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Desktops—with
total sales of 2.23 mn units in fiscal 2002-03—grew 11%
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Portables finally began to sell, growing 50% to touch 48,247 units
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HCL Insys retained the top spot, ringing in 1.7 lakh units at 11% growth—but it needs to watch out for HP, which has an aggressive retail strategy
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Acer and Accel were the turnaround stories—showing over 100% growth
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Revival? Certainly looks like it. In 2001-02, there were three companies—IBM, HCL and PCS—on the positive side of growth. Mind you though, it was just about positive. You could almost cut out PCS, which had a small base... HCL Insys was on a similar wicket, barely positive... IBM was less than 10%—another barely there story.
Even the overall segment growth of 7% was an accounting technicality—overall numbers had been readjusted, owing to the feeling that component industry sales figures—especially those of Intel—had been much higher than the total PC market. And if you were to knock out the accounting adjustment, fiscal 2001-02 would have landed up on the negative side, rather than showing 5% overall growth.
There’s no adjustments or readjustments this time around. For 2002-03, the growth is real at 11% and this can be seen in the vendors’ numbers. While most have reported robust growth, two companies—Acer and Accel—have reported growth over 100%.
What was the ‘growth year’ like?
As in fiscal 2001-02, the upcountry strategy continued. Given the vendors’ dependence on metros and top cities, in which the same set of customers is targeted, the market became heavily commoditized, akin to the consumer durables space. While the consumer durables segment was lucky—given the absence of the assembler community—desktop vendors had an additional challenge to take on.
Price undercutting became a way of life and vendors had to bundle add-ons to be able to lure customers. Bundling desktop with scanners, printers and CDs, among other gizmos, became the norm. Branding seemed to be the only way out and vendors spent heavily on this front. While some like Zenith Computers, IBM and Hewlett-Packard relied on print ads to jack up sales volumes, others went in for roadshows and carnivals to popularize their products. In fact, roadshows topped most lists in terms of adopting tactical marketing strategies.
Mind you, these efforts were made in an attempt to increase marketshare in the fast-growing SOHO segment. And not without reason—the home PC segment is expected to record the strongest compounded annual growth rate of 56.9% between 1999-00 and 2003-04, according to an IDC report. This has also set the battleground for a price war between MNCs, Indian brands and local assemblers.
And vendors are going all out to reach out to the home customer in each and every part of the country. Little wonder then, that retail, along with roadshows, was one of the main components in the vendors’ desktop strategy. And we are talking retail beyond the metros.
In April, Hewlett-Packard India announced the opening of its 700th retail outlet in the country, scaling up the network from 450 in a short span of six months. The company has plans to ramp up the number to over a 1,000 outlets by the end of the calendar year. Similarly, Zenith Computers, which has a retail strength of about 140, plans to add another 100 outlets this year.
A quick estimation of the number of roadshows organized by vendors is a good take on how important retail has become for vendors. HCL organized over 1,700 small and big roadshows, while HP had 1,250 to its credit. Wipro, Apple and Acer cashed in on over 100 roadshows each. Even the distributors were unwilling to be left behind, with some like Aditya Infotech and Rashi Peripherals hitting “touch points” 50 and 25 times, respectively.
Barring big vendors like HCL and HP, for whom non-metros account for a sizeable chunk of desktop sales, others hitched on to the roadshow bandwagon as part of their brand-building activities. Brand association remained one of the key reasons for organizing
roadshows.
While a majority of the companies focussed on the SOHO segment, a few like Wipro and IBM continued to focus on corporates. Wipro, for one, announced plans to consolidate its desktop range into one brand—Wipro SuperGenius. According to Wipro, the new consolidated brand will cater to the company’s corporate customers and help it enhance its vision and position the company as an end-to-end solutions provider. However, this is not to say that Wipro is out of the reckoning in the home segment—the company has plans to offer SuperGenius desktop solutions with multi-media features built in.
Another major trend in the desktop segment was the entry of Korean companies. Samsung and LG, traditionally into peripherals, made an entry into the segment. Also, a few non-IT companies announced their foray into the IT desktop space. BPL Telecom, for one, announced the launch of its Cybercom branded PC in December 2002. Again, the target was the home user.
The rationale—at the moment, the home segment is the only enthusiastic buyer, and like everyone else, BPL too wants to tap the segment’s potential. The company could leverage its consumer goods experience to make some inroads into the segment.
Realizing the need to compete against low-cost Indian branded players and assemblers, vendors tried to bring down desktop costs. The market saw the emergence of kits that were primarily targeted at assemblers, which would enable them to integrate kit components with their individual offerings. eSys was the first to launch kits based on Via’s C3 processor and the Linux operating system.
Tech Pacific launched its AMD-based kits, generously bundling components from Samsung. While a few like eSys started selling Via-based PCs at Rs 9,999, others used the OS option to shave a few thousand rupees off the final cost.
