Jumping the fence

When an IT vendor splashes out big bucks to launch a range of LCD TVs in the Middle East, you begin to understand just how important business positioning and brand development has become. Convergence is the name of the game as IT vendors set their sights on the traditional giants of the consumer electronics space and the stakes are high.

  • E-Mail
By  Stuart Wilson Published  July 6, 2005

When an IT vendor splashes out big bucks to launch a range of LCD TVs in the Middle East, you begin to understand just how important business positioning and brand development has become. Convergence is the name of the game as IT vendors set their sights on the traditional giants of the consumer electronics space and the stakes are high.

For IT vendors looking to make it big in the consumer electronics space, changing the perception of their company in the eyes of end-users is a prerequisite for success. Simultaneously, they must also create new channels to market that effectively push product into the consumer retail environment.

You can’t push consumer electronics products through an IT channel. It will work to an extent but there remain significant differences between the IT and consumer electronics distribution arenas. For IT vendors wanting to jump the fence into the consumer electronics arena, a whole new channel philosophy is required.

It is about so much more than appointing a few distributors and badgering them to build channel breadth. Vendors have to work incredibly hard to get the ‘buy-in’ from retailers and consumers alike. The perfect balance of push and pull marketing is an imperative in order to secure that all important shelf space.

One vendor that is already heading off down the convergence road is Acer. It is not alone, with the likes of HP and Dell also looking closely at product areas outside their core IT business. Acer certainly pulled out all the stops for its regional LCD TV launch party held in Dubai. The glittering affair, held at the Madinat Jumeirah, included dinner, dancing, DJs and even a performance from Lebanese pop quartet The Four Cats.

Now, I must admit that I am normally pretty cynical when it comes to this type of event — resellers strutting their stuff on the dance floor, long boring speeches and second-rate entertainment is often the order of the day.

However, I feel compelled to put my inherent cynicism to one side and actually admit that Acer’s launch was a superb event all round. Short snappy speeches and high quality entertainment were laid on and the Acer partners in attendance still got the opportunity to boogie away on the dance floor to their heart's content.

Senior Acer executives rubbed shoulders with some of the leading lights from the Middle East distribution and retail channel and there was an overwhelmingly positive reaction to the announcement from all parties involved.

Talking to the channel players at the event and asking them why they wanted to move into pushing products that were typically the preserve of a specialist consumer electronics channel, the same answer cropped up time and time again: margins.

The consumer electronics channel — despite the fact that it is a very mature industry with multiple vendors fighting for market share — still enjoys margins that the IT sector can only dream about. We’re talking double-digit margins for retailers and a few extra percentage points for consumer electronics distributors as well in comparison to their IT counterparts.

Given the current situation, it is little wonder that the IT community is wholeheartedly embracing the concept of convergence and pushing hard to ensure that their brand names become synonymous with the technology that sits in the living room as well as the office or study. The IT channel is already much more efficient than the consumer electronics channel in terms of end-to-end costs. The IT vendors are also used to working on pretty slim margin pickings, and you get the feeling that they are geared up to bring similar levels of operating efficiency into the consumer arena.

LCD TVs is just one step on a long journey that IT vendors will now embark on. If the major IT vendors can agree on open standards and build the media solutions that customers want, they have a prime opportunity to steal a march on their consumer electronics rivals.

Some IT vendors are also moving fast to secure a first mover advantage in the region that puts them ahead of their rivals. There are some major vendors operating in the Middle East that have so far failed to launch some of their cutting-edge products — often convergence related — in this region despite the fact that they are already available elsewhere,

This decision could be linked to product shortages or alternatively related to the concept that there is not yet enough critical mass in the Middle East market to justify a regional launch. This is seriously flawed thinking. Every day that these companies do not offer specific products such as LCD TVs in the region the barriers to entry become higher and higher.

LCD TVs will probably make up a pretty small proportion of Acer’s overall sales in this region, but that’s not the point. IT is an industry where companies have to look ahead, see the bigger picture and plan accordingly. That means understanding that the LCD TV could well be the gateway to supplying a complete digital home solution.

Major IT brands such as Acer, HP and Dell do have the ability to jump the fence and become a genuine force in the consumer electronics world as convergence gathers steam, but only if they have the right level of commitment and the necessary investment is put in place.

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code