Navigation and GPS devices
Garmin's (GRMN - Get Report) been shifting navigation features and maps over to smartphone apps, spreading out its services to personal training equipment and fish finders and sneaking in other offerings such as apps that monitor a car's horsepower and fuel efficiency. TomTom's chief executive, Harold Goddijn, recently told CNBC that his company isn't diversifying fast enough into subscription services, side deals with automakers or its own spread of apps.
If these companies are looking at a world without their standalone navigation devices, why do U.S. consumers still buy them? Part of it is that 60% of the U.S. still doesn't have a smartphone and needs a standalone device for navigation and GPS. The rest who still buy GPS devices are a bit fickle, frugal and just a touch lazy.
"You can always leave it in your car," Entner says of the devices. "You're changing your phone more often than the GPS device, and I now have three or four attachment for different phones so I can use the phone as a GPS device, which is a major annoyance when each of them is $30 to $40."Other countries don't face this question because they don't have such high-class problems. In a white paper Entner wrote for Mobile Future, he notes that the 21-month handset cycle in the U.S. is the fastest in the world. The average European waits between three to four years before changing phones, while consumers in developing countries can wait as many as eight to 10. "For GPS, we're looking at a global market, and that's what's kept GPS devices in demand," Entner says. "For the U.S. the phone is almost a disposable fashion item and for people in India it's a status symbol like a car -- people in the U.S. change cars more often than people in other countries change phones." Of course, the U.S. wouldn't be able to cycle to the Next Big Phone so quickly if its carriers weren't picking up a big part of the tab. While carrier contracts in the U.S. can eat up more than 60% of an iPhone's upfront costs, buyers elsewhere often have to part with the full price. Some Americans may just keep a cheap GPS around to avoid leaving their $200-plus investment in the car or to spare themselves from having to switch formats, but buyers in other countries already know a cheap feature phone and an entry-level Garmin can be a lot more cost effective than an all-inclusive smartphone -- especially at full price. "How many people would buy the iPhone if it was $600?" Entner says. "We know the answer to that, because the first iPhone was $400 and not a lot of people bought them."