While all vendors tried their hands at Linux, LG made a start with the announcement that all its desktops would have Linux as the standard OS. Others soon followed suit, and vendors like HP and IBM are also offering Linux-based desktops now. Acer made its offering for Rs 28,000 on a Linux-based OS. Via, which talked of a sub-Rs 15,000 price-point desktop, not only introduced the same, but also initiated a novel way to get its product to market—third-party endorsement. It tied up with premier educational institutes like IIT to set up a PC lab, attempting to drive home that for most applications, one doesn’t need a high-end system. The company is learnt to be in talks with major PSUs and is optimistic that it’ll sign on the dotted line shortly.
Finally, the big question—the new HP. Would it succeed, or would it let competitors make hay while the uncertainty cleared off? HP managed to retain its number two position but if a comparison is done with new HP and Compaq+HP, then the new HP is certainly down by around 21%. However, the company has managed to maintain its average selling price at about 49K, compared to the sub-40 price-point for all other vendors.
Notebooks
Undoubtedly, fiscal 2002-03 was the turning point and a great year for all vendors. Notebooks grew by over 50%, compared to a 25% fall in financial 2001-02. For the top three positions, there was status quo, with HP on top, followed by IBM and Toshiba. While the average selling price last year was at Rs 1.2 lakh, fiscal 2002-03 saw what appeared to be a huge drop in the average price—tumbling as it went down to less than Rs 90,000. Factors like reducing price-points and
a need for increased mobility need among corporate users were tje key drivers for the growth of the segment. If in fiscal 2001-02, the flavor was sub-Rs 75,000, this year it was the sub-Rs 60k notebook. Acer introduced its notebook at this price-point. And while corporates continued to be the top drivers for growth in this space, sale to educational institutes further propped up demand for notebooks. Overall spending in the education segment increased by eight times—with management institutes accounting for a major chunk of these machines.
Professionals also pitched in to buy “mobiles”, and companies with very strong networks—HP and HCL Infosystems—seeing good business for their prodeuct offerings. HCL Infosystems was able to leverage its network to sell Toshiba notebooks and sales jumped by over 100%.
HCL Infosystems
Despite there being a new giant on the block—the new HP—HCL Infosystems retained its crown as the Indian notebook king. HCL’s huge reach of over 1,000-plus resellers helped it retain its leadership position. In terms of numbers, HCL grew by 11% in unit terms... but estimates made by the Dataquest team peg growth at 3% in value terms. Thanks to heavy competition, the average selling price took a knock by a couple of thousands per unit, and hence the drop in value terms. In terms of strategy, there was no radical shift in the modus operandi followed till the previous year. The focus has been on the SOHO segment, government, education and BFSI (banking, financial services and insurance). Given its understanding of the government and financial segments, HCL Infosystems was the number one player in the commercial desktops space.
For the home segment, HCL Infosystems kept brand association in ‘B’ & ‘C’ class cities—with its tactical marketing roadshows and traditional carnivals. Another old strategy which has worked for HCL in the metro and key towns is its technology leadership position. Also, the company has products for all segments—ranging for the Rs 20,000 Via-based desktops to the Rs 50,000-plus range for high-end users.
Given HP’s aggressive retail strategy, it will be interesting to see the numbers tally next year.
Hewlett-Packard India
While HP, thanks to the many Compaq brands in its stable, held the number one slot, it couldn’t dethrone HCL in the desktops segment. To achieve this, HP
outlined an aggressive retail strategy in September 2002. Some measures already in place—over 700 retail outlets, with plans to touch 1,000 by end-2003. While HP lost out in the commercial desktops space, it more than made up in the consumer desktops space. Given the wide portfolio of its products, it could aggressively use bundling offers as the bait to get in customers.
IBM
Unlike last year, where it grew by 9% in the desktops space and fell by 18% in the notebooks segment, financial year 2002-03 was a good year for the company. Desktops crossed the 100,000 mark and grew by a heady 39%, while notebooks were strong but more sedate at 58% growth. The company has been putting in place its channel infrastructure and now boasts of 170 services outlets across 64 locations—all selling desktops.
Assemblers
Rain or shine, they continue to rule the market and increased their stranglehold through the fiscal under review. Last year, assemblers accounted for 58% of the market. This year, they increased that percentage to 64%. And there’s no awards for guessing their formula of success—a far wider reach, and a much cheaper price. Given that component players and distributors tried to woo them, the stranglehold isn’t likely to loosen in coming times either. Unlike branded players who serviced the commercial space, a majority of the assemblers stayed in direct touch with the fastest growing segment—the home and SOSB spaces. Looking ahead, it is difficult to envision the Indian market without assemblers. As long as they continue to hold the price advantage, consumers will make a beeline for them.
Among branded players, HP has got its act clear and will be a strong contender for the number one position in the ongoing year. Others will have to come out with innovative strategies to keep themselves on the ‘recall’ list. Given good rainfall across the country and an expected upswing in the economy, vendors can look forward to a good year... Amen.
Yograj Varma
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