This Christmas, you're unlikely to see massive sales of PCs atssive sales of PCs, clones, software and hardware - think again. retail.
So if you've stockpiled several thousand multimedia clones in the hope that the big brands have underestimated demand (again), the chances are you will be giving them away on 1 January 1998.
Sales are set to be steady rather than spectacular, one reason being that there is no single consumer motivator to purchase PC hardware. In 1994 there was CD-Rom multimedia; in 1995 it was Windows 95; last year it was the internet. This year, most of the people who would have bought a first PC for the home have done so already. And those who want to replace an old one will walk round PC World banging keyboards for an afternoon, then buy from mail order.
Remember how the advent of MMX this January put a dent in last year's Q4 figures? News leaking from Intel a couple of weeks ago that it plans to introduce a half-price Pentium II chip late next year for sub-$1,000 machines won't do the consumer market any favours this Q4 either. How do you sell a £1,300 Pentium 200 II now, when wary punters are fairly sure it will be £750 next autumn?
It means the PC makers will have to work harder to shift their current PCs, not just in the days left till Christmas, but until the cut-price Pentium IIs come out as well. So expect to see more bundled software, more bundled peripherals, and more 'buy now, pay later' and zero per cent finance deals.
The Bank of England will be playing The Sky's The Limit with interest rates and the rest of world yoyo, as share values add to the general reluctance among consumers to cough up £1,500 for a piece of beige plastic.
Set against this are more favourable factors. People still have building society windfalls to spend - although foreign holidays, double glazing and a new car tend to come higher on the shopping list than a PC. Furthermore, the effect of the death of the Princess of Wales, which depressed September's retail sales, has worn off according to the British Retail Consortium. Sales in October were up five per cent on the same month last year. And the European PC sector is booming, say analysts at market research firm Dataquest, with Q3 sales growing by a lucrative 17 per cent.
Much of this is down to bullish consumer sales, with the UK leading the charge. This is a remarkable performance considering that in Q3 last year we were still feeling the aftershocks of Escom's demise and the chilly winds of the recession were blowing tumble weed down Europe's high streets.
And it looks as though it will last.
'We have entered a new PC market growth cycle, which the nature of the market suggests will last some two-and-a-half years,' says Steve Brazier, associate director of Dataquest's European PC group. 'We expect this steady growth to be a continuous process driven by economic fundamentals, rather than a stepwise process of technology improvements.'
Not surprisingly, Compaq is doing well from this boom and is now way out in front with 16 per cent market share, double that of second-place IBM, which is losing share to the likes of the increasingly strong Hewlett Packard. Compaq will do well again this Christmas, provided it can keep the supplies coming through. Its machines are still over-priced compared to the competition, but in computer circles its name carries the same cache as BMW does in the motor world.
Siemens Nixdorf is also improving, both in mainland Europe and the UK, and will have a good Christmas at the retail outlets it has worked its way into. Siemens is a name already known in the home for high-quality kitchen appliances, and the kind of customers who can wack out their wad on a £1,000 oven are just the customers the company wants. It used to be an industry joke that Siemens was a bank that dabbled in technology; but now that it has woken up, it could be bad news for some of the smaller PC makers.
The good news for retailers is that, with the exception of Dell, the rocket-trajectory of mail-order PC makers has flattened out. None of the big ones will fall back to earth, but they've stopped growing at 20 per cent per annum. If PCs are an even bet this Christmas, the smart money is on peripherals and add-ons. PC World is running national press ads without a PC in sight - it's all peripherals.
The big news is imaging - digital cameras, scanners and the software to go with them. 'PC photography is currently the boom area, with digital camera sales growing every month,' says Nick Culley of Midwich Thame.
'The bulk of the business is going through PC-related stores, but the photography chains like Jessops are enthusiastic about devoting space and resources to digital cameras too.
As the number of features increase and the price drops, and as the cameras become easier to use, this will be an even more consumer friendly, mass-market product.'
This is echoed by other sources, and confirmed by the advertising welly that manufacturers have put behind the products. There are now several makes to tempt punters, from Kodak's ageing DC25 with a street price of less than £200, up to JVC's GR-DVX digital video camera, which at £1,600 is more than the average retail PC. Sony will do well in this sector because of its name, but then so will Minolta with its Dimage V - which looks slick and rides on the back of the brand's growing clout in photography.
What better way to remember the festive season than take digital pictures of the family squabbles around the Christmas tree and subsequently replace the mother-in-law's head with Stalin's? With image manipulation still in mind, scanners are popular too, but unfortunately for handhelds, only flatbeds will do.
There is absolutely nothing wrong with handheld scanners - for 99 per cent of home users who print on a 600dpi inkjet, they are perfectly adequate.
