A trip inside the real CESJanuary 13, 2014: 11:15 AM ET
Forget the product announcements and press events. For a true taste of consumer technology's biggest annual gathering, we hit the show floor and shadow vendors in action.
By Alex Halperin
FORTUNE -- Sean Simone is looking for attention at the Consumer Electronics Show.
The scruffy, 24-year-old tech executive is standing in a distant corner of a humming hall packed with technologists, marketers, and journalists. Behind him is a sign for his company, the Baton Rouge, La.-based startup Yellow Jacket.
He's wearing what has become a uniform for Silicon Valley types: sport jacket, t-shirt, sneakers. He's holding what looks like an iPhone in his hand. Periodically, it emits a horrifying pttzzbbbpptptt! that pierces the din in the hall.
Passersby stop and approach him, wondering where the burst of white noise came from. It's Simone's iPhone -- or rather, the case around it that turns the unassuming device into a stun gun. The crackle came from a momentary bolt of electric current twitching between two metal spikes protruding from the top of his case. It's so terrifying that Simone believably says the noise itself is a deterrent to miscreants set on "Apple picking." As Simone parries people's questions -- the shock, he promises, is "well below the lethal threshold;" yes, the product is legal in most U.S. states -- he flicks it on, the blue-white fever line igniting between the two prongs. So reveals the newest product from this young, six-person company, perhaps the most buzzworthy at the show in all senses of the word, and signals its successful bid for attention in the Las Vegas Convention Center's oceanic North Hall.
It's no small feat. Each year, several thousand companies descend upon Las Vegas in January with new products to capture the attention of their industry peers. Scores, if not hundreds, are there to claw out a niche in the smartphone accessory space. In a hangar-like space where multinational companies vie to outdo each other with "booths" the size of mansions, many more companies erect modest displays at great cost, with the hope of ginning up business.
Among technology writers, it has become a cliché to say that CES is a waste of time. Some of the industry's most notable companies, like Apple (AAPL) and Amazon (AMZN), don't even show. The ones that do, like Samsung and Sony (SNE), rarely reveal anything Earth-shattering. And with so many companies investing in their digital marketing and outreach efforts -- streaming keynotes on the web; unleashing press releases at a predetermined day and time -- it leaves precious little to justify a reporting trip to Las Vegas.
But the real CES -- the one that happens in the aisles of the convention center -- is something else. For the many companies like Simone's that aren't household names, CES is a place to connect with distributors, investors and the occasional journalist. It is a place to be seen for the first time. It is a place that is more hope than hype.
The iPhone case market is "very, very saturated," Jeff Sasaki says. He's the founder of San Carlos, Calif.-based Element Case Inc., which is showing off a line of phone cases made from "military-spec" gun parts, priced between $60 and $160. Another family of cases, made from polycarbonate and priced between $50 and $200, promises impact resistance and was developed in partnership with Ducati, the Italian motorcycle company. Last year, Sasaki's first trip to CES led to placing its products in a Polish chain of Apple resellers. "We never would have met them without taking the risk and coming," Sasaki says.
Portland, Ore.-based Recover Inc. sells $38 iPhone cases laser-cut from wood veneers including walnut, bamboo, and rosewood. Taylor Murray, the company's 27-year old president, says CES was a way for him to network and learn more about growing a business. His company "didn't come here to write a bunch of orders," he says.
But the real saturation is at the low end of the phone accessory market, where competing companies don't have premium materials or crippling force to distinguish their products. It's largely a price game. At CES, that means that buyers are at the top of the trade fair food chain. The bigger the company they represent, the better.
Unlike Simone, who came to CES as a vendor, my brother-in-law Noah Rosen came to CES as a buyer for his family's business, National Wholesale Liquidators, a discount retail chain with about a dozen stores in the Northeast. National's stores, with their cramped aisles and abundance of product, look like Wal-Marts would if they had been dreamed up in an Eastern European shtetl. National doesn't sell high-end smartphones, so accessories like chargers, cords, and cases are of the most interest. Rosen moves a lot of smartphone cases.
Intrigued by the negotiations that go on between vendors on the show floor at CES, I shadowed him for a morning. It provided a look at a part of the show rarely mentioned in press coverage.
It was fascinating. At one booth, he liked a clutch-style iPhone case with a kickstand that he said would sell well with women. Another "heavy duty" model with tread texture and a kickstand might be popular with teenage boys, he said. He mulled over buying them from the Chinese seller in bulk for about $1.20 each. After shipping, packaging and other fees, he could sell them for $5 or $6. He likes to make "50 points" on imported items, he said.
