Cautious optimism sets scene for Q4

GfK's Dominic Ashford picks out the likely success stories for IT sales following encouraging category performances in the third quarter of 2011

The total volume of sales of IT product groups tracked within the GfK Panelmarket between the third quarter of 2011 and the same period last year rose by two per cent.

A five per cent average selling price (ASP) increase drove a value growth of seven per cent over the same period. Channels selling B2B saw a greater share of this sales expansion, with the system houses (which for us represent an aggregation of the IT mail order and IT resellers channels) showing a volume increase of 20 per cent and value growth of nine per cent.

Retail channels experienced growth of six per cent in value, but declined one per cent in volume between the third quarter of 2011 and the same period in 2010.

This growth in UK distribution came against the context of a general decline in traditional computing, with netbooks, notebooks and desktops all experiencing falls in volume and value. It can be tempting to focus on the growth of web books (also known in the industry by the term "tablets"), as these devices are beginning to represent a significant portion of value in IT.

However, this does not show the whole picture, especially for B2B sales, with the sales value of web books in system houses representing only 11 per cent of the value of this product group in the overall market in the third quarter of this year.

Just as significant is the growth from other areas, and the implications this has for the market.

Storing up sales expansion

One such area is storage, which grew in value by 14 per cent between the third quarter of 2010 and the third quarter of 2011. Part of this sales expansion has come from consumers and businesses simply needing to store more data as they become bigger users of digital technology.

Beyond that, however, is the fact that newer technology has been harnessed that better suits users' needs.

Between the third quarter of 2010 and the same period this year, sales of solid-state drives (SSDs), for example, grew in value by 86 per cent in our Panelmarket survey, and 138 per cent in system houses.

These drives are used by newer computing form factors such as web books and some premium kinds of netbook. However, this strong growth also suggests that consumers and businesses both value the benefits this type of storage offers for use with more traditional computers as well.

These benefits, which include greatly increased read and write speeds, smaller sizes and more energy efficiency, suggest capacity is far from the only factor driving the growth of storage. SSDs currently tend to hold less data than magnetic disk hard drives, but they offer the kind of mobility and flexibility that characterises the way we now interact with information and media.

Another product that reflects this trend is the wireless router. Advancing technologies surrounding this product have allowed for faster data transfer speeds and more reliable networks, and it seems consumers are prepared to pay for these better-performing products.

Despite a 27 per cent increase in prices, sales of wireless routers grew in value by 13 per cent, which offset a fall in sales of 11 per cent by volume between the third quarter of 2010 and the same quarter this year.

Clearly, fewer routers are being purchased. This is probably due to the fact that most households or offices that need wireless access now have a device. The increase in sales in value terms suggests that some consumers may have such needs. At the very least, some are indicating that they require faster or better access. This is perhaps a result of the number of devices we now use to browse the web.

It is not necessarily entirely new kinds of product entering the market that can stimulate growth for the IT sector. It is possible to maintain growth for more established product groups, not just by cutting prices, but by making sure that the products on offer are adapted to suit changing consumer and business needs.

The examples of storage and networking illustrate how newer technologies have been harnessed to match the fact that users are relying more on digital technologies and becoming more reliant on the data contained therein, leading to growth for these categories.

Dominic Ashford is an account executive at GfK Retail and Technology