Bill Brownell, general manager for marketing at Microsoft, gave a presentation to EMEA distributors and partners at the recent Distree forum where he insisted that the challenge for this year and beyond is to do what he called “getting great at retail”.
For Microsoft, he suggested, the key challenge is to take advantage of the fragmenting and growing opportunities surrounding consumerisation. For example, Windows Phone and Windows 8 will, he said, increasingly compete for the titles currently held by Apple’s iPhone and iOS - so products based on or supporting these must be sold in the right way by partners.
At the same event, Dave Sousa, director of global brand development at US-based peripherals vendor Manhattan, said the channel challenge is to move beyond the core hardware sale. “It is about going beyond the box to boost your margins,” he said.
He urged channel players as well as vendors to be sure they offer the right mix of peripherals to their customers. Retailers and distributors too often rely on stocking a limited range of accessories and similar items. However, in his experience customers themselves specifically indicate that the inventory on offer does not meet their needs, he added.
What customers want, he said, is to be able to buy all the varieties of peripheral they would like from one outlet. That means resellers should be stocking a range of vendors, as well as a complete range of peripherals - cables, Bluetooth, USB offerings, mice, keyboards and so on - for each vendor. Only then would they maximise their sales, he claimed, and prevent customers going elsewhere.
Sousa added: “In the EMEA market, the profit opportunity across the region for accessories is enormously great compared to the profit opportunity we can make from selling computers.
“In order to capture this opportunity, you need to drive more inventory - not just more of the same product - you have to carry a variety of products for each communications device you are selling.”
Afterwards, Alex Tatham, sales and marketing director at Westcoast, expressed doubt that Sousa’s advice to the channel is at all practical. Maybe in some cases, for some partners, it might work to stock a range of, say, iPod cases, but generally not all of them.
“That is particularly true of Westcoast, which has a ‘narrow and deep’ policy, in that we have a limited range of vendors as opposed to having a broadline policy. We try to sell the opportunities that we want to sell,” he said. “[The peripherals opportunity] is not a substantial opportunity; it just isn’t. So I would disagree with him.”
Tatham (pictured, left) said there are only about 20 retailers in the UK market that are likely to make any difference to what happens.
Some of the e-tailers might well appear to stock everything, but that was generally about setting up all the SKUs on their system rather than actually having all those options in stock at that moment.
“Meanwhile, the retailer will dictate the stocking policy. They will go in and pick the opportunities they want out of 600 SKUs. They might take 10,” said Tatham. “And I think I would criticise vendors here, for generally they are often SKUing up every two months. It is very hard to keep up, and very, very hard to drive sales.”
What’s more, a lot of the so-called “latest and greatest” technology on offer from vendors is often anything but, he said. New peripherals might have a few tweaks, or a different colour or design, but rarely offer anything truly innovative to the end user.
“So the distributors are not looking for the latest and greatest. What we are looking for is the terms of the transaction. How we are going to promote the offerings through marketing, what the pricing is, where your market strategy is; those sorts of conversations,” added Tatham. “And many of the vendors are not prepared, at their end, to talk about that, so they just don’t know. They say, ‘Oh, I’ll get someone to phone you’.”
That said, he agreed there had been certain runaway successes of late in the accessories arena.
“Those Native Union handsets (an old-style telephone ‘handset’ that can be plugged into a modern mobile phone) - they were all going to Harrods and buying 5,000 of those a week before Christmas. That was just fantastic. That’s a really good product,” said Tatham.
At least one vendor seeing success globally across a variety of other regions has singled out the UK as a difficult place to find a distributor for its peripherals.
Julia Yu and Hiltson Zhang, sales executives at DeepCool, which makes a range of accessories that can be plugged into desktops, notebooks and tablets to reduce their operating temperatures, were also at Distree.
They said they had been unable to source a distributor to sell their products in the UK. “We do not know why,” said Yu. “We think there is some potential, so we want companies to pay attention.”
Zhang added: “It helps them to have a cooler business. We need resellers and distributors. We want to find a UK company that will sell for us. The product is easy to launch, but the UK is difficult.”
Zhang said 13-year-old DeepCool had found distributors in Germany, Russia, Spain, Bulgaria, Romania, Italy, Greece and elsewhere, including its Chinese homeland, without hardship. The products in its “chiller” fan-based range are proven to lower hardware operating temperatures - improving performance - by a significant degree, a feature that is very popular with gamers and overclockers.
The successes of vendors such as Logitech and Belkin confirm that peripherals remain a profitable avenue, however. Belkin is a private firm, but has reported sales of $1bn (£630m) annually for its accessory portfolio, ranging from speakers and wireless dongles to baby monitors and rack enclosures.
Logitech’s latest results, for its fiscal Q3 2012 ending December 2011, saw sales down five per cent to $715m from the year-ago quarter - but that is still a good result, with quoted gross margin of 36.2 per cent, up from 36.0 per cent a year ago. It expects sales of $2.3bn for the full year.
Eszter Morvay, research manager for the personal computing group at IDC, has confirmed that customers are still shelling out in the PC market - and on more kinds of gadget. “They are still spending money, but it is on different devices,” she said. “So there are more and more devices out there.”
The bring-your-own-device-to-work trend is a main driver. A wide variety of peripherals is needed to support each form factor, including new media and applications. And they themselves may require management, support services, consultancy, and even integration services. But whether or not such a fragmented opportunity can be mined easily across the channel is another matter.
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