Market Focus
UPS Vendors Innovate in a Shrinking Market
 The booming notebook business is bad for the UPS business, but vendors are finding novel ways to cope—and even thrive
By K R Nambiar & Sharmee Roy
The sub 5-kVA UPS market has seen volumes dipping, mainly due to the growth of sales of notebook computers over the past year. Poor consumption patterns from the home and SOHO markets have also contributed to the negative growth in this segment. In response, UPS vendors in the country are trying to beat the markets by introducing innovative product designs, venturing into the retail segment, and increasingly focusing on B- and C-class cities.
The home, SOHO and small business power solutions market had seen positive growth rates throughout the last two decades, largely due to the near-exponential growth seen in the Indian PC market. However, since 2007, a decline in the growth in desktops, coupled with tremendous growth in the notebook market, has sent the entry-level UPS numbers spiralling down.
“The consumer UPS market is driven by desktop sales to homes. It is bad news for the 600 VA UPS market when consumers opt for notebooks,” explains Ankesh Kumar, Senior Manager, Channels, Emerson India. “However, since the SMB and SOHO segments have a mix of notebooks and desktops in their environment, we expect that the growth in this segment will be stable.”
Points out Deepak Sharma, General Manager, Asia Pacific Region, Eaton Electrical, “The chances of home consumers or SOHO consumers buying a UPS are less while purchasing a notebook. However, if a customer has a server in his network then he will certainly buy a UPS. All communication equipment such as servers, routers and switches will require a UPS. In a nutshell, notebook demand will impact the stand-alone computers’ demand for the 400-600 VA kind of stand-alone product, but not for larger boxes where one is backing up networks.”
Meanwhile, notebook vendors and their partners have been trying to sell the multi-utility value of notebooks. “Channels sell notebooks stressing the fact that these have the utility of a desktop and UPS, hence we have seen that generally consumers do not buy a UPS along with notebooks. Still, we always recommend that they buy a UPS when they buy a desktop, and especially an assembled desktop,” explains Sampath Kumar, CEO, Positive Systems, a Kochi-based sub-distributor.
To counter their eroding marketshare in metros and A-class cities, vendors are focusing more on B- and C-class cities where more desktops are being sold, and where the power situation is much worse compared to the large cities. “To ensure that their top-line targets are met, vendors are countering the [contracting] trend by focusing more on the smaller cities where desktops are still sold in large numbers,” says Deepak Sharma, Director, Sales, UPS Business, Delta Energy Systems India.
Market size reduces
Although the spokespersons of leading vendors agreed that the consumer UPS market has shrunk, perceptions of the drop differ among vendors. Some of them attribute the fall in volumes to a shift in consumer buying patterns after Diwali 2008. “The total market in the country stood at approximately 13 lakh units in 2008. This means there was a decline of approximately 43 percent compared to 2007, which had clocked sales of around 23 lakh units. The household and establishment segments are showing poor consumption owing to low consumer buying sentiment,” says Rajnesh Sinha, DGM & Head, Computer Peripherals, Intex Technologies, New Delhi.
Others feel it’s primarily the sub-1 kVA market where volumes have dipped, while the 1kVA-5 kVA market is showing healthy growth rates. “The market size of the 1-5 kVA power range is the second largest segment in the Indian UPS market, contributing about 21 percent of the revenues. The market is fuelled by the 1.3 million small businesses’ need for power solutions, which is growing every day,” analyzes Sharma of Delta. He feels that the overall drop in numbers is largely in the 600 VA category.
“According to me, the market for the sub-5 kVA category is worth around Rs 1,500 crore. The current year is certainly witnessing a contraction in this market. According MAIT, for the OND quarter, sales have gone down by 36 percent. I personally don’t think this is quite drastic, but this year we may see a 20 percent shrinkage in the total market,” said Sharma of Eaton.
A Frost & Sullivan report forecasts that the overall market will grow at a CAGR of 14 percent till 2014, but this will be largely due to the growth in the SMB segment. “The Indian UPS market is expected to witness robust growth over the forecast period up to 2014. The market offers tremendous opportunity for both multinational and Indian manufacturers,” says Anindya Das, industry analyst, energy and power systems practice, South Asia and Middle East, Frost & Sullivan.