At another booth, Rosen got excited about a more novel product: iPad stands. The simple models look much like the hardware that classical musicians use to hold their sheet music. Vendors suggest keeping an iPad stand next to a desk, a bed, or a recliner. ChenSource, a Taiwanese company, had one on display for $6. Rosen thought he could sell it for $19.99 -- though he noted that the stand's stem, perhaps two inches in circumference, was unwieldy and likely added to its cost.
A company named Levo offered iPad stands with arms that could be adjusted horizontally and vertically, but the expected retail price was $99, far higher than Rosen wanted to go. Levo's senior vice president of sales, Jeff Magsitza, sensed Rosen's hesitation. "It's not the price point," he argued. "People will buy." He also cautioned that cheaper stands could lead to liability issues.
Rosen remained unconvinced.
Rosen walked the floor of the convention center, stopping by booth tables and schmoozing with exhibitors. He was also interested in hot, new product categories like wearable tech -- but only on his own terms.
"What's your cheapest watch that does e-mail and text messaging?" Rosen asked at a Chinese company's modest booth. An eager, young saleswoman presented him with a watch that syncs with a smartphone and can display e-mails, tweets, and other messages. She said it would cost him $35 each if he bought 500, a price that, if he was interested, Rosen would consider a starting point for negotiations.
Samsung sells a smartwatch that retails for $300. Rosen wondered if he could sell this one for $60.
He took the watch, which had a rubber band, and brought it to his nose. He inhaled deeply. It's a fast-and-dirty quality test he he likes to do on for Chinese products to see if they're molting. Poorly manufactured products give off an aroma, he said. This watch "smells a little poison-y, a little toxic," he said.
He asked the saleswoman if her company had customers in the U.S. She admitted that they did not. "I can't be your guinea pig," he said, shaking his head. Then the watch's screen went dark, its battery expended.
Rosen was more captivated by Super, a Chinese company offering a variety of USB and HDMI cables. He seemed particularly infatuated with a line of USB cables made in bright colors with a textured coating. "Very nice cable," he said. He told the salesman that the packaging should have a window so that people could feel the coating.
Not far from the colossal Samsung booth, Rosen stopped by an importer and wholesaler named QFX Inc. The Vernon, Calif.-based company sells headphones that resemble models from the popular Beats by Dr. Dre line and colorful earbuds that seem to pay homage to the trendy Skullcandy brand. (Lest one miss the reference, they have skull and crossbones printed on them.) The company also sells mutant boomboxes with CD and cassette players and USB and SD card inputs, as well as standalone speakers, some almost as big as refrigerators, that could rock a block party. Rosen knows he can sell QFX's basics like clock radios and flashlight radio combos, which he calls a "lifetime staple" product.
Rosen knows the man behind the table, Joel Abrams, QFX's Director of Sales & Marketing for North America, from previous shows. It doesn't take them long to get to it. Rosen wants QFX to name a wholesale value at which it would fill his stores' orders without charging for shipping. They seemed to settle on $3,600. Across National's stores and over a year's time, a deal like this would be worth well into six figures.
The pair walked around the displays, discussing the products that Rosen wanted. He liked a Bluetooth-enabled stereo system that, with a matte finish, looked more stylish than the other merchandise. Rosen thought he should be buying it for $18.50.
Then Abrams surprised Rosen: He might be able to go even lower, to $18, or maybe even $17.50.
"Please don't build advertising into the price," Rosen said.
He meant that he wanted QFX to kick in a bit more for his circulars. When Abrams started in, Rosen said that QFX would only have to pay an advertising fee for the units National sells. In about 15 minutes, the two men had hammered out a framework for doing business.
Back at the Yellow Jacket booth, Simone says that Taser -- the well-known company that is as synonymous with stun guns as Band-Aid is with adhesive bandages -- stopped by.
"I was like, man, I've been waiting two years for you," he says, chuckling.
Simone maintains that his shocking iPhone case is intended for "soccer moms" and "nurses" -- that is, regular people who are more likely to buy pepper spray than carry a firearm. During another demonstration, he explained to onlookers that the forthcoming model for iPhone 5/5S models would allow for the stun gun part to detach, assuaging concerns that consumers don't always want to walk around with a weapon in their pocket.
"I live in a really dodgy neighborhood," one woman from the San Francisco Bay Area says. A stun gun iPhone case could make her feel safer. "Just don't use it on Ken," another person replies.
Simone says he has received a lot of interest from companies outside the U.S., including those based in the Middle East, Africa, and Eastern Europe. At the upcoming SHOT trade show -- also in Las Vegas, and put on by the National Shooting Sports Foundation, the trade association for the U.S. firearms industry -- he'll be more interested in positioning his product as a weapon, to attract interest from law enforcement officials.
Here at CES, Simone doesn't want to stick out quite like that. "We want to be categorized as a smartphone accessory," he says.