Input Devices: Growing Better Than PCs

The input devices business is experiencing growth rates, which are
slightly more than that of PCs. This can be largely attributed to opening up of
the upgrade market in the country. With customers becoming more feature and
aesthetic-conscious, transition from corded to cordless is also becoming
prominent. While margins remain as trivial as before, partners hope that with an
expected 15% growth this fiscal, they would be able to earn decently.

Input devices are fast-moving items, given the fact that most buyers simply
replace it instead of repairing when it is not functioning optimally. Though
margins are typically low in this business, volumes are very high.

According to a recent study by MAIT, in the first half of FY 2002-03, as many
as 9.75 lakh units of keyboards got sold, recording a unit growth of about 16%
over the previous half-year period (H2, 2001-02). While MAIT did not specify any
data on mice business, it is expected to be almost similar to those of
keyboards.

And
with buyers showing an increasing inclination to shift from corded to cordless
mice, there is a huge upgrade market that is also opening up. Says Sunil Sharma,
MD, Kobian India, "Market expectations are changing. Customers want better
feature-rich products which should look good aesthetically too."

According to R Manikandan, AGM, LG India, the market for input devices
follows the PC market trend. "There also exists a huge replacement market
for mice and keyboard, which I believe would be about 25% of the total
market," says he.

While vendors expect business in this segment to grow by 40%, partners are
gunning for a more achievable target of 15%.

PLAYING FIELD FOR ALL

Despite the fact that a large number of brands jostle in the input devices
space for better marketshares, evidently there is more than enough playing field
for each of these brands owing to a huge demand in terms of volume. Says Atul
Mehta, MD, Compuage Infocom, "The market for keyboard and mice should be at
over Rs 3 crore per month for each of them."

	"Logitech will grow at 15% in FY 2003-04, because besides first-time sales, there is also a good upgrade market in the country"
Sanjeev Shah, Country Manager, India Liasion Office, Logitech Far East

Rajeev Jain, Assistant Manager, Priya Ltd explains that the market for the
mice and keyboard is a little bigger than the desktop market. This is because
the two products are sold along with the desktop and some upgrades also take
place over and above this.

According to Ashish Aggarwal, Director, Trifin Technologies the market is
growing at 50% revenue-wise on quarterly basis.

"Market expectations are changing and customers want better feature-rich products which should look good aesthetically"
Sunil Sharma, MD, Kobian India

Ananth Lazarus, Head, SMB & Channel, Microsoft India agrees with him.
"All the two million PCs expected to ship this fiscal year in India, will
go with a mouse and keyboard," he says.

Sandeep Parasrampuria, MD of The Best pegs the market at two lakh units
monthly for each product. JP Bansal of Intex Technologies opines that the
monthly market for mice would be as big as one lakh units and 80,000 units for
keyboards.

	"We plan to conduct roadshows in select cities to enhance our channel communication and increase partners motivation to push Odyssey input devices" Â
Atul Mehta, MD, Compuage Infocom

Rakhee Sharma, Sr Executive-Product Management, TVS Electronics gives the
channel more reason to smile by informing that IDC estimates the keyboard market
to be Rs 1,608 million in the year 2003.

However, Ashish Shah of Vira Technologies, which sells 150 units mice and
keyboards monthly, is not very confident of this figure.

"We want to focus on providing quality products. The number game can wait"
Sandeep Parasrampuria, MD, The Best

MARKETSHARE MATTERS

In the mice space, everyone roots and votes for Logitech as the leader, with
Microsoft close on its heels. Says Ashish Shah, "Logitech is the clear
leader with almost 50% marketshare, while Microsoft would have 25%. Users are
also becoming more and more aware of iBall."

Jinesh Shah, Product Manager-Logitech, Rashi Peripherals seconds this,
"In mice, Logitech commands 50% marketshare. Samsung and Microsoft would
have another 15 and 10 percent respectively." Adds Rajeev Jain,
"Logitech leads with 35% marketshare while Samsung would have 20%. In
keyboards, Benq is tops." Piyush Shah of Pune’s Compu Gallery agrees with
this.

