Apple Fashion Accessories A Boon for Small Businesses

NEW YORK ( TheStreet) - The cottage industry of making accessories for the Apple ( AAPL) iPhone and iPad is exploding. From monogrammed iPhone protective cases to messenger bags designed specifically for tablets, small businesses are using consumers' obsession with mobile devices to come up with unique - though not necessarily inexpensive - accessories.

According to ABI Research, the overall handset and tablet accessory market topped $41 billion in 2012. Apple iPad and iPhone accessories represented between $5 billion and $6 billion, or roughly 14% of the market.

"It's a large portion of the accessory market," senior analyst Michael Morgan says.

Broken down by device, consumers spent roughly $37 on accessories per smartphone in 2012, ABI Research says. For tablets, consumers spent between $40 and $50 on accessories per device.

Apple's iPhone "really did start the protective case trend," Morgan says, adding that approximately 75% of users also purchase cases for their phones.

Small retailers are looking to make a name for themselves in this ever-burgeoning market.

"Just go on Etsy. It's the new craft. Instead of making pot holders you're making smartphone cases," Morgan says.

"The good ones tend to have something that's differentiated and defensible. If you make a case and you put jewels on it, there's nothing to prevent Joe from down the street from doing the same thing. Let's say you have access to a proprietary material," that would limit design copying, Morgan says.

Some key tips stand out for attacking the aftermarket accessory industry:

1. First and foremost, make sure your product is unique yet functional.

Stash Bags' owner and designer Mari Forssell says she tries to not pay too much attention to what the competition is doing and focuses on her own innovative designs.

Her products include smartphone cases, Amazon ( AMZN) Kindle, Barnes and Noble ( BKS) Nook cases, iPad and iPad Mini cases, MacBook Air cases, camera bags and laptop bags.

Although she does follow tech blogs and other tech-related news for latest gadgets and market information, the products are a result of Forssell's entrepreneurial spirit and her Finnish background.

"Stash specializes in handmade laptop messenger bags and camera bags with a vintage style combined with Scandinavian simplicity, using vintage fabrics whenever possible. All products are handmade from start to finish in the Stash studio in Dallas using quality materials and attention to detail to ensure a durable and stylish Stash bag," Forssell says.

Forssell credits social media sites including Facebook ( FB) and pinning Web site, Pinterest, as a "great source of new customers." Most of her products are sold on Etsy.

The industry is "incredibly competitive," says Bryan Hynecek, vice president of design at Speck, a protective case maker for smartphones and other gadgets.

Speck products became extremely popular because of their form and function -- and wide range of colors available.

The cases are sold in both big-box retailers and carrier stores, as well as directly.

"When we started out we didn't even think about marketing, we just focused on making a really good product and hoped that people would like it. And it worked out for us and it sort of built up around that. We have a pretty good following that really connect to our product," Hynecek says.

While Speck has been around since 2004, Hynecek says it was spread too thin across a number of accessories. About five or six years ago (which correlates with the launch of the first iPhone), the company honed its product line to only making cases.

2. Find a distribution partner.

If you really want to go big with your design, finding a distribution partner is key, but that will also be the biggest challenge. While many small retailers can have some success selling on Web sites like Etsy or in a boutique store, the reality is securing distribution partnerships that will ensure your product beats the competition, Morgan says.

Distribution partnerships is what "keeps a lot of big players in place these days ... not unique or special cases," he says. "They're big businesses and they can work like a big business. Sometimes 40% of the margin could go to shelving and logistics."

Speck's Hynecek says the key to getting on retailers' shelves is "a lot of relationship work."

"We started with a few products with each of those stores and the better you do, the more time the buyers show you ... and the more products you can bring" into stores, he says. "It's really a relationship-building experience."

Sam Odunsi, owner of PHD Bookbinding, (which sits on the campus of University of Texas but is not formally affiliated with it), launched his cases for tablets, Casemodo, earlier this month.

PHD Bookbinding is a leading online bindery for library-quality hardcover binding and personal academic publishing. The idea to use the company's skills to produce covers for tablets came about after Odunsi saw other competitors entering the market - and doing it wrong.

"We thought this was something unique that we could add to turn it into a full-fledged fashion accessory," Odunsi says. "Other players don't do custom binding and when they do it's very cheap stuff. Ours is good enough to complement any class of handbag or wallet or any business accessory. It's not cheaply made. This is a very durable product and it's a high-quality product."

But it didn't come without challenges. Odunsi says while the product itself was ready to go to market a year ago, the company wasn't satisfied with its online ordering system, which needed to be revamped to allow for essentially custom building of cases.

"We had to develop a lot of things in house," says Odunsi, who also plans to launch an iPhone case.

Going forward, Odunsi has bigger plans for his product. While he plans to continue to sell direct to retail, he sees an opportunity in private labeling and is looking to market the cases to universities, businesses and other retailers for resale.

"We see opportunity everywhere for this because of the uniqueness of the product. We can print any design on it that can match anything. We do have some standard designs that go well with the leather products," he says. "We are just starting out to try and find out the extent of how far we can take this."

3. Create a strong brand.

Online boutique Emily Ley, based in Tampa, specializes in office products and paper goods for women. Owner and creative director Emily Ley says adding monogrammed iPhone cases to her product line was a natural extension of her brand.

Monograms represent "a beautiful Southern tradition" that celebrates family, Ley says, and customers are fiercely proud of their individualized cases, making for great brand awareness and word-of-mouth business.

"Where big-box brands that were simply 'selling products' used to thrive, boutique brands with authentic brand messaging and amazing brand loyalty are becoming key players," says Ley, who sells her merchandise on Etsy.

Ley says small accessory retailers also need to give great customer service to keep loyal customers.

"Consumers are buying 'the why' more than 'the what'. They want to not only believe in your product, they want to believe in you and what you stand for," Ley adds. "We pay 100% attention to developing brand loyalty, interacting with our consumers and delivering a remarkable client experience. By investing our time and energies into our customers, we grow our base and develop relationships with them. That kind of experience is viral."

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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