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Felix Baretto, LG.

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Jimmy Patel, Jacky’s.

"We are not into big volumes, but maybe those like Carrefour or other big retailers are moving the numbers," said Patel. "With us, the focus on netbooks is not high. If you take overall business, it is about 15% of our cake."

Distributors that have been keen to pounce on the netbook category and view it as an added revenue source that can help them sustain the pressures of wholesaling in the current financial climate have, nonetheless, had to be savvy about the correct positioning of the mini-PC. In their eyes it seems that netbooks are commanding great attention, but are solely for power retail. They too warn retailers to be very careful about clearly demonstrating the difference between a netbook and a notebook to the end-user.

Most interestingly, some distribution partners do not see netbooks leading to the cannibalisation of the low-end notebook margins. Vijendra Singh (main picture), general manager for personal systems and retail at hardware distributor FDC, which carries Lenovo and Acer netbooks, effusively defends netbooks as a compelling category.

"The netbook market has given us an additional opportunity within the same category," asserted Singh. "It contributes 26% of our total business and it is not that we are losing market on the notebook - the notebook market is there - but the netbook market is additional revenue."

He goes further to suggest that the category has attracted new end-users such as the younger consumer and those that have a laptop for home and office use but see the netbook as a possibility to remain connected on the go. Singh also holds a view in common with almost all commentators of the IT market that the netbook retains limited opportunity for the corporate reseller channel.

George Su, deputy managing director of Asus Middle East - which has been a pioneering name in the netbook market since its conception - disagrees, however. He claims there is value in resellers that target businesses to consider carrying netbooks.

"One of the Eee PC target segments is the mobile corporate user who are definitely in need of connectivity with basic or mid-level computing," said Su. "For the corporate reseller they have a product which fits the bill of their customer's requirements."

FDC suggests that netbooks not only promote up-sell opportunities, but facilitate them as a result of their minimalist specifications, such as low memory and no optical DVD drive. According to Singh, bundling brings the channel extra revenue. "This cross-bundling is happening and the customers see a very good value proposition," explained Singh. However, he also concedes that the need for such added value is largely to do with the low and increasingly competitive price of the netbook. "They are buying bundles from us because currently the ASP for the netbook is low at US$399 and they want to bring the ASP up," added Singh.

Despite this, Singh insists the margins associated with netbooks are worthwhile due to the attractive cost for the end-user. He also indicates that the low ASP means the consumer is more flexible when it comes to up-selling attempts. "Margins are healthy on netbooks because the ASP is low, people don't mind paying a few extra bucks," said Singh. "They are moving much quicker. Last quarter we sold more then 12,000 units."

One vendor that says it is working hard to support its netbook channel is LG. Felix Baretto, business manager of notebooks at LG Middle East, claims correct positioning goes hand-in-hand with in-store marketing. "We are working on the channel in terms of incentives and target-driven rebate systems," said Baretto. "From time to time we also conduct dealer seminars to educate the partners and help them understand our direction."

Support from vendors has come in other forms - moves that take into consideration the financial crisis and the impact it has had on the IT channel in the Middle East.

"Some of the vendors don't have targets for the notebooks - netbooks are an additional business and they found that it was too immature for them to put targets on," admitted Singh. He does, though, expect vendors to begin implementing targets for the channel now that the size of the market and netbook potential has become clearer after two quarters' worth of data.

Perhaps some of the many vendors that have jumped on to the netbook bandwagon could lead the way by underlining the value that netbooks will hold for the channel once the consumer furore has died down. It is evident that netbooks are popular and that most retailers cannot afford to overlook them.

There just remains the issue that margins will inevitably tighten as the competition increases and retailers might find it unfeasible for netbooks to occupy shelf space at the expense of higher margin IT products. If the netbook business is to be a sustainable for the channel, retailers and distributors that cannot move huge volumes are going to have to carve out some sort of value offering that boosts the netbook sale.

Netbooks may be passing through retail outlets and warehouses in the Middle East at a rapid pace, but that will only continue if the consumer and corporate channels can develop a business model to make it all worthwhile.

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