PC Distributors Losing Out in Tough Asia-Pacific Market

PC distributors and dealers are losing out to direct sales methods during the tough economic times in Asia-Pacific, according to recent research from Dataquest This situation will lead to consolidation in the distributor and dealer community, Dataquest says. Direct sales of PCs in the first half of 1998 grew by 15% to 1.6 million units, compared to a 3% decline in sales through resellers in Asia-Pacific (excluding Japan) to 2.7 million units,

PC distributors and dealers are losing out to direct sales methods during the tough economic times in Asia-Pacific, according to recent research from Dataquest This situation will lead to consolidation in the distributor and dealer community, Dataquest says.

Direct sales of PCs in the first half of 1998 grew by 15% to 1.6 million units, compared to a 3% decline in sales through resellers in Asia-Pacific (excluding Japan) to 2.7 million units, Dataquest reports. The market research company includes sales via the Internet, fax, telephone, and by vendor sales forces as constituting direct sales.

The increase in marketshare for direct sales reflects an end-user shift to buying cheaper, unbranded PCs, according to Lane Leskela, senior industry analyst for Dataquest's Asia-Pacific PC and Printer Distribution Channels program.

Unbranded PCs accounted for 27% of all first-half 1998 shipments in Asia-Pacific and 60% of all units ordered directly by end-users in this period, Dataquest said. PC shipments in the China market alone (excluding Hong Kong) exceeded 1.4 million units in the first half of 1998, accounting for one-third of the region's total units. More than 600,000 PCs were ordered through direct channels in China during the first half of the year.

Margin pressure from local brands and unbranded models configured by PC stores and dealers from standardised, low-cost components are affecting the competitiveness of some traditional PC brands, Dataquest says. The region's PC component volume remains high in the wake of significant price erosion from the original manufacturers.

Leskela says Asia-Pacific is already seeing sub-$US500 PCs enter the market, through the unbranded PC assemblers. This process will continue to erode margins and PC marketshare for international brand resellers who will be forced to focus on higher-margin systems and value-added services, he added.

Dataquest says channel consolidation is an inevitable trend in Asia-Pacific as buying power continues to diminish and the region's PC market grows less attractive to official resellers. And with unbranded and entry-level PC prices eroding traditional margins, the low-cost/high-availability direct order model is reinforced in the Asia-Pacific market this year.

The market research company says it expects PCs ordered through direct means to rise to as much as 40% of the region's shipments by the end of 1998.

Dataquest, a GartnerGroup Inc. unit, based in San Jose, California, can be reached at +1-408-468-8000 or via the Internet at http://www.dataquest.com/.

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