of the phone itself.
• The Apple iPod has spawned a whole new class of accessories -- from armbands to FM transmitters, matching colored cases to cables – that are also designed specifically around that one product.

Consumers understand this relationship but, at least within consumer technology, are often unwillingly to make the trade-offs that come with this type of a product sale. How many times have customers complained when the cost of the optical cable to connect the DVD player is more than the player cost? Then again consumers sometimes don’t recognize the actual pricing paradigm for the retailer: They criticize the cost of ink cartridges, but they have no idea that the cost of printers is kept purposely low to off-set the cost of ink. Despite this seeming dichotomy consumers continue to snap up accessories and the market to supply them will continue to grow.

Harry Balzer
NPD Foodworld Vice President

While occasionally food marketers have increased sales by offering “mini” versions of their well-known brands, the long-term trend has been just the opposite: Consumers have been used to getting more food or drink for the money, as in larger portion sizes. But given the current media-led discussion about the obesity epidemic in this country, the food industry is under tremendous pressure to try to make “small” a marketable attribute.

A number of companies have stated intentions to downsize portion sizes as a way of addressing the rise in obesity, but it remains to be seen if consumers will follow this lead. Many in the industry remain skeptical. The NPD Group has been tracking consumer satisfaction at all the major restaurant chains for the past couple of years. Without divulging confidential information, the chain that always receives one of the highest customer satisfaction ratings is also the chain best known for large portion sizes. Will the American consumer really start to want less? If you listen to what consumers say, the answer is a resounding, “yes.” If you watch how Americans eat, the answer is an incredulous, “no!” Make no mistake: Americans generally rate a restaurant based on how much food they get for their buck.

Can food marketers really make “small” a big trend? There are only two ways to change consumer behavior over the long term. Is it a good deal, or is it easier to obtain? Can “small” foods be made to look like a good deal or easier to eat?

Christina Charasse
NPD Funworld Industry Expert

In the toy industry, selling in a big-ticket gift item and then creating add-on business with smaller, less expensive accessories is a tried and tested success formula many manufacturers have relied on over the years. But it doesn’t simply make good business sense, it also makes toy buyers feel good about their purchase: Unlike a toy a kid plays with for a few days or weeks and then loses interest forever, accessories can keep a toy fresh for months or years, add an infinite amount of play value, and allow the toy to “grow” with the child.

We have seen this principle at work in one of the recent years’ most successful toys, Leapfrog’s LeapPad system, where an ever-growing range of LeapPad Books ensures that once a child owns a LeapPad, there is always new content as she plays, acquires new knowledge or skills, and looks for new challenges. It has also ensured the manufacturer’s product has stayed on the top seller lists year after year.

Other prime examples are found in so-called “system toys,” like Lego’s various play themes. These sets offer accessory items of various sizes that complement a central gift set, but have play value of their own.