Miserable mark-ups on PC components have prompted distributor KMS Components to expand into consumer electronics (CE).

It intends to ensure that half of its revenues comes from CE product by the end of next year instead of roughly five per cent today.

Although KMS has grown its component business by 30 per cent in two years, sales manager Steve Bland said the market is too tough to rely on.

“Focusing on CE products means we can give customers a larger range from which to buy and more chance of double-figure margins.

“When big companies slash prices everybody is forced to make a tiny profit margin,” he said.
Bland said most of KMS’s CE sales come from its own-branded flash products. KMS also recently signed a distribution deal with CE manufacturer Elonex (CRN, 18 February).

“Elonex picks products that stand out, so there is a margin opportu-nity not just for us but for our resellers,” he said Bland claimed that the channel has taken to CE products with some enthusiasm.

“A significant number of [reseller] customers see the benefits of even the small range of consumer products we have introduced,” he said.

The new market creates significant branding opportunities, he added. Resellers and system builders that commit to high volumes will be able to rebadge the products. Creating their own brands and styles gives resellers more power to differentiate. “It has already proved very successful with large retail chains,” he said.

Market analysts say the consumer market has powerful influences on the business computing market.

“Some sectors, such as the science community, are starting to use games consoles instead of PCs because they are more flexible,” said Bob Tarzey, service director at analyst Quocirca.

“Anything a PC chip can do, a games console chip can do. Kids coming into jobs are more likely to understand how to use them too.”