By Stuart Wilson
Major vendors are fighting for market share in the Middle East monitor market and channel strategy is the front line of the battle. Coupling distribution breadth with pricing policies and second tier engagement tactics that ensure a reasonable margin for all resellers and retailers concerned has become a pre-requisite for vendors.
Growth market|~|monitorkv200.jpg|~|K.V. Narayanan, sales manager digital IT division at Samsung Gulf Electronics|~|Major vendors are fighting for market share in the Middle East monitor market and channel strategy is the front line of the battle. Coupling distribution breadth with pricing policies and second tier engagement tactics that ensure a reasonable margin for all resellers and retailers concerned has become a pre-requisite for vendors
The growth in demand for monitors in the Middle East region is outpacing global growth rates. Simultaneously, the shift from CRT form factors to LCD models is in full swing as spending power climbs and the price differential between the two technologies narrows even further.
“Worldwide, monitor sales are climbing 7% year-on-year — despite the increase in notebook shipments,” said K.V. Narayanan, sales manager digital IT division at Samsung Gulf Electronics. “We expect that demand will continue to climb in 2006. In the Middle East, monitor sales grew at 15% in 2005 and a similar growth rate is expected in 2006.”
With such healthy growth rates, it is little wonder that major vendors such as LG, Samsung, BenQ and Acer are investing considerable resources in the region to boost their sales and refine their channel strategies. While the vendors accept that CRT remains the dominant form factor, the real emphasis in terms of marketing has already shifted to the LCD side of the fence.
“For LG, the focus now is all about LCD monitors and in order to maintain our growth rates we are committed to focusing on our dealer and retailer relationships moving forward,” said C.H. Lee, president at LG Electronics Gulf. “We know that we need to differentiate both our products and our channel engagement model to stand out from the competition in the market.”
Both LG and Samsung, two South Korean powerhouses in the global monitor market, have invested significant resources in terms of innovating the design and functionality of their monitors to appeal to end-users and partners alike. LG’s focus on the consumer space ensures that the vendor not only markets its monitors on their specification, but also harnesses the vendor’s brand equity, positioning an LG monitor as a lifestyle choice.
“We have to innovate and come up with the unique functions and brand awareness that ensure customers actually specify that they want an LG monitor,” added Lee. “LG has a strong position in the GCC market, which some research houses estimate is about 1.2 million units a year in terms of total market size.”
||**||Channel strategy|~|monitorbakshi200.jpg|~|Manish Bakshi, general manager at BenQ Middle East|~|Despite all the talk about product differentiation and functionality, the vendors are acutely aware that this will only take them so far in the market. Without a decent margin proposition for the channel, even the best products in the world will find it difficult to carve out a route-to-market in the Middle East. BenQ’s regional management has put considerable emphasis on looking after all its partners from top to bottom when it comes to profitability.
“We are keen to ensure that the channel dynamics should be maintained and that the profitability should not just lie with the vendor,” said Manish Bakshi, general manager at BenQ Middle East. “It should filter down to the reseller or retailer that is interacting with the end-user — the last mile of the channel. If you’re not making all the channel tiers satisfied in terms of profitability then problems will inevitably occur.”
“We want partners that have a healthy business, a proactive sales model and an ability to communicate the unique selling points of BenQ monitors,” Bakshi added. “We are trying to keep distributors and second tier partners happy. In total, we probably spend about 75% of our time interacting with resellers and retailers and the remaining 25% with the distributors.”
From the distributor perspective, the monitor market represents a significant opportunity to boost sales even further and make a decent margin in the process. Almasa IT Distribution has seen significant demand for the range of Acer monitors that it carries. The regional distribution giant is also paying close attention to the long-term product demand trends.
Vijendra Singh, manager 3C Group at Almasa, explained: “Almasa IT currently has Acer for distribution. This includes a complete range of LCD and CRT monitors. The margins vary with the model and the quantity. It’s probably between 3% and 5% margin at the distributor level and between 5% and 12% margin at the channel and the retail level.”
“We expect the LCD market will grow further in the next 12 months,” added Singh. “15” LCD will be obsolete; 17” will become an entry-level model. The market share of 19” LCD will grow in the SOHO segment and demand for LCD TV will also grow. CRT will still remain a major force in African markets.”
||**||Stable pricing|~|monitorlee200.jpg|~|C.H. Lee, president at LG Electronics Gulf|~|Like Samsung and LG, Acer, while still selling CRT monitors in the Middle East and Africa, is keen to promote its LCD products moving forward. Sanjeev Dua, business development manager displays and peripherals at Acer Middle East, said: “The focus is now very much on LCDs, even though CRT is still the dominant form factor in the Middle East and Africa. In the CRT space we will actually deliver the monitors on a container basis to in-country distributors.”
Distribution strategy is playing a critical role in defining the relative success of monitor vendors in the Middle East, with each manufacturer looking to open up as wide a channel as possible while retaining control and visibility over sales out and end-to-end margin dynamics.
“We use Redington and Tech Data in the UAE operating as regional partners but simultaneously have in-country distribution partners in markets such as Kuwait and Qatar,” said Narayanan at Samsung. “Blending in-country with regional distribution has produced a very stable model for us but we are always looking to see if there is any way we can increase our market share even further.”
During 2005, the monitor market has benefited from relatively stable pricing patterns and this has given the channel greater confidence in terms of stocking the products, running long-term promotions and a greater ability to forecast.
“Going into 2006 we expect the same kind of stability as in 2005. Monitoring the margins is an ongoing process and we meet resellers and distributors regularly to ensure that we are in line with industry standards,” added Narayanan. “One trend we have noticed in 2005 is multifunction monitors doing very well in the retail space. Consumers like products with multiple uses and this is a very real sign that convergence is beginning to happen.”
The opportunity for the channel to make a decent margin selling monitors is still very much alive and kicking in the Middle East. However, this remains a polarised segment and needs to be treated as such. The route-to-market for an entry-level CRT monitor is very different to that required for a multifunction LCD device. Distributors and resellers need to pick a vendor wisely and consider their profit potential.