Computers and Peripherals - Australia

Computers and Peripherals - Australia

HEADLINES

Current value sales decrease by 1% in 2009 to reach A$4.3 billion

Portable computers records strong current value growth in 2009, while desktops is in decline

Netbooks grows by 58% in current value terms in 2009, albeit from a low sales base

The average unit price of computers and peripherals decreases by 6% in current value terms in 2009

HP is the leading brand in computers in 2009

Sales of computers and peripherals are projected to decrease by a 1% constant value CAGR over the forecast period to reach A$4.2 billion in 2014

TRENDS

Sales of computers and peripherals grew by 5% in retail volume terms in 2009, a significant slowdown from the 9% growth experienced in 2008. Meanwhile, current value sales decreased by1%. This performance was largely due to the decline in desktops, which suffered a 20% decrease in retail volume sales in 2009, as consumers switch to portable computers such as laptops and netbooks. These product types were not able to entirely take-up the slack, however, since consumers were holding back on spending due to the economic slowdown. Monitors and printers also experienced slight slowdowns in retail volume growth as they moved further towards becoming obsolete.

Computers have become a central part of the lifestyle of most Australians, and with the launch of netbooks in 2008 their portability and flexibility of use expanded. With the category increasingly skewed towards portable computers, portability is the most important factor, but as this occurs consumers are increasingly demanding more power for their computers. One area which limits the portability of computers, especially laptops, is battery life, and consumers are becoming increasingly impatient with the constant need to recharge. Longer battery life and light weight are the main strengths of notebooks, which can work for up to 6- hours at a time. Given that portable computers are constantly being carried around, durability is also important.

External hard drives are booming since they represent the best solution for a portable source of memory to go along with the portable computer. Their growing popularity is also due to prices falling considerably (meaning that the old recommendation of backing-up files is becoming increasingly important, although cloud computing services do provide another option). At the same time, applications such as downloading movies and music are data hungry meaning that there is significantly more data for consumers to store. This, alongside a shift to laptops, creates an urgent need for consumers to find a means of storing data.

The average unit price of computers and peripherals decreased by 6% in current value terms in 2009 to reach A$350.00. The average unit price of computers fell by 4% in current value terms in 2009 to reach A$1,048. Unit prices continued to fall as the presence of inexpensive netbooks exerted downward pressure on the prices of laptops, whilst desktop computer prices sunk as is to be expected in a declining category.

Having been introduced to the Australian market in 2008, netbooks instantly found an audience among students and consumers who would previously have bought a laptop but were wanted longer battery life, and improved portability. Inadequate power and memory, however, saw enthusiasm has wane in 2009, although the presence of a netbook alternative to laptops has led to significant price pressures on laptops.

The adoption of IPTV is likely to be slow in Australia due to slow broadband speeds, which make the streaming of content to televisions impractical on a regular basis. As long as broadband speeds remain slower than in most other developed markets, Australians will not consider streaming content to their television to be a reliable form of entertainment.

There are a great many reasons for the success of netbooks, and laptops. For example, consumers have become so used to being online that they need a means of facilitating their addiction, and portable computers can be used in a greater range of situations. This is particularly the case in relation to netbooks, for which all three main telecommunication companies, Telstra, Optus and Vodaphone, offer plans, meaning that they use the same “mobile internet” as mobile phones and can thus be used virtually anywhere. Although these plans only accounted for a small portion of computer sales in 2009, this is a trend that is likely to grow over the forecast period. Long battery life remains one of the most important attributes that consumers are looking for, as recharging remains one of the biggest limitations to the portability of computers.

The growth in sales of portable computers was also driven by the launch of Windows 7, which was specifically designed with portable computers in mind. However, due to the anticipation of Windows 7, portable computer sales actually slumped for a few months prior to its launch. Windows 7 did result in the corresponding launch of specially designed models such as the Sony Vaio X series, which highlights its extremely slim dimensions.

Despite recording strong retail volume sales growth during the 2000s, monitors was affected as consumers upgraded from CRT to more aesthetically pleasing, space-saving and energy efficient LCD screens – without necessarily upgrading their desktop computers. This driver of growth is becoming marginal. With computers migrating to laptops and netbooks – which incorporate screens – and even more recently, “all-in-one” computers, in which the CPU and other machinery are incorporated into the monitor, the need for a specialised monitor is fading. Printers is also experiencing a significant slowdown in retail volume growth as consumers are increasingly emailing files, or uploading their photos onto social networking sites such as Facebook and MySpace.

As computers shifts from desktop to portable formats much of the mystery and the need for specialist advice is being removed. Nonetheless, computers are mainly sold through electronics and appliance specialist retailers, including Harvey Norman, The Good Guys and JB Hi-Fi, but also through department stores such as Myer. Specialist retailers that are positioned as more business-oriented, such as Officeworks, or more technical, such as Dick Smith Electronics, remain important, but these barriers are fading. Retailers have certainly embraced laptops which have become dominant in terms of both the number of models displayed and the prime store positions in which they are presented.

