For the retail IT channel, Christmas comes twice per year.
In addition to the traditional holiday season in December, August tends to be the second-busiest selling season of the year as the summer comes to an end and students gear-up for back to school, and the rest of us gear-up for back to work.
With a challenging economy, maximizing the back to school shopping season will be even more important this year, as will pushing greater volume to compensate for the rapidly declining selling prices across the spectrum of consumer electronics categories. Industry stakeholders say this season it’s about three things: going small, going mobile, and going in style.
Sales growth is expected to taper off this season although overall numbers will remain strong says Darrel Ryce, an analyst and director, technology and entertainment with NPD Group. In 2006, the back to school season in Canada showed revenue growth of 13 per cent over the previous year; in 2006 the growth rate had declined to six per cent. For 2008, given that January to May sales were down three per cent, Ryce is forecasting flat growth of zero to two per cent over 2007 figures.
“Based on how the market is doing this year it looks like flat growth, but back to school is still as important as it used to be,” says Ryce. “Back to school represents 20 per cent of the revenue generated annually for the IT market.”
Looking at the retail IT retail channel, unit shipments are up considerably but prices are also dropping rapidly, a phenomena that’s creating real challenges for the channel says Tim Billing, vice-president of retail sales for North America with Ingram Micro.
“To hit the same revenues as in the prior period you have to sell a lot more units,” says Billing. “In Canada the strength of the dollar has also had a strong benefit to consumers. I’d say the price of technology in last 18 months has declined rapidly.”
Unit sales remain strong, but whether that will translate into revenue growth for retailers is an open question, says Billing. The price pressure is across all segments as well. Where retailers are doing well is to offer higher-margin services offerings, such as Best Buy‘s Geek Squad. He notes Wal-Mart is also launching a services department to support its technology sales business.
The hot categories this season will be the same as in recent years, says NPD’s Ryce: laptops, desktops, inkjet cartridges, monitors and memory.
Laptops will lead the way, he says, driven by the shrinking price gap between laptops and desktops along with ever improving performance, leading many students to make laptops a must-have classroom accessory. Ryce adds the ultra portable space is one worth keeping a close eye on, where price points are declining as well.
Together, laptops and desktops account for 50 per cent of back to school revenue, and despite the strength of the laptop segment Ryce says desktops are still showing strong results. The typical use case for desktops is changing, however, to become more about the video and entertainment experience, and a digital media hub to complement laptops and other mobile devices a home might possess.
“The PC gaming market still exists too, and is doing quite well,” Ryce adds.
The strength of the laptop space is echoed by Ingram’s Billing, who also points to the emergence of the ultra portable and mini laptop space, noting Ingram has recently added a 7”, US $250 mini laptop from 3K Computers to its lineup.
In other categories, Billing says anything to do with MP3 players and accessories is strong. He adds whole accessory ecosystems have and are emerging around the iPod and iPhone. Anything Bluetooth-related is also hot.
From a trend perspective, says Billing, its increasingly becoming about style. Vendors this season are paying more attention to the look, design and colour of everything from desktops and laptops to even digital cameras.
“With so much of the technology coming to market today colour and style is playing such an important role. And it’s targeting a specific demographic market, which is good for back to school,” says Billing. “Technology is also getting smaller and more portable.”
Innovation and design are big parts of HP‘s (NYSE: HPQ) lineup for back to school lineup says Jeff Cates, vice-president of the personal systems group with HP Canada.
He points to the recently launched HP TouchSmart PCs in the desktop space as a stylish device that will be at home in the den, kitchen or the office, and notes HP is also bringing some of the higher-end gaming technology of its Voodoo business to its consumer lineup with its Blackbird PCs.
The hottest space right now though is laptops, says Cates, where HP is putting a lot of focus into meeting customer needs around aesthetics and design.
“I think that’s become one of the biggest differentiators in the laptop space,” says Cates. “It comes to personify who (the buyer) is…they’re really looking at the look and feel of the device.”
HP has launched a number of new laptop lines recently, including its Artist Edition and Thrive lines with bold and stylish, non-traditional designs. Smaller and lighter are also key laptop trends, says Cates, adding the mini-laptop space holds promise.
“We’re starting to see growth there but people are still trying to understand what the market is,” says Cates. “They’re lower-spec machines, people are trying to understand what you do with them.”
One of the companies to capitalize on the growing accessory market around MP3 players is Belkin. Greg Milkovich, Canada country manager for Belkin, says the vendor has a range of accessories, such as holders and cases, which come in different colours to reflect consumer personality. He’s also excited about Rockstar, an inexpensive and small hub device that lets someone share their MP3 music with other people.
The other major area of back to school business for Belkin revolves around laptops. Students are looking for portability, says Milkovich, and Belkin has a line of products to support students in their mobile computing experience.
The products include specialized backpacks, laptop protection sleeves, travel mice, laptop security locks, and a USB-powered laptop cooling pad.
“What has become really popular for us is the CushTop,” says Milkovich. “People can sit in front of the TV on the couch and work in a more comfortable position, with their laptop on their lap (on the CushTop). It gives you a great experience.”
