Notebooks have driven PC unit growth in the UK for quite some time now. Even during 2009, when the financial crisis brought corporate IT spending to a near halt, and consumer confidence weakened in the light of poor economic conditions, notebooks remained a reliable sales driver in an otherwise suffering PC landscape.
Our data showed that continuous growth in the notebook segment, accompanied by an increasing saturation in the desktop sector, brought notebook unit share in UK distribution up to 80 per cent in Q409. That’s compared with a notebook share of 76 per cent in the first quarter of 2009.
However, this continuous unit growth did come at a price, as it was generated to a large extent by the stronger-than-expected consumer uptake of netbooks. Following the successful launch of Asus netbooks in late 2008, netbook sales boomed throughout 2009, as the choices on offer expanded, consumers worried about price, and vendors explored alternative channels -- such as telecomms providers.
By the end of 2009, netbooks had taken a 35 per cent bite out of the notebook market in UK distribution – and cannibalised mainstream notebook sales in the process.
Clearly though, while netbooks greatly helped portable unit sales in UK distribution, their increasingly strong role within the notebook sector spelt bad news for revenue and even more so, for margin development. With a distributor average selling price of £204 in Q409, large volume sales of netbooks were indeed needed if PC vendors were to make any kind of reasonable margin from the category.
The netbook category’s 35 per cent market share of notebooks in Q409 itself translated into just 21 per cent in revenue terms.
However, Q210 marked a turning point for notebooks. At the end of Q1 this year, netbook sales began to slow, and mainstream notebooks gradually picked up. Netbook sales did keep rising during the quarter, but growth slowed more and more each month. Consumers also began to show renewed interest in mainstream portables.
May saw mainstream portable growth actually outperform netbook growth for the first time this year. Mainstream notebook sales rose 31 per cent year on year during the month, netbooks only 7.7 per cent year on year.
Reasons for the revival
Reasons for the revival of mainstream notebook fortunes vary. Standard notebooks have benefited, firstly, from Intel’s latest processor launches, particularly the Core i3 and Core i5 processors. Also, rising consumer confidence in the light of improving economic conditions in the UK in Q2 meant consumers cheap, low-end computers held less appeal.
Meanwhile, consumers became increasingly aware of the limitations of netbooks, what they can and cannot be used for.
The latest developments are good news for revenue and margins in distribution, and for average selling prices (ASPs). Notebook ASPs stabilised over the last few months, partly because of exchange-rate shifts and rising component costs.
According to our data, notebook revenues were up by a consolidated 19 per cent in Q210 compared with last year, representing 25 per cent unit growth. Excluding netbooks, revenues increased 22 per cent year on year in Q2 – or 25 per cent unit growth.
Marie-Christine Pygott is a senior research analyst at Context
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