Brand wins
Despite the decline in the market, a trend that’s good news to the ears of branded players is that customers are increasingly preferring branded players to unbranded players. Some unbranded players are still holding on because of their lower prices and personalized service, which many customers value above brand value.
However, branded players point out that some of the unbranded players often use spurious materials inside their power systems to arrive at a much lower price. “Unlike an assembled PC and branded PC, where most components such as processors, disk drives or monitors are standard and supplied by vendors such as Intel, Seagate and others, a UPS can be assembled using materials of varying quality and standards. That’s why you can get an unbranded player from the unorganized sector offering a UPS of the same rating as a branded player—at less than half the price,” explains S Ramesh, Secretary of the UPS Manufacturers Dealers Association (UMDA). “Our association, which has 92 members, including all leading UPS manufacturers, is working to ensure that the unorganized sector does not spoil the reputation of the Indian manufacturer.”
Says Sinha, “Competition from local players is one of the major challenges we face because they compromise on the quality of the product, and offer better prices. We have countered this with effective communication, and education of consumers and channels.”
However, the recession is playing spoilsport to the efforts of leading manufacturers. “Once the recession set in, even the most quality-conscious customers started shopping around for lower prices,” says Dinesh Nair, General Manager, Sogo Computers, Bengaluru.
Retail and aesthetics
Apart from focusing on B- and C-class cities, some of the vendors are also trying to woo large format retailers. “Only the 600 VA product can move through retail. Large configurations require technical support, and it’s better we sell them through channels,” says Sinha.
Vendors are also investing in the proper training of channel partners to ensure that they are able to sell and support customers. “Channel partners are our lifeline, and they have helped the company grow significantly over the years. We will invest in training and equipping them, and strengthening our partnerships,” says Gaurav Burman, Director, Transaction Business, American Power Conversion (APC) India.
UPS manufacturers are also looking at improving the aesthetics of the products that are specifically targeted at consumers. “A UPS is an important part of the overall look of your workstation. A user always wishes to have a neat, compact and clean set-up, and a UPS must be a look-enhancer in the whole environment. Not only this, it should have the best ergonomics to save space,” adds Sinha.
Kumar of Emerson also believes that design and aesthetics are important factors for consumers in the sub-5kVA segment. He feels that in the coming days manufacturers will try to improve on both design and overall power density to attract more customers.
However, Sharma of Eaton disagrees. “Instead of aesthetics, demand for UPS is driven more by brand, quality or service support. These rank higher than aesthetics because in most places the UPS is not kept on top of the desk but hidden somewhere below.”
Fluctuating prices
Indian manufacturers saw their bill of material prices fluctuate as copper and lead prices melted a couple of quarters back. Then a weak rupee offset some of the benefit of lower prices. Adding to their woes throughout 2008, oil prices were high, thereby increasing the cost of batteries. Indian UPS manufacturers are hoping that prices will remain stable this year, and they would all like to see stable battery prices because battery prices often determine the cost of the solution. Comments Kumar of Emerson: “Battery prices have been like the stock market for some time. We are hoping that they will see days of stability.”
New offerings
Vendors were critical of the new trend of some manufacturers shipping multi-utility UPS wherein both lighting and computing power backup are managed by the same device. “This is not a good idea as both products work on different technologies and their purposes are different. It will only reduce the life-span of the UPS,” warns Kumar of Emerson.
Comments Burman of APC, “The biggest trend we see is that with new technologies everyone will try to offer more wattage per square inch because real-estate costs at both home and office are getting expensive. Energy efficiency—which means that you consume less power while charging—is a key focus of APC.”
Notes Ramesh of UMDA, “In the past few quarters we have seen many brands bringing out, in the sub-5kVA range, features which were previously seen only in high-end UPS products in the 10 kVA and above categories. That is why you’ll see features like digital signal processing, modular design or hot swappable units even in a sub-5 kVA UPS. It’s good for the small business customer.” |