Punters don't understand that to get the best output from a 24-bit colour 4800dpi flatbed you need a six-grand thermal dye sublimation printer.
The human eye can't distinguish much more than 16-bit colour anyway.
But why bother to educate them and down-sell to a £90 handheld when the demand for a £200 flatbed is already there? Hewlett Packard will do well in the scanner stakes, because there's a 50:50 chance that the punters will already have an HP printer at home, and they feel safe buying kit made by the same company. Agfa will also fare well because it's brand-linked with photography, although less well-known brands have Agfa licked pound-per-feature.
The obvious accompaniment to a scanner is an image editing package.
Adobe is light years ahead of the competition, but the packages look professional, ie, as dull as November in Bognor, hence no one outside of publishing or advertising has ever heard of them. Corel, newcomer MGI and scanner-maker Primax are the ones to stock.
Better than scanners for volume sales will be printers, especially colour printers. After all, if you own a PC powerful enough to process images, having a few print-outs lying around for people to see is a great way of manoeuvring the conversation around to the prodigious size of your CPU. Epson is spending £2 million on a pre-Christmas TV campaign that's short on technology and long on humour.
And whenever one manufacturer spends a bucket-load on TV, all the other brands benefit too. Lexmark is boxing smart, linking its colour inkjets to the PC photography boom with catchlines like 'Photo processing: the three-day service of the three-minute?' HP may be king of the office, but Canon is big in consumer and its holiday tie-in with Thomas Cook this season will give it an extra boost.
Printers are so ubiquitous that the margin is wearing away. But inkjet refills, paper and other well-presented consumables can make the difference between thin-sliced frozen chicken and plump turkey breast for Christmas dinner. Photo/ scanner/printer combos yield better profit, but at £250 to £800, they're only likely to appeal to the dedicated photo hobbyist with a galloping PC. Scanner/printer/fax combos are really only for small businesses that go for January sales or end-of-tax-year shopping.
Also hot for the moment are 3D graphics cards, as avid gamers up-grade their flagging PCs to cope with the sudden wash of Q4 titles. Games companies seem to fall into this trap every year, writing titles for what they believe will be the best-selling hardware configuration. They seem to forget they should be writing for last year's best-seller, ensuring a healthy installed base. Then they wonder why they get wiped off the shelf and chucked into the bargain bin after four weeks.
But 3D upgrades are usually bought by a discerning few who memorise the review magazines and then try to belittle sales staff with complex and pointless questions. Besides, 3D hardware development is moving so fast that cards become obsolete within a quarter. And mid 1998 sales will peak quickly as 3D becomes a Jellytot on the motherboard, so shift them before Christmas.
Modems will be important because the internet bandwagon is still rumbling down money mountain, but it's all volume and little margin. If you like 25:1 odds, then the ever-expanding internet could throw up a few strange winners in the consumer arena - video conferencing and internet telephony.
Both of these technologies are a bit like owning a fax machine in 1983 - right now there's no one to call but, boy, are you going to feel smug next year when everybody wants one.
'You will soon get good video conferencing for less than £100,' says Bill McKay of Ingram Micro. 'It will become more useful and more in demand as it becomes harder to travel on the UK's roads.' Furthermore, there's an increasing number of people with international relatives and friends, so email, telephony and video conferencing is on the up. Who cares if the kit costs £150? It's phoning California for the price of a local call and diddling BT that appeals.
Even networking products will gain favour because people don't like to throw away their old PCs. The problem with more than one PC in the house is space constraints. Barn-size dens with enough room for a three-node Lan may be hip in the US, but Europeans live in rabbit hutches. Nevertheless, networking will be more popular next year, along with DVD.
It would be nice to think WebTV will take off this year, but it owes more to the product PC model of business than the service-oriented model that prevails in TV. Until the cable companies pile in, offer internet access as a bullet point on their menus and give the set-top boxes away, WebTV will remain a minority interest. The safe software bet has to be Encarta 1998, with the deluxe edition best for margin. But unless your store is on a desert island you will be competing on price points with every man and his Dixons.
Other sure-fire winners are the latest Europress songbooks, following up on the Oasis monster hit. Blur doesn't have the same cache as Oasis, but Dire Straits and Sting are popular with the thirtysomething, middleclass PC buyers (do do do ah da da da anyone?). It's a shame Europress hasn't got hold of the rights for the Spice Girls songbook - although the lyrical content would be briefer than Geri's dress.
The PC has spawned a whole new range of 'what to buy him' items and utilities software has emerged as the digital equivalent of novelty socks and a witty tie. While Norton has the name, Nuts & Bolts looks the best and is pitched at a clever price (less than £50). Who knows, maybe next year Marks & Spencer will replace the shower gel and carwash kits with Cleansweep.
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