If you believe the doomsayers; competition, convergence, mobility and services may constitute the four horses of the apocalypse for Australian whitebox manufacturers. However, manufacturers themselves reject claims that the end is nigh, pointing to their traditional strengths and plans to maximise opportunities for growth. If anything, this renewed gusto is good news for whitebox resellers who stand to benefit from increased competition, and an expanded market space predicted for convergent IT products.
According to Stuart James, PC and notebook analyst for retail market research group GfK, whitebox manufacturers in Australia are in for a rough ride. Already facing increased competition as tier-one vendors overtly target the SME and consumer market, he predicts whitebox manufacturers will have difficulties in breaking their way into the emerging market for convergent products, and problems saddling growth in the mobile space.
“We’ve already seen the whitebox share of the retail market shrink slightly,” he said. “Desktop prices have come down so much that multinational vendors are now playing in a price space which used to be the mainstay of whitebox manufacturers. Moreover, they are increasingly offering custom-built boxes in direct competition with whitebox vendors.”
Following successes in the custom-build market, vendors such as Acer, HP and Dell are unlikely to revise the approach any time soon. Acer Oceanic marketing director, Raymond Vardanega, said the company experienced 210 per cent year-on-year growth in the retail sector for 2004, attributed largely to the BuildYourOwn strategy it introduced in 2001.
“Our BuildYourOwn strategy, has been one of the major success factors that contributed to Acer’s continued growth and momentum,” Vardanega said. “Local whitebox manufacturers have traditionally appealed to this market segment, but Acer provides these customers with PCs tailored specifically to their needs with the peace of mind of a major brand name.”
While local manufacturers are keeping an eye on developments, they point out that size and flexibility continue to work in their favour in the custom-build space.
“The big tier-one vendors just can’t accommodate the customer the way we can,” managing director of local manufacturer Plus Corporation, Nigel Fernandez, said. “We offer customers 75 different cases to choose from, HP and Acer have less than 10. We also have three-day turnarounds, and the flexibility to always be up with the latest products.”
Whitebox manufacturers also reject the idea that they will find it difficult to create offerings for the emerging convergent space. In fact marketing manager for Protac Computers, Patrick Cheng, claimed whitebox brands are ideally placed to seize opportunities in this new market.
“The first tiers are still new to the entertainment type of market, even if they do have good products, it is not easy for them to take the market share from the existing players,” Cheng said.
He highlighted brand loyalty as an important factor as the market grows.
Although opinions diverge as to the opportunities for whitebox manufacturers in this space, it seems universally recognised that the retail channel will be vital to their success or otherwise.
Spending on digital products increased by 44 per cent between 2002 and 2003, reaching $2.5 billion, according to the Canon Consumer Lifestyle Index compiled by GfK. Whitebox manufacturers, such as Plus Corporation and Protac, are already rolling out digital TV tuners, DVD burners, set-top boxes and home networking products.
However, it is up to the resellers to use floor space to help end users visualise how all these products might fit together in their lounge rooms. What’s more, the ability to tie digital home entertainment systems together will provide an always-welcome boost to services revenue for whitebox resellers.
And while he is skeptical about the capacity for whitebox manufacturers to attack the convergent market, GfK’s James said resellers can do well if they get the right skills base to sell convergent products before commoditisation erodes margins.
“The digital lounge room is on the verge of becoming reality, and if they want a part of it resellers will have to focus more on selling lifestyle rather than just the technology,” James said. “They will need to become full integration specialists, and it’s worth their while because the market will be huge.”