While there is around 10% CAGR in many markets, competition is fierce in the 20 - 500 USD market segment and openly competing with the big sharks will be nearly impossible. the beat's phenomenon wont be repeatable. You need to find a niche and design products towards this.
I agree with this, and I would also caution you against taking market-level CAGR numbers as being applicable to your business in particular. Apple, Sony and Bose have been introducing higher and higher-priced versions of existing models for years now, and AFAIK they probably still have very disproportionate market share among those 3. So, you could see growth comparable to that just from line refreshes among the biggest names.
IIRC ~80% of relevant Amazon search traffic was going to those brands plus Beats a few years ago.
What that meant for names other than those 4 was there was actually never any real opportunity to steal that market share. People would show up to Amazon, type in "Bose headphones", buy a pair of Bose headphones, and exit the market for the next 2-5 years. To change that decision-making process, we would have needed to advertise on a level comparable with Bose before they showed up at Amazon or Google to start shopping. Needless to say, their monthly ad budgets would put our annual revenue to shame, so our true actual addressable market was maybe 20% of what you'd think by reading market sizing data from industry groups, or really less, since we only sold online and many headphone sales (in the mainstream) are still in-person at Best Buy, etc.
Despite the massive household penetration of headphones in general, and the massive annual revenue in the segment, I once calculated that on any given day, there were much fewer than 100 people we could actually sell a pair of >$200 over-ear wireless headphones to online in the US. This was years ago, but it's a long way of sharing my opinion that a straight reading of high-level market data tends to lead to massive over-estimates of your own sales.
If you enjoy rude awakenings, there are many in store for you in the exciting world of consumer audio.
Finding a niche is a necessity, just be sure it's a good one!
Competition is more than fierce in this market, I would say. You see the MSRP and compare that to known COGS and logistics costs, and see a difficult fight, perhaps. But IMO surmounting the simple cost advantage is the easy part...
6-7 years ago, if you ran the numbers on what certain Chinese brands must have been spending on ads and shipping (things we paid the same amount for on Amazon) it seemed like it was numerically impossible that they made any margin at all. I am not sure why they did it, but I'm not exaggerating, even if the headphones cost $2 to produce and ship to the US, the margins would have been razor-thin or negative.
Anyway, like I've said, it can be done, but you should do everything you can to avoid going into direct competition with people who own headphone factories and sell directly to consumers. Find some way to sidestep that. Even if it's simply better, differentiated branding, make sure nobody will look at your product and see a more expensive version of your competitors'.
In general if you know (factually, not just personal intuition) why a given group of people will prefer your product over the next best alternative, AND you know how they will find out about your product, AND you know you can reach (more than) enough of those people to stay afloat, you may have a business on your hands. This isn't just in audio, but in general.
Also, this might go without saying, but get honest feedback from people in your target market (true strangers, not friends or even acquaintances) before spending real money on anything. If people aren't excited about your stuff, better to find out while they are still concepts and renderings and you have a chance to change course.
PM headed your way.
