PC channel will grow in 2000

PC channel will grow in 2000

Despite some serious hiccups in the PC market in the form of Y2K slowdown, component shortages and the onset of direct selling models, a fair percentage of Australian PC resellers are predicting growth in excess of 10 per cent next year.

Of 500 resellers surveyed by analyst Inform each month, over a third forecast growth in excess of 10 per cent across all product groups in its September report.

The most optimism was expressed for services growth, with just over 70 per cent of resellers expecting to grow at a rate of 10 per cent per annum in this area.

`Most large direct vendors have a pretty good handle on services and they will increase this as it is where they will make their money as well. So resellers have to find a niche for services with some of the littler guys,' said Phil Burnham, senior Inform analyst.

Some of the options he identified were Web development, build-to-order services, white box services, network installation for SMEs and desktop management.

If resellers don't move away from traditional box moving they will be the victims of a general consolidation of the channel and a continued commoditisation of the products they sell, Burnham predicted.

And diversification doesn't just mean grasping onto services like a lifeline. According to Burnham what resellers stock is also of paramount importance. `The line between computer resellers and other businesses is blurring. Resellers need to look at getting into other markets as well.'

But despite postulating that the PC market in general will grow at 20 per cent next year and that resellers can get a slice of the services action, there are no assurances the market can live up to these expectations, especially in an era characterised by vendor direct sales models.

According to Inform data, moves by IBM earlier in the month to amalgamate its consumer and business PC divisions and take its PC products off retail shelves is only one example of a possible overwhelming response to the changing market forces that are squeezing the channel.

Most noticeably vendors will be faced with pressure to deal direct from consumers, lower margins, Internet bundling deals and white box manufacturers.

However, according to Burnham, this strategy is much more suited to North America than Australia, with IBM denying any plans to move out of retail outlets here. It did in fact lead the retail market in September with 12.9 per cent of units shipped.

Yet Apple will be the next to take up the direct model in earnest, with sources in the UK and the US revealing to Inform plans to adopt a 100 per cent direct model in those countries. This would involve Apple utilising its online AppleStore to sell the majority of its products.

Burnham suggested the strategy could make its way to Australian shores if proven successful in the UK, a market that has traditionally been lacklustre for Apple.

However the colourful vendor is performing much better in Australia than the UK and actually recorded the top selling desktop for the month of September in the form of its iMac 333.

Similarly, Compaq's compromise over its direct retail strategy undermines the viability of Apple going direct locally. `Figures haven't come out yet but Compaq no doubt lost some sales because of Harvey Norman's decision to stop selling Q products. Overall it depends on how much they sold through their stores but I would think they lost some revenue' Burnham said.

Yet vendors going direct are not the only threat to the reseller. According to Burnham, the `fly-by-night resellers' are causing their more legitimate brethren no end of difficulties. `There are less and less margins on hardware as it is and some resellers just keep pushing margins down even further.'

On the notebook front Compaq gained the number one sales spot in September for its Armada 1750 336.

According to Inform, the mobile market in general is looking healthy, with vendors such as Compaq, Dell, Hewlett-Packard, IBM and Toshiba establishing a mechanical and electrical standard for notebook displays. If it manages to avoid supply problems induced by TFT screen shortages, Burnham predicts that market will grow at a similar rate to the desktop market, which is currently at about 20 per cent per annum.

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