	"Although Logitech had 80% marketshare till a year ago, this has fallen to 55% due to Microsoft’s aggressive thrust"
Ketan Patel, Director, Creative Computers

Rajesh Mehta, MD, LM Technologies says, "Under the mice category
Logitech is the most preferred brand. Samsung is the most preferred brand in the
entry-level keyboard and Mercury for multimedia-ready keyboards."

Ketan Patel of Creative Computers feels that although Logitech did have the
lion’s share at 80% in the market till a year ago, this has fallen to 55% due
to Microsoft’s aggressive thrust.

Says Jinesh, "For keyboards, Logitech has around 20% marketshare, which
is good considering that it started selling keyboards in India only two years
ago. Samsung has another 40%, while the remaining 40% is shared by assorted
brands like iKey, Intex and other Taiwanese products."

THE
NUMBER GAME

After the channel, let’s hear what the vendors themselves have to say
about the marketshare of players in this segment. Sanjeev Shah, Country Manager,
India Liasion Office, Logitech Far East acquiesces that in the mice, Logitech
has over 50% marketshare and a significant lead in the keyboard market as well.
Odyssey has a very small presence in the mice market, which it hopes to improve.
However, Atul informs that it commands 9% marketshare for its keyboards.

Rakhee informs that in the mechanical keyboards market, TVSE once commanded a
marketshare of 48% in volumes.

But not everyone had such a good going in the keyboard space. Says Bansal,
"We sell about 25,000 to 30,000 mice a month, however our keyboard sales
are lower, at about 6,000 keyboards a month."

Priya
stopped selling keyboards over two years ago, because "We found that this
was a price-driven market and we did not want to compromise on quality for
price," says Rajeev, adding that the company sells 5,000 mice yearly.
Dushyant Mehta, MD of Mediaman too has quit the keyboard market, because the
profits according to him were very low in this business.

Most opine that The Best has managed to create good brand recall for its
products. But Sandeep says that he is not very keen on gaining marketshare at
the moment. "We want to focus on providing quality products. The number
game can wait," he remarks smilingly.

THE YEAR GONE BY

Odyssey had a good going in the last fiscal. "Our turnover grew almost
10-fold from Rs 30 lakh to Rs 3 crore in FY 2002-03," informs a jubilant
Atul. However TVS Electronics’ turnover for 2002 dipped slightly to Rs 210
crore as against Rs 216 crore that it clocked in 2001. Priya’s revenue in 2002
for mice was roughly Rs 1.5 lakh. "This was more or less at par with our
revenue in the previous year," says Rajeev.

Surprisingly for a leader, Logitech’s sales in the same fiscal was just
marginally better than that of the previous year. "One reason for this is
that we have increased our portfolio by adding new products," explains
Sanjeev.

Overall
channel sales registered a hike. Says Sanjay Kumar of Bangalore’s Newtech
Computers, "Our total revenue from keyboard and mice sales accounted for Rs
60,000 in 2002-03. In volume terms we registered a hike of 40%." Ketan too
saw his business grow by nearly 10-12% over the previous year.

Trifin Technologies did business worth Rs 1.6 crore last fiscal and hopes to
do Rs 2 crore this fiscal.

BRIGHT PROSPECTS

With the gaming industry poised for growth and demand for cordless products
increasing, there is widespread optimism that the current fiscal bodes well for
all.

Compuage Infocom expects growth of 50-60% in terms of volume for keyboards
and a revenue growth of 8-10%.

Sandeep anticipates a growth of 10-12% . "When we launched our products
early last year, our growth rates were high. But this is not indicative,
therefore we cannot compare this growth to some other benchmark," he adds.

Adcom’s Product Development Manager, Vivek Bhatia forecasts a 25-30% growth
over and above the PC growth rate in the market for the input devices. Sanjeev
too finds the industry on a progressive path and feels that it is poised to grow
at 10%. TVSE hopes to grow by 40% this year.

Priya, which was not very focused on mice sales, is now holding talks with a
supplier to re-launch mice as well as keyboards with better models.

Piyush, Ketan, Jinesh and Sanjay reflect the vendors buoyancy as they expect
their own business to grow by atleast 10-11%.

FOCUS ON BRAND AWARENESS

To propel growth vendors have come up with schemes that will appeal to the
channel as well as buyers. Compuage plans to conduct roadshows for Odyssey
products in select cities. "This will enhance our channel communication and
increase their motivation to push these products," says Atul.

