Analyst: Local business key to reseller survival

Analyst: Local business key to reseller survival

An analyst has urged IT resellers to immerse themselves in servicing local business communities or risk exclusion from the sales chain. The comments follow another mass merchant announcing its intention to step into the computer market.

PC commoditisation is an ever-growing concern for small IT resellers. Maturing products and better consumer understanding have helped retail giant, Harvey Norman, snatch up about 30 per cent of $1.5 billion annual PC sales.

The latest retailer to enter the fray is JB Hi-Fi. The consumer electronics merchant already carries several traditional IT products including printers, consumables and software.

CEO, Richard Uechtritz, refused to discuss its strategy but said 20 per cent market growth during the past year made it an enticing proposition.

GfK account director for IT, Neville Ray, said the desktop market in particular had undergone significant changes recently as discount department stores Kmart, Target and Big W entered the mix. In Germany, the Aldi supermarket chain now accounts for up to 30 per cent of all desktop sales.

"The market is different; it's a whole new channel. As we move towards the PC being a commodity, there's less need for a specialist seller," Ray said. "The PC isn't a fridge, but it's getting to that point."

According to GfK's Q1 sales figures, 32 per cent of desktop PCs had been sold for less than $800.

"A fair percentage of this has been pushed by discount department stores with sub-$500 models," Ray said. "The strategy has obviously worked."

Discount department stores had yet to enter the notebook space, he added, because of product complexity.

IT resellers would continue to have a place in the market provided they could offer a location and business focus, Ray said. He urged resellers to get into the fabric of their local business communities and offer services wherever possible.

"My advice to IT resellers would be to aim at local business and do the things mass merchants can't - offer onsite advice, upgrading, consulting and software."

Ray said price meant some small business users would be tempted to buy from the mass merchants.

Toshiba information systems division general manager, Mark Whittard, said smaller resellers should avoid competing with retailers on consumer hardware pricing.

"It's a lot more convenient to go to a mass merchant where you have a selection of eight brands. But you're not necessarily speaking to an expert on mobility computing," he said. "That's why resellers need to offer services like hot swapping, disaster recovery, installation, configuration and wireless network advice. These are the areas where they can win."

Like all major vendors, Toshiba maintains a separate line of notebooks for retail and IT resellers to provide each with differentiation.

Whittard said there was increasing feature crossover but the market was still big enough for all channels.

"Even though hardware is a commodity, notebooks are still a complex product, particularly for small business users," he said. "There is room for small business resellers - mass merchants won't absorb all of that business. We still have specialist Hi-Fi retailers who sell premier products and offer expertise."

Samsung national sales manager for IT, Joe Serra, said digital convergence could be the opportunity resellers needed to turn the market around. Although aimed at consumers, he argued businesses were already looking to these products. Resellers could capitalise on this provided they recognised where convergence products fit.

"I don't think the [channel] framework will change but we will see digital convergence come to the fore more quickly," he said. "Both sides can coexist."

The larger issue facing the market was how to ensure the needs of both retailers and resellers could be met successfully, Serra said. While IT products were increasingly available through mass merchant channels, traditional IT resellers were also demanding access to consumer electronic lines.

Serra said Samsung was yet to define a proper centralised strategy for opening up all categories to both channels. He blamed lower margin expectations in the IT channel.

"IT resellers will still have a competitive advantage on every product purchased on the mass merchant side because they have lower overheads," he said. "Vendors have to deal with this and provide access to all of their products tactfully. You can't have a flat cost structure across both markets."

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