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Fri 7 Dec 2007 04:00 AM

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Panel beaters

Making a profit in the monitor market might seem like a straightforward process, but it shouldn't be taken for granted. As Channel Middle East reveals, resellers need particular skills at their disposal to survive in this effervescent sector.

The past year has seen an energetic shift in the desktop display market with LCD monitors almost completely phasing out CRT as the end-user screen of choice. The ratio of LCD to CRT in the Middle East has practically caught up with the 80:20 ratio already witnessed in Europe, with LCD now accounting for 70% of the Middle East market in the first half of the year. The revolution that industry analysts were predicting has arrived and monitor vendors are working hard to answer consumers' increasingly specific and complex demands.

This fast developing and innovative sector is benefiting from an increased desire for better aesthetics, higher resolution, larger screen sizes and faster response times. Marketing managers boast of superior ergonomics, HDMI and DVI functionalities, integrated media card readers, high-grade resolution and market growth rates of over 40%. For the channel, this means plenty of opportunities for those committed to the monitor sector.

The level of sales sophistication amongst the sales channels in the region varies greatly and this affects the message and communication the end-user or buyer receives when making that purchasing decision.

Ahmad Hijazi, assistant marketing and sales manager at the monitors division of Samsung Gulf Electronics, claims the sector is profiting from a "fast upgrade" rate coupled with the faster-than-average growth path of the Middle East IT market. That is creating additional opportunities and room for incremental business across many segments. Today's consumers know what they want and are not settling for smaller screen sizes. Increasingly they opt for LCD or plasma over CRT which has been firmly relegated to an entry-level purchase. "This is attributed mainly to the increased awareness of the IT consumer, and the increased importance of more convenience and diversity as far as display options are concerned," stated Hijazi.

General manager at BenQ Middle East and Africa, Manish Bakshi, is also enthused by the commercial possibilities that are still to be cornered in the ever-advancing monitor market. "Increasing demand for high-end models, such as the 19-inch and above, are fast dominating the market and demand for 26-inch and 30-inch models is developing gradually," he revealed. Data from UK-based research house Context Bryan Norris Associates extols the positive upturn in the market.

According to Context, the top six players in the MEAC LCD monitor game all recorded above-average growth (the average being 22%) in the first half of 2007 compared with the same period the year before. By the end of the year, the Middle East should record LCD shipping numbers in the region of five million units. Times, it would seem, are good.

But despite the climax in the replacement cycle, hitting margin targets can be a daunting task for the region's IT dealers. Industry onlookers warn of a dark cloud hovering over the industry as LCD price points continue to drop and competition becomes ever more aggressive. Globally, a slowdown in some key Western European markets, a less buoyant Russian buying policy and uncertainty about sanctions in Iran may well exert some influence over markets in the Middle East.

Even in a market with a supposedly simple business model - receive box, add a mark-up and sell it on - it is important, now more than ever, that resellers and retailers build on the skills and capabilities needed to maximise monitor sales. Ian Gobey, general manager at NEC Display Solutions Middle East, is adamant that the tempo of the channel must be upped and a wider choice of product made available: "I am constantly surprised to learn how passively sales of LCD monitors are approached," he said. "The scope of the choice is normally confined to a narrow band of vendors widely available," he added.

Aaron Fright, MEA regional director at Viewsonic, is just as vocal about the channel's capabilities: "The level of sales sophistication amongst the sales channels in the region varies greatly and this affects the message and communication the end-user or buyer receives when making that purchasing decision," he proclaimed.

"Many resellers sell monitors in a commodity form, which often means that many essential features - such as performance benefits and front-of-screen aspects which may set that particular screen apart from others on the market - do not get thorough coverage during the end-user decision-making process," added Fright.
Talking to resellers though, fully educating the customer as part of their decision-making process is not necessarily the most effective tactic. Some are finding themselves confronted by an even more tech-savvy client who knows their LCD from their CRT and has very specific demands from their purchases, be it work, gaming or media.