Sandeep, on the other hand, will continue building the ‘i’ brand and
educating its channel. "We do not believe in bundling offers, as we want to
develop our brand on the strength of its quality products," he quips.

Microsoft has a plethora of channel incentive schemes like ‘Diamonds are
Forever’ and ‘Gold Rush’ as well as buy-back offers for consumers.

Advantage Computers has adopted the ‘Go direct to customer’ strategy for
Adcom products. "This will include participation in exhibitions and
seminars," informs Vivek.

In the fiscal gone by, Logitech had come out with its Logitech retail partner
(LRP) program where it tied up with retailers all across the country for its
products. "We will continue increasing our retail partner network. In
addition to this, we will introduce newer models in the keyboard and mice
segments," Sanjeev informs.

BUNDLING CHOKES BUSINESS

Bundling of input devices with other products is the biggest bane in this
market. Some vendors bundle their brand of mice/keyboard with almost every
product they distribute, which leads to over-supply and consequently price
cutting. "Also pricing plays a big role and the price differential between
established local keyboard brands and cheap Taiwanese imports is just
2-3%," laments Rajeev. Ashish adds that at times dealers have to resort to
selling mice for margins as low as Rs 1-2 per unit.

Jinesh agrees with him, "There is a limit to how many products a dealer
can sell. Partners de-bundle these mice and sell them first, before buying our
product. This in turn means that our sales gets affected."

However, Sandeep views this bundling phenomenon in a positive light.
"This trend will wipe out the unbranded market because, importers of such
products cannot take the continuous drop in sales, due to bundling of other mice
brands," he says.

Newcomer Vishal Malhotra of Praxis Technologies has just introduced the
Rhombus range of input devices in the country.

And he is already caught off-guard with the formalities involved in
importing. "I really wish that the processes for import are made more
user-friendly for new companies like us to be able to do business in
India," he states.

But there are others who are worried about the market being flooded with
cheap, low-quality imports through the legal and gray channels. "These
products are ergonomically designed and manufactured with user comfort in
mind," fumes Ananth.

Also, these products fail frequently and since these products are not backed
by warranties, the channel has to replace it, even at the cost of hurting their
margins.

Tackling fake mice has been a continuous challenge for Logitech. Three years
ago, over 40% of its business was affected by fake mice sales. "But our
constant vigilance had brought this down to 20% and we want to bring this even
lower this year," says Sanjeev.

SERVICE TO SUCCEED

Most vendors offer over-the-counter replacement for input devices. Given the
relatively lower prices of input devices, it does not make sense to repair the
product.

Most vendors have multi-locational service centers. Compugae Infocom, for
instance, has service centers at 14 locations, while Intex has 21 independent
service centers at all its branch offices.

Says Vivek, "We have 12 branches and eight C and F agents and all of
them are equipped to handle service, so we are represented in 20 locations
across the country."

Logitech relies on its three distributors–Aditya Infocom, Neoteric
Infomatique and Rashi Peripherals to provide service for its products.
"This helps us to cover the length and breadth of the country," says
Sanjeev. Mercury too imbibes this model of providing service through its distys.

TVS Electronics too has a widespread support network with nearly 300
authorized service partners and 14 call centers spread across the country.

MEAGER MARGINS

Most dealers and resellers stock input devices because it has become a
commodity item and moves fast. But at the same time, the margins are nothing to
write home about.

Says Jinesh, "Resellers have a margin of 5-6% on the ordinary brands.
For the premium high-end brands it could be 7-8%."

Dharmendra Baid, Managing Partner, Mega Byte Corporation earns a margin of 4%
for Mercury products. But though the margins are low, he is satisfied with it.
"The schemes rolled out by Kobian for keyboards and mice are very
attractive, which help push our sales," he explains.

But there are others who are not as pleased with the margins in this
business. Piyush is one of them. "Margins are very low and fickle in this
business and usually are less than 3%. But at times we sell at 1 or 2% just to
pump the units turnover," he laments. Ashish too states that at times he
earns only Rs 15-10 on each unit sold.

VINITA BHATIA

in Mumbai with inputs from MOHIT CHHABRA in Delhi and SUNILA PAUL in Bangalore