Are Fashion Phones a Fad?

by Avi Greengart,
Principal Analyst, Mobile Devices
February 7, 2006

Valentine’s Day will be here soon, and with it comes the annual surge in purchases of flowers, chocolates, and …pink Motorola RAZR phones? Yes, just in time for Valentine’s Day, Cingular, Verizon Wireless, and T-Mobile are all carrying the iconic Motorola clamshell in slightly different hues of pink (though T-Mobile calls the color of its hot pink RAZR V3 “magenta”).

Eighteen months ago, phones in the U.S. were black or silver, bar or clamshell, and vendors hyped imaging capabilities or focused on the next big thing, music and video playback. Today, there are three different pink RAZRs, round PEBLs, slim Samsung sliders, and a Special Edition Sidekick II from noted tattoo artist Mr. Cartoon. Nokia is pushing a $900 stainless steel slider with no standout features to speak of, but notes in the press release that it contains “specially reinforced glass used in luxury timepieces” and the slider uses “a bi-stable spring mechanism and stainless steel ball bearings, like those used in high-performance automobiles.” What is going on here?

Limited edition devices like the Sidekick II have been around since Claudia Schiffer lent her name to a blue Palm Vx. What has changed is the culture: relatively few people had PDAs, but nearly everyone (literally) has a cellular phone. The phone is the most personal of personal technology – it goes everywhere and is more amenable to emotional associations because its primary function is to help people connect and communicate. Therefore, consumers are more likely to doll up their phones with rhinestones, or spend more to buy a handset that is especially stylish.

However, in the U.S., carrier subsidies and postpaid contracts drive consumer pricing expectations: basic voice phones are free with a contract. Design has always been a critical part of a mobile handset’s success, and Nokia has a long history of building phones specifically as niche halo products for the European market. More recently, Samsung saw mid-tier cameraphone success by shaving off the external antenna and tapering the clamshell case. But only Motorola’s RAZR proved that U.S. consumers are willing to pay more – a lot more – for a phone that looks and feels good, even without much in the way of features. The RAZR’s design is not just slick, it is also functional, providing great pantability (“pantability, adj. – the ability to fit in a pair of pants without making the wearer feel like they are lugging around a piece of coal”).

Thus, the RAZR created a new fashion category, and Cingular’s price cuts have fueled its growth. With Cingular’s exclusive on the Motorola RAZR now expired, rivals Verizon Wireless and T-Mobile now offer the iconic product. Cingular responded by initiating a price war, bringing the former $499 product down to $99 with a two year contract (it’s back up to $149 for now). Sprint has countered with a super-thin clamshell of its own, the MM-A900 from Samsung, which is likely to steal sales from other Sprint Power Vision phones, but its casework is not as attractive as the RAZR. Samsung also has a stunning super-thin slider at T-Mobile (the SGH-t809) and an odd joint effort with Bang & Olufsen called the Serene, which is not likely to make it to the U.S. LG has its own RAZR clone in the works. Nokia not only has a high end fashion phone, the 8801, for sale through Neiman Marcus in the U.S. for $899, but a three-device fashion line sold primarily overseas that is refreshed annually.

Vendors are also focusing on tactile aspects of design, using soft touch plastics, combinations of glossy and matte finishes, or open/close mechanisms that are rather addictive. To stay one step ahead, Motorola is launching other feature-poor/style-rich devices in thin and rounded designs at premium prices, and feature-rich versions of the RAZR for both GSM and CDMA.

On the heels of the RAZR, far from being a fad, “fashion” phones will grow into a significant category in the first half of 2006. For now, these are premium priced devices (other than the RAZR, where Cingular has started a price war). As the market gets flooded with design-first handsets, the initial premium prices will have to come down on many models, bringing fashion phones beyond a category, and simply another aspect to consider when purchasing any phone. By the end of 2006, most designs commanding a premium will seep solidly into the mid-tier category after launch, even as unique versions of these designs with higher quality materials or enhanced technology will still be produced at somewhat higher prices.

Thus, the fashion phone is headed in two directions: down and up. Fashion will head down into even the most basic phones – once the tooling is paid for, design is a competitive advantage, and products with a clear design motif or uniquely valuable form factor stand out from alternatives on the shelf. The high end luxury space was pioneered by Nokia with its super-luxury Vertu brand, which was a bit ahead of its time. However, with mobile phones no longer a new technology product but a modern staple, the desire for exclusivity will enable a new, luxury handset category. Consumers looking to differentiate themselves can expect to find more options in the $500 - $1,500 range to complement their designer clothes, accessories, and luxury automobiles.

Free Advisory Report - Just a Pretty Face: What the RAZR Gets Wrong

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