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Editorial: A brand new approach?

Editorial: A brand new approach?

After a period where it was standing on the edge of a cliff, Digiland Australia has spent the past year or so building a new business model under the auspices of former boss and one time founder, Laurie Carmichael. This has seen the company abandoning its volume model in favour of a narrower focus aimed at the digital home market. It has signed deals with a number of lesser known Asian vendors and many of the products it now carries are not available from anywhere else in Australia. This, at least, gives it a point of differentiation in the market.

A change of focus was largely forced upon Digiland after it put too many eggs in its HP basket, only to be dropped in September 2003. This was followed by a mass migration rarely seen outside of the African plains as a host of branded vendors including Epson, Maxtor, Acer, Linksys, AMD and MSI all looked for pastures new. In the two years to June 2005, local Digiland revenues fell from $US79.1 million to $US282,000. A pulse was barely detectable and the company looked gone for all money because of the damage that had been done to its reputation.

At the end of 2005, Digiland still has a long way to travel on the road to good health. But the decision to brand its own hardware (see page 1) is a fascinating one that would help put the company back on an even keel if it is successful.

The Singaporean hardware distributor isn't the first to put its own badge on products - Synnex has been pedalling its Mitac brand for years now - but the Digiland plan is more targeted and that is a trend I believe we can expect to see more of in the New Year.

Ingram Micro stepped into the unbranded market in Europe several years ago with LCD screens and digital cameras sold under the name Video 7. The hardware range was made available in the US earlier this year but Ingram has so far kept shtum if it has any intentions to bring it to Australia.

Expect to see more of the same from other distributors in 2006. In an industry where many of them are working on such low average margins, it makes a lot of sense to dabble in building their own product. After all, they already have existing relationships with the component vendors and offering their own product as entry-level alternatives to the big brands is an attractive way of boosting margin averages.

The Digiland branding is most interesting because it is specifically targeting the digital home market, which has a lot of growth potential. Whether or not it can get a footing in what will be a highly competitive market remains to be seen, but the idea is still a good one.

Success, or otherwise, will depend on whether it can create demand and install confidence in its dealer channel. The Digiland name will not be restored quickly, but it is at least headed in the right direction.

Brian Corrigan is Editor of ARN. Reach him at brian_corrigan@idg.com.au


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