There is also a demographic of customers for whom the mass of specifications and variables in the monitor market, and indeed the IT market as a whole, can be overwhelming. The ground-level reseller must have honed sales techniques to satisfy the desires of both these customers.

Channel partners contribute to the business by identifying more markets, quick deliveries, fast stock rotation, credit policies, increased reach and catering more to systems integrators.

Ashish Panjabi, chief operating officer at IT super-retailer Jacky's, thinks that regardless of how sophisticated the consumer is in their needs, they all think the same when it comes to screen choice: bigger is better.

He identifies two key consumer groups for the widescreen monitor - the ‘numbers' person in need of a widescreen because they are crunching data and working on spreadsheets all day, and the home user who adopt it to enhance their viewing pleasure.

It is also worthwhile mentioning this year's much-vaunted introduction of the Windows Vista operating system which - with its split screen possibilities - looked like it could boost sales of desktop monitors. Panjabi is sceptical of the subject, however. "A lot of people have seen it and played with it but are not aware you have split screen on there," he conceded. "I think that this is probably something on the marketing side of Microsoft that they need to improve on."

In a sector that boasts ongoing technological change, constant training in both the skills of demonstrating the product and the ability to fit it to the right customer is often a step in the right direction to helping resellers maximise their revenue. Samsung's Hijazi takes training very seriously. "We try to ensure that the staff of our partners and specifically the sales team have full knowledge of the Samsung offering and Samsung product lines, and this interest is translated by our floor salesman training (FST) initiative, to continuously train the sales force and equip them with the knowledge and best practices so as to better satisfy customer needs and expectations," asserted Hijazi.

NEC's Gobey says it is a question of how much of a priority the sales of display technologies are to the reseller. "It all reverts back to training and NEC recognises this," remonstrated Gobey. "From this month we will be providing training for our regional business partners and several resellers in the UAE. This training will be conducted regularly around the region to help keep our channel partners informed and up-to-date."
The commitment to renewing skills is just as strong at the other end of the channel. "Once you start understanding what it is consumers are actually doing now, whether it is on Secondlife or MySpace, you start seeing the potential in the market and where the monitor comes in. So training is becoming a lot more important," stressed Jacky's Panjabi.

However, for some vendors there are pitfalls to investing, time, money and resources in training partners. "You train any channel sales people today and probably a month later half of them are working somewhere else in another industry altogether," protested Sanjeev Dua, product marketing manager at Acer. For Dua, although a working relationship with channel partners is important, he also observes that, particularly at distributor level, an emphasis on education can hinder business. "I don't think they require too much hand holding," he asserted.

A lot of people go to Asia and buy very cheap B-grade panels. This has ruined consumers’ confidence. I urge the seller to pay attention to the quality of the monitor, don’t just look at the price.

Surprisingly, in the predominantly vendor-driven LCD market it is the relationship between regional partners that facilitates high levels of product education. So it is imperative that each tier of the channel understands their role, especially when their success is so intrinsically linked. Nowhere else is this relationship more important than at the local level. "The local partner will also be more capable of executing marketing campaigns, scanning market potential, providing more specific and regional feedback," said Hijazi at Samsung.

These are all capabilities that are most effectively carried out by local partners who have their ear to the ground. This view is reiterated by BenQ's Bakshi, who feels stalwart channel associations play a large part in ensuring sustainable profit margins. "The distributors and channel partners contribute to the business by identifying more markets, ensuring quick deliveries, faster stock rotation, better credit policies, increased reach, catering more to systems integrators and, enhanced and more effective efforts on sales-through and sales-out," asserted Bakshi.

But no matter how strong the alliances in the channel, monitors are a still perceived as a slim margin product and it is often local partnerships that shoulder a lot of the margin burden.

