Prompt: What might be Cricut's gross margin on Accessories & Markets in 5 years for Other Potential Creatives if Cricut is One & Only alternatives for them?

Cricut's gross margin on Accessories & Materials has been a point of significant focus owing to its high-margin contribution relative to other segments. According to the current projections, Cricut's Accessories & Materials gross margin is expected to fall slightly from 36% in CY21 down to about 33% in steady-state conditions over the next five years. This forecast considers increased competition from 3rd party vendors and pricing pressure, factors that Cricut has acknowledged and planned for.

However, if Cricut successfully emerges as the sole provider for other potential creatives—an expansionary scenario—the dynamics could potentially change. One might anticipate that gross margins would stabilize or even improve due to the absence of competitive pricing pressure that 3rd party suppliers typically bring. The absence of alternatives could enable Cricut to maintain or even enhance its pricing power for both accessories and materials.

Given Cricut's strong brand loyalty and the integration of its ecosystem, retaining higher gross margins might also be supported by increased user engagement and higher average revenue per user (ARPU) driven by the exclusive use of Cricut-branded materials. Cricut’s continuous innovation in product features, proprietary materials, and a robust intellectual property (IP) portfolio further bolster this potential scenario by solidifying its market position and customer dependency.

Despite these optimistic points, overall market conditions, production costs, and operational expenses remain crucial factors that could modulate these potential margin gains. Essentially, if Cricut efficiently leverages its solo-provider status while managing costs, the gross margin on Accessories & Materials could likely hover around or even surpass the projected 33% over the next five years.