Falling retail sales have begun to hit the computer industry in the slow run-up to Christmas.
Prices are under more pressure than ever before as high street dealers try to clear inventory before the expected January price-cutting announcements from Intel and other major manufacturers. Many in the channel believe prices have come down too far to be supported. Retailers are now selling for revenue rather than margin.
Larry Smith, UK manager of the consumer division at IBM, said sales would probably remain lower than the company had originally planned. IBM has taken action on prices to stir up the market. The most popular price points were #1,000 to #1,300 and over #2,000, with very little in between.
Martin Breffit, sales director at Tiny Computers, predicted a post-Christmas blood bath. He claimed some retailers would be left with surplus stock because they were holding computers which were too low-spec, and that customers were future-proofing by buying higher range products.
'It's a tough market out there but we are winning,' he said, predicting that the pressure on prices would increase in the new year.
Hamish Haynes, Compaq consumer business unit manager, also said sales had been slow, but he believed it was evidence of a maturing market. Haynes said computers were no longer a seasonal product. 'People don't need a PC for Christmas. They have learned that the new products come out and prices fall in January, so they are waiting.'
Nazir Jessa, managing director of Watford Electronics, was more cheerful.
His refurbished 4,000 sq ft shop, which opened on 8 December, has been busy. Jessa said the most popular price point was about #900. The company has also begun trading from its Website.
Software sales have suffered less, according to Christopher Peacock, sales director at Gem. He claimed utility products and games like Age of Empires were selling steadily.
A Computer 2000 representative said the distributor had 'almost its best November ever', with good growth in printer sales. The other area of high sales was new technology, especially digital cameras.
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