The notebook market is in a flux today. Prices of entry-level notebooks are
going down and more variety of notebooks are coming in. But buyers seem to be
simply not interested.
Understandably vendors and channel partners are resorting to different
strategies to woo customers. A few vendors are trying to implement a combination
of rigorous and periodical training programs for their channel, along with
attractive incentives, to increase sales.
S Rajendran, GM-Marketing, Acer India, points out that IDC's initial forecast
of 40 percent growth is unrealistic in today's market. He is of the opinion that
even achieving 20-25 percent growth would be tough.
Insipid market growth
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Narrowing price tags of entry-level notebooks should increase the demand for laptops in general. |
FX Infotechnologies sells almost 35 units of entry-level and 15 to 20 units
of mid and high-end notebooks per month. Sunil Jose, Manager, points out that 80
percent of the company's sales come from the SME and corporate segments. SOHO
contributes the rest.
According to him the market is growing at the rate of 20 percent. This
opinion is substantiated by JA Johnson of Futuristik Control Networks who says
that the average market growth rate is 18-20 percent.
Sudhakar of Lerana Infotech finds these growth figures highly optimistic.
Says he, "Growth figures will depend on the corporate buying pattern."
A sentiment that is echoed by Girish R of Gates Technologies and Jayant Nair of
LM Technologies who have seen disappointing sales in notebooks in recent months.
According to sources in Vitesh Systems, the company recorded a 40 percent
drop in the notebook business as against its previous year's performance.
Market expectations
Channel partners foresee a stability in demand and increase in sales of
notebooks by mid-2002. "Notebook sales should grow at a healthy rate of 35
to 40 percent by early next year," says Sunil Jose of FX Infotechnologies.
According to him, the growth in the notebook market could be largely
attributed to the growing demand in mobile devices in the country. He adds that
the demand will increase in the entry-level slot of notebooks due to the drop in
prices.
Jayant also believes that the sales should improve around the same period. He
points out, "Entry-level notebooks are largely considered as a replacement
for desktops. So the growth and demand is directly proportionate to the
advancement in the PC market."
Though desktop PCs will continue to record a growth in its sales, notebooks
will carve out a niche for themselves with the mobility and performance of a
computer being the driving factor among users.
For the mid and high-end notebooks, customers mainly come from niche
verticals in the market. Here the deciding factors are aesthetic looks coupled
with rich features. Buyers in these verticals are not price-sensitive, which
helps channel partners earn higher margins in comparison to the entry-level
notebooks.
Fighting challenges
Besides the current slowdown, there are other challenges staring in the eyes
of resellers. These include low awareness about notebooks and poor understanding
of its productivity benefits.
Apart from this, given the fragile nature of the product, including the small
form factor and TFT flat panel, it is necessary to educate customers on how to
handle the product carefully.
To address these issues, vendors and channel partners have been organizing
roadshows and seminars at regular intervals. These have had a positive effect,
especially among corporate buyers.
According to Ranjit Nambiar, Senior Manager Sales (Frontline Division), HCL
Infosystems, the conversion rate of prospective corporate buyers into customers
is around 60 percent as against a 25 percent in the SOHO segment.
Investing in channels
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Expecting notebook business to improve mid-next year, partners are adopting better sales strategies. |
There is a need for more informed and trained personnel to provide robust
after-sales support. Vendors have decided that the best way to go about this is
to invest in their channel partners, both sales and service. This investment is
largely to keep them updated on the technology, as well as better ways to
provide after-sales support. "We have dedicated Acer Care Clinics in the
top nine cities to provide easy support for notebook customers," says
Rajendran of Acer.
In a move to boost channel sales, Compaq Computers has rolled out special
programs for Compaq notebook resellers (CNR), which will give them ample
opportunity to earn incentives, with relatively small effort in promoting the
company's notebook product range. The CNR programs are targeted at resellers who
bring in orders for Compaq’s notebook range and is focused towards a specific
market segment.
According to the program, a dealer from Compaq’s channel network can
register himself as a Compaq’s notebook reseller. Top performers from this
program are assured with awards, which would motivate them to record better
results. Compaq claims to have built technical expertise within its channel
network through this program, while motivating them to become leaders in their
respective segments.
Living on the edge
In light of slump in demand, the going is certainly not easy for channel
partners in the notebook business. Those who are selling to SME and home
segments will see a dip in their sales.
Those who are selling to the corporates stand a better chance because in this
sector, there are still requirements and budgets allocated for the purchase of
notebooks. However, Ranjit of HCL Infosystems says that there has been a drop of
10 to 12 percent in the demand coming from this segment.
However, a positive aspect to notebook-selling is its margin structure.
Typically the margin structure varies for different levels of the channel
network.
Distributors can earn anything from a five percent margin for a sub-Rs 70,000
entry-level notebook, going up to over 10 percent on the high-end models.
Dealers, on the other hand, stand to gain three to four percent on entry-level
and high-end notebooks respectively.
When demand dries up, what can bring cheer is repeat business. Customers
always come back when they are assured of prompt support. Partners have to look
at these options before the market upturns for good.
Vendors from their side are pitching in to popularize the usage of notebooks
in order to generate demand. Also, the dropping prices of entry-level notebooks
should also push up the demand. Or so the channel hopes!
Sunila Paul in Bangalore