Retailers get set for convergence

Vendors, retail distributors and retailers themselves are looking at how best to combine the IT channel and the consumer electronics channel as convergence fever grips the market. Ahead of DSF 2005, new distribution deals and store concepts are being rolled out.

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By  Stuart Wilson Published  November 24, 2004

Vendors, retail distributors and retailers themselves are looking at how best to combine the IT channel and the consumer electronics channel as convergence fever grips the market. Ahead of DSF 2005, new distribution deals and store concepts are being rolled out.

The boundary between home electronics and IT products has already become blurred. With digital media formats becoming ever more commonplace, more and more products defy conventional efforts to put them in one category. With this in mind vendors, and retailers in the Middle East are addressing the convergence challenge.

Jacky’s Electronics is already taking steps ahead of next year’s Dubai Shopping Festival (DSF) to remodel one of its flagship stores to better address the convergence of IT products and consumer electronics. Ashish Panjabi, chief operating officer at Jacky's explains: “We are renovating one of our outlets at Deira City Centre ahead of DSF. This will involve refurbishing the store, carefully examining the product mix and paying more attention to digital IT products that reflect the convergence that is occurring.”

In practical terms, this means introducing more LCD TVs and plasmas, integrating some previously separate displays dedicated to home electronics and IT and increasing the emphasis on devices such as digital cameras. For retailers, measuring the return on floorspace is a vital metric — especially in mall-based stores. If it is a choice between sticking a refrigerator on display or a case full of 40 high margin digital devices such as cameras, savvy retailers will plump for the latter.

Traditional IT vendors are also starting to explore the consumer electronics channel as a route-to-market for products that straddle the boundary between IT and home electronics. BenQ signed up the UAE’s Eros Group as a distributor and retailer for its LCD TVs, Joybees and brand new DVD recorder a couple of months ago.

D.J Babani, CEO at Eros said: “BenQ is already very strong in the IT channel and they wanted to move into the consumer electronics channel. We have a network of 450 dealers and we will be able to launch BenQ products in the consumer electronics channel. Now is the right time to do this as the digital era emerges. The quicker we get into this the sooner we can reap the rewards.”

“Three to four years ago the IT channel was viewed completely separately from the consumer electronics channel. Now you see a lot of our dealers selling IT products. MP3 players are closely linked to IT and it is important that dealers start seeing the synergies between IT and consumer electronics,” he added.

The cutting-edge products driving the convergence between IT and consumer electronics remain at an early stage in the product lifecycle and this means strong margins for the vendors, distributors and retailers that can build meaningful scale during this early adopter stage.

“Right now, all the consumer electronics products for BenQ like LCD TVs, DVD recorders, MP3 players and projectors have good profitability for each and every tier,” says Manish Bakshi, general manager at BenQ Middle East. “In our experience, consumer electronics has better profitability than IT.”

These trends are not specific to the UAE but extend across the wider Middle East region. This year’s DSF should see some cutting-edge retail campaigns that highlight just how vendors and retailers can work together, drive sales and position the very concept of IT and consumer electronic convergence in the mind of customers.

While the idea of a truly converged digital home looks great on paper and in technical briefings from the IT and consumer electronics vendors, both sides of the industry need to work together to present it to customers in a way they understand. This means mocking up whole rooms that actually combine display devices, wireless networks and IT devices. Convergence is coming and the vendors and retailers that move quickly will be well positioned.

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