Sales Are Down, Index Notwithstanding

IDC India's Industry Performance Index (IPI) paints a rosy picture for the first six months of this financial year. Going by the index, sales of PCs and LAN hardware have grown by 63 and 65 percent respectively in comparison to last year. 

But industry leaders are not very convinced by these figures. They say that only the first quarter had satisfactory sales but nowhere near 60 percent. The second quarter saw the slide creeping in which continues to date. 

We certainly don't agree to IDC's prediction that "impressive performance in the first half would be repeated in the second half of this fiscal, with another 0.95 million PCs sold in the latter half of the year". With the kind of sales that have taken place in the third quarter, there is no way this figure could be reached. 

This brings us to the issue of whether IDC's index has been arrived at based inflated figures collected from the field. It could very well be, because feedback from the market does not support the high level of growth projected by the index. 

The danger of inflated figures is always there because very few would like to project that the sales are down especially when someone calls up for the purpose of a survey. We are sure IDC would have incorporated corrective measures to overcome the danger of inflated figures. And yet, there are very few who are willing to take the index on its face value.

At the end of the fiscal year, we are certain, IDC will have a different story to tell because from October onwards sales have not picked up at all. One of the leading PC vendors says that his dealers have done only 30-35 percent business in December. A top distributor points out that his billing for the leading software brand for the last two months has been zero!

The US market has been hit even worse. There was a drastic drop in buying of PCs in the retail market in the fourth quarter of the calendar year. The result, according to PC Data research group, is that the industry has suffered its first year-to-year unit sales decline.

The month of December saw the highest ever decline in sales, a massive 24 percent. This despite the fact that $ 6

billion were spent on online shopping during Christmas season. A total of 10.1 million PCs were sold during the new millenium, 0.8 million less than 1999. Thus the alarm bells in the form of profit warnings raised by IT companies are already proving to be true.

The situation in the Indian marketplace may not be that bad because we are still in the growth phase and PC penetration across the country is miniscule. The home segment will continue to buy PCs but the buying in the commercial sector will be dull. 

We have seen dotcoms dying natural deaths. One of the vendors related an interesting instance of making money on PCs sold by him six months ago to a dotcom, and now buying them back at half the price! Perhaps ISPs are an opportunity since homes are buying PCs to access the Net.

It is time to tighten belts and offer utmost customer care. Getting into solutions and services could provide steady revenue. Upcountry market has a vast potential and needs to be explored vigorously.

sylvesterl@cmil.com