Distributors need to get real about online sales

Rudy Aunkofer, a group director analyst at GFK, spoke in Monaco about the future of distribution and the effect of commoditisation on the market.

GFK works in 85 countries and believes that the channel is like evolution. It isn’t the best product that survives, it’s the fittest of products that survives. Survival of the fittest means adaptaion and commoditisation will affect the market.

Growth returned to the market in 2010 but distribution was always performing below markets – distribution and poor distribution has “certain challenges”. Markets are segmenting and disties should adopt to the situation. Growth rates fell in the fourth quarter last year – consumers focused on a lot of products including cars, furniture and very expensive things. This. he said will characterise the consumer market over the next few quarters.

People are focusing less on IT and digital products. In central Europe distributors will have to convince people about new products they have.  Russia has a similar picture but it’s more extreme because there’s a huge move out of the traditional style of business.

The same underlying conditions exist in Western Europe, Eastern Europe and the CIS. The B2B market is returning. GFK is expecting B2B growth in all of these areas.

The online channel continues to increase, the typical B2B channel will fall from 47 percent to 37 percent. Etailing is growing but it’s only a part of the retail business. The internet is one channel out of others. In 2011 the replacement market will grow in the B2B sector.

The traditional channel has certain challenges. Online sales are very aggressive but GFK’s analysis shows this is changing dramatically. At the high end, the share is stronger online than in the traditional channel. There are very cheap mobile computers online, but they’re having lower specifications. The changes are not going to go away, he said.

GFK thinks that an overall picture is nice, but the situation is complicated and different in different countries.  Disties in the Eastern and Western European channel are very different. The fears that the internet might take over the majority of business is not true but it varies on the countries. Online is a new type of channel.

The market is being segmented by screen size. The size of the product is segmenting the market for computing products and for all sorts of peripherals.  

Ninety five percent of people are voting for mobility with internet access and ease of use. Seventy five percent buy products for multimedia, 66 percent are buying on design and only 53 percent are only using it for work.

Netbooks and iPads and the like sold well over Christmas but in August or September last year the numbers were falling. The challenge is the average price of 600 Euro and slows down the development of the products.  The markets will continue to show seasonality but average prices are likely to fall to far lower than that.

There’s a lot of discussion about cannibilisation. One tablet costs twice as much as a netbook. It’s unlikely people are buying tablets rather than netbooks – tablets have to come down in price to 250 or 300 Euro. Sales of netbooks continue to be stable.All-in-one desktops are growing and in a country like Switzerland are up to 40 percent of the desktop market.