Since November 2008 there has been an additional channel for netbooks: telecommunication service providers. Realising that the primary function of netbooks is to surf the internet, Dell Computer offered the Inspiron Mini 9 Netbook along with a Vodaphone broadband plan in November 2008. Telstra with Acer Aspire One and Optus with Samsung NC10 followed in August 2009.

As computers are becoming more popular, and more associated with entertainment and fun, instead of work or study activities, they are being placed closer and closer to the front of stores. In many stores, they are among the first products that the shopper sees upon entering the outlet.

COMPETITIVE LANDSCAPE

HP (Hewlett-Packard Australia Pty Ltd) remained the leading brand in computers, particularly desktops, although it also has a major presence in laptops, monitors and printers. With the computer category rapidly shifting away from desktops and associated peripherals such as monitors, HP needs to shift its emphasis towards portable computers. In 2009, however, its focus appeared to be more on building-up the “all-in-one” computer segment, whereby the CPU is contained in the monitor, which, whilst not as portable as a laptop, does at least serve to release desk space.

For a long time, Dell Computer kept to its business model of dealing directly with consumers, who were therefore able to order tailor-made computers, rather than go through retailers. The company has, however, expanded product availability to include retailers: Officeworks in 2008, then Dick Smith Electronics and The Good Guys in December 2009.

Although Asus (AsusTek Computer Inc) introduced netbooks to the Australian market, Acer (Acer Computer Australia Pty Ltd) has received the most benefit from this development. Acer became the leading brand in 2009. Consumers are increasingly embracing netbooks as more major manufacturers such as Acer Computer and Hewlett-Packard enter the category.

Computer credibility is less important when it comes to monitors. As LCD screens are used for both, it is the companies that are recognised as major LCD TV manufacturers which are making the most gains. In 2009, LG (LG Australia Pty Ltd) and Samsung remained the leading brands in monitors, despite not otherwise having a strong presence in computers.

In other computer peripherals, retail volume share movements depended on the device. Previously, the main types were keyboards, mice, and webcams, with Microsoft Australia Pty Ltd and Logitech Australia Computer Peripherals Pty Ltd the primary competitors. However, the external hard drive category is expanding rapidly, led by Imation ANZ Pty Ltd and Seagate Technology Australia. Thus, Imation and Seagate made significant retail volume share gains on Logitech and Microsoft in other computer peripherals in 2009.

PROSPECTS

As the excitement about netbooks – based on ease of portability and low price – subsides, consumers will consider other options for accessing the internet when on the go. The most obvious means of doing so are mobile phones and portable media players, and the capability of both alternatives is likely to improve over the forecast period. Thus, manufacturers of mobile phones and portable media players are expected to offer improved substitutes for netbooks. Since online access is the primary use of netbooks, the ability of other devices to provide this function will have a negative impact on demand. Netbooks faces growing competition from mobile phones, which can increasingly be used for more and more functions, but also laptops, which are becoming more and more portable. A growing number of laptops are expected to feature embedded 3G, thereby expanding the locations in which they can be used, while opening-up a new retail channel via telecommunications companies.

Further pressure on netbooks is expected due to growing customer dissatisfaction. While relatively inexpensive, netbooks still do not provide the level of performance that consumers desire. A boost to netbooks may appear in the forecast period, however, with Asus, the pioneer manufacturer in the category, using Google’s Android platform, to create a “smartbook” at even lower price points.

As consumers continue to migrate to portable computers, the demand for desktops, and therefore monitors, is declining. The demand for monitors will decline even further as desktops shift to an “all-in-one” model with the CPU at the back of the monitor – thereby making the monitor obsolete. Moreover, the trend towards consumers surfing the internet via the television will remove the need for an additional dedicated monitor. Manufacturers of monitors intend to add value through touch screens, although this function is likely to be introduced to laptops as well. Other means of encouraging consumers to upgrade their existing monitors exist include Samsung’s plan to migrate its computer monitors to LED by the end of 2010, whilst 3D monitors are also on the drawing board.

The success of “apps” for iPhone will be replicated by iPad (should the iPad become a phenomena it is the “apps” that will create the buzz), allowing consumers to personalise their computers. This is expected to provide the future direction of the category. This would give Apple a needed edge in relation to marketing tablet computers, given that HP, Dell, Sony, Lenovo (Lenovo Group Ltd) and Microsoft are planning to issue their own tablet computers.

“All-in-one” computers should slow down the rate of decline in desktops as they have the advantage of clearing-up space that would otherwise be taken-up by a traditional desktop. Since portable computers began to dominate the computer category, consumers have become accustomed to increased desk space. For desktops to survive they need to compete on this level, and “all-in-one” computers will be the means of doing so.

Whether or not the iPad, and the other tablet computers that will doubtlessly follow, revolutionise the category, the excitement surrounding its emergence is predicted to provide strong retail sales growth in the short term. The attractive prices of iPads should encourage consumers to embrace tablet computers, as well as bring addition price pressures on both laptops and netbooks. Manufacturers of netbooks will need to discount their prices simply to retain their price advantage. Over the forecast period, the average unit price of netbooks is expected to decrease by 29% to reach A$356.00 in 2014.