Luxury Handsets: Fashion Goes Mobile

Normal cell phones have lost their snob appeal. So fashion houses such as Armani and Prada are filling the gap with ultra-snooty designs

By Matt Mabe

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A boutique on the Champs-Élysées in Paris carries a mélange of luxury-brand items from such fashion designers as Prada and Giorgio Armani. But unlike in most luxury retail stores, you won't find towering ceilings, track lighting, or crystal display cases for the items. The designer products sold in this small shop are fashion phones.

Handsets are no longer just a tool for communicating in the modern world. They have become status-defining lifestyle products. In recent years, leading handset manufacturers, such as Nokia (NOK), Samsung, and LG Electronics, have paired up with such prominent, high-end labels as Prada, Armani, and Ferrari to capitalize on the intersection between their respective customer bases. By turning phones into fashion accessories akin to handbags or sunglasses, each industry is likely to boost its brand equity and set new design trends, according to a study by market research firm ABI Research.

The products now being developed by these telecom-fashion partnerships are far more sophisticated than those of a few years ago. As the market develops, fashion houses are playing a greater role than ever in specifying features and designing the look of the handsets that carry their names. Some are even eschewing relationships with established phone makers and developing their own products, which are manufactured under contract by specialty producers.

Trinkets for Millionaires

ABI Research reckons that a niche business whose sales measured just $3.4 billion in 2006 could grow to $11 billion by next year and top $43 billion in 2013. "This is the future," says Kevin Burden, director of the Mobile Devices Division at ABI Research.

The rise of brand-name fashion phones builds on several trends. In recent years, a handful of small luxury makers, such as GoldVish, Mobiado, and Bellperre have released ultra-expensive, hand-crafted phones sometimes costing up to hundreds of thousands of dollars (BusinessWeek.com, 12/21/07). Constructed of precious metals, studded with diamonds and other jewels, and wrapped in exotic leathers, they have struck a chord among the small group of people who can afford them—namely, millionaires and celebrities. Nokia's luxury Vertu subsidiary has helped lead this trend (BusinessWeek.com, 12/21/07), though its phones tend to cost only tens of thousands.

At the other end of the market, fierce competition among major handset manufacturers has driven prices so low that consumers have become accustomed to paying little or nothing for a phone included with a service contract. The ubiquity of handsets in everyday life has erased their former value as status symbols.

Musts for Status Seekers

Now, some mass-market consumers seem ready to reclaim that lost status by buying phones dressed up with a fashion imprimatur. "Consumers are looking for 'masstige,'" says ABI's Burden, using a term that describes the migration of luxury brands into the consumer market. At the same time, the constant struggle to elbow out handset competitors has led manufacturers to search for new selling propositions.