Grow-your-own sales in a box
The figures are up for packaged software for the home, but businesses are feeling the pinch
Irwin: Software sales are changing in response to market trends
Packaged software sales are growing, but the share of the market by category
is shifting.
The boxed software market continues to grow strongly in both volume and value terms. On the consumer side of the market, growth has been driven in recent months by steady promotion on security products and home user-oriented office suites.
As a result, box software sales increased 11.7 per cent in retail channels in the first quarter of 2009 compared with the same quarter in 2008.
The B2B side of the box software market has not mirrored this success, however, with a 52.4 per cent decrease in volume sold over the same period.
Given the difficult economic times, with businesses scrutinising their budgets, small businesses in particular have been squeezed, and the business sales-focused IT channels have felt the impact of this.
The box software market in the UK B2B channels can be separated into two streams. The first is small businesses with relatively few users, for whom licence options can prove cumbersome. This part of the market is under some threat and showing signs of decline.
Low-volume, high-value segments make up the second major stream and, conversely, are succeeding despite the pressures of the economic situation.
All change in retail channel
Retail channels have changed considerably over the past 24 months. The large
multiples have been consolidating their software lines in store, reducing ranges in favour of high-volume lines.
Because of this, the more specialist lines have lost their place on the high street. And this, combined with broadband connectivity becoming ubiquitous in UK households, means the internet is becoming an important route for distribution.
To put this into context, the sales value for the internet channel declined 7.8 per cent in absolute terms when comparing the first quarter of 2009 with the same quarter a year ago.
Again, comparing the same periods, the value of non-internet sales slumped 17.3 per cent as a lot of the high-value lines made a natural transition to online players.
Interestingly, specialist independent retailers and specialist IT resellers are also faring rather better than the market as a whole in most cases.
The IT Mail Order (ITMO) segment in particular has sold more specialist,
big-ticket box software over the quarter, pushing value into the channel and
arresting what would otherwise have been a worrying loss of revenue.
The percentage of the boxed software market represented by IT resellers has
fallen in terms of quarterly sales by value from the first quarter of 2007 to the first quarter of 2009 from 17.6 per cent to 8.8 per cent.
The specialists category has grown in the same two-year period from a 41.6 per cent share to a 46.3 per cent share by value of the boxed software market.
Over the past two years, the average price of items in the ITMO channel has steadily increased by nearly £50.
There are glimmers of hope, but while the mass appeal of office and security
software products means that promotion has buoyed the market, this is only a short-term solution to the underlying problems caused by the economic downturn.
Tristan Irwin is account executive at GfK