The dangers of not keeping an eye on market changes in a slim-margin world were illustrated at the start of 2006 when, as if overnight, the standard 15-inch square monitor was replaced by the 17-inch. This showcased how important it is for channel players to be aware of developments in the monitor field. It also highlighted timing as a major factor in the success of the monitor channel and its symbiotic relationships.

For Acer and its channel partners, the key to good timing is organisation. "If you have good planning you can always plan to bring the goods when the price is right and put it in the market at the right time," said Acer's Dua.

To keep the competition on their toes, resellers must also boast a holistic knowledge of the PC monitor industry and not only predict but understand why trends occur. Jacky's Panjabi looks to the manufacturers in Asia for hints as to where the market is going. "I was in Japan last month and I saw the Sharp factory which is probably the most advanced LCD factory in the world at the moment," explained Panjabi.

"They are now manufacturing everything on next generation lines which means the older lines got a lot faster all of a sudden and a lot of the monitor manufacturing goes onto those lines." Monitor manufacturing, according to Panjabi, is closely linked to developments in television production. The production of bigger panel televisions influences the monitor market by driving down the costs as PC screens are manufactured on previous generation TV lines.
Almasa, distribution partner to vendors such as Proview and Viewsonic, remains keen to point out a danger in the market that it thinks retailers need to acknowledge. "In the Middle East, a lot of people go to Asia and buy very cheap B-grade panels," revealed Frank Sheu, Almasa's CEO. "This has ruined a lot of the consumers' confidence," he said. "I urge the seller to pay attention to the quality of the monitor, don't just look at the price."

Retailers of monitors would do well to focus a large proportion of their efforts on the commercial market. Despite today's upwardly mobile workforce, managers still opt for PCs over notebooks because this ensures that their employees' work and information is safely located where they can see it, in the office. Niches within the commercial sector such as education, government and healthcare are huge IT markets where the demand for quality, space-saving monitors is unlikely to dry up for a very long time.

The market in the region is robust enough to survive global economic downturns. It’s a very good market to receive new products. And this is a sign of the maturity of the market.

Samsung's Hijazi points out that value-added selling is very important in attracting the corporate purchaser. "The idea is to not only sell the product alone, but as part of a bigger office solution." This will drastically increase the profitability of the commercial reseller. "Typically this allows the partner to sell the product as part of a service and substantially increase their margins," said Hijazi.

Some of the skills of selling to the commercial market are the same. For instance, resellers need to be empathetic of the customers' preferences but they must consider that the priorities of the commercial buyer will be much different to the consumer. Khalis Tuer, regional manager at Philips Middle East, says that finding a simplified solution in a product will attract the commercial purchaser. "For instance a flame retardant feature in an LCD monitor will give peace of mind to an IT manager of a bank or an airline," said Tuer.

Monitor vendor LG makes the point that even though the monitor market is difficult to predict, partners must carefully plan for the mid- to long-term and be strategic in their alliances. "The resellers who are interested in the monitor business for the next five years must take a careful look at who is the right partner," warned HK Kim, general manager of IT products at LG Electronics Gulf. "Whoever can focus on the key major streams with new solutions and intensive communication will be the only ones who can survive in the latter part of 2008," added Kim.

Despite the uncertainty surrounding the monitor market, the future still looks promising. Context predicts the Middle East will experience growth well into 2008, with first half forecasts for LCD penetration resting at 83% compared to 70% recorded earlier this year. Vendors are, perhaps unsurprisingly, assured the market is robust enough to survive the onslaught from laptop growth, commoditisation and global economic downturns. "It's a very good market to receive new products. And this is a very good sign of the maturity of the market," said Samer Attasi, sales manager at hardware vendor DTK.

The Middle East monitor channel can look forward to 2008 with a sense of optimism. But the days of merely getting a box from the vendor, adding a mark-up and selling it on, have elapsed. Channel partners in the region must appreciate the constantly changing desires of their customers and carefully foster relationships in the channel to answer those needs. If this is done, there is no reason why 2008 should not be the great year that industry analysts such as Context are predicting.

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