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Low-cost notebooks: Threat to PC sales?
With the price difference between laptops and desktops narrowing, sales of notebooks are climbing.
By Vandita Agrawal
2007 can be called the year of affordability. The recent re-surfacing of finance-based purchase options has had an accelerating effect on the consumer desktop market which is already witnessing a consistent drop in end-user prices for both branded and unbranded players.
Acer has showed a good rise in its volumes as the company launched various models targeted at the low and high-end segments. HCL also breached the affordability index by offering notebooks in the sub-Rs 30K segment. The introduction of newer value/price bands has expanded the market, especially for entry-level notebooks, and companies are now warming up to the idea of providing employees with notebooks instead of desktops at a marginal 10-20 percent higher investment cost. The trend brings forth a crucial challenge that vendors and resellers will be facing in times to come: notebooks taking over desktop sales.
The new strategy
Acer has flooded the market with its new notebook range that comes at Rs 21K while HP has introduced one at Rs 24K. At these prices notebooks could very well overtake desktops in sales by 2010. The share of notebooks has risen from less than 6 percent a couple of years ago to over 17 percent last year and this trend is expected to continue. “Affordability and availability will bring the price point to a lower level, bringing desire to the customer. At the same price point notebooks are giving more value to the customer. With a lot of infrastructure (like Wimax) falling in place, the potential is much higher across the country,” says Rajendra Kumar, executive VP, HCL Infosystems.
The reason for the new pricing strategy, according to a survey conducted by CRN across the nation, is to make people buy advanced technology with mobility at a rate affordable by all. “If my customer wants a PC with a specific RAM and processor, and if I can push a notebook at the same price as a desktop PC with much more features, long battery life, and the option to take it anywhere, my customer will be happier to buy a notebook than a desktop,” says Raju Manocha of Delhi-based Classic Network Computers.
These entry-level low-cost notebooks are targeted at young students, beginners, tech-savvy employees and those who do not need a high-end notebook—but want to feel one and own one at a low price. “Since the past few months the prices of notebooks have dropped drastically. Notebooks, which were earlier a style statement, are now a necessity among the growing number of educated youth. Mobility at low rates has brought a lot of curiosity; footfalls have increased and has impacted sales positively,” informs Ajay Grover of Meerut-based Foretech Systems.
But what about the shrinking margins? “Low-cost notebooks help draw people to retail shops. They see a lot of value in buying a notebook at these price points. We get the same margins if we push a desktop PC, so we push both, and the choice is left to the customer,” explains Pankaj Aggarwal of Lucknow-based Docket Care Systems.
Will the good old PC lose?
However, there will always be a market for desktops in the present context. Sure, price is a factor that will help boost notebooks sales, and in that sense notebooks are better positioned than PCs, but that’s not the only success factor here. “The home market may not grow at the same pace, but there are major segments like government, PSU, BFSI and BPOs that would continue to focus their attention on desktops. In the home segment those desktops models which are able to combine aesthetics, innovative form factors and great performance will continue to have a market,” says Himanshu Kohli of Kanpur-based Comexcell Technologies.
Adds S Rajendran, general manager, sales and marketing, Acer India, “A key point to note is that the entry level offering from Acer comes replete with rich features. For instance, the entry-level Celeron combo notebook comes with features like Gigabit LAN (giving 10 times the speed of conventional network), Dolby stereo speakers, SATA hard disk drives and a quick charge battery apart from the new generation Celeron M 530 processor and a 5-in-1 card reader. These kind of features are pretty much exclusive to Acer at the entry-level, and show our seriousness about making the best technology affordable to the entry-level notebook user.”
Mahinder Agarwal of Delhi-based Broadway Computers remarks, “At the end of the day customers want value from the product. They don’t want a reduced version of the product; they want something that still shows them why they need to use these things.”
According to IDC, even if the low-cost notebook does eventually take off, it will neither be a threat nor have a major impact on the traditional PC market; instead, it will be a boon. Theoretically, the low-cost notebook could help the desktop market in the long run because it’s helping to boost IT awareness. “Low-cost notebooks help generate a lot of curiosity among the customers for technology. It helps attract those customers who can’t afford high-end notebooks or PCs. Not everybody wants a notebook, but the desire to adopt IT will definitely help PCs as well as notebooks in the years to come,” says Kumar.
The road ahead
Notwithstanding the buoyancy, India’s notebook penetration levels are very low when compared to other geographies. For instance, India has one of the lowest rates of computer ownership in the world—just about 10 computers per 1,000 people. But things are changing for the better. India has grown at much faster pace than most Asian geographies in the notebook segment. However, the country still being a large desktop market, the ratio between desktop and notebook is still skewed. Over 80 percent of the market is still on desktops. On the notebook front, the penetration has grown to 17.42 percent of the overall PC market from less than 6 percent two years back, and Rajendran expects the market for notebooks to grow by at least 35 percent in unit terms in 2007-08.
In this scenario can the low entry-level price-points for notebooks prove disruptive? Not really. We are in an age when technology is being redefined the world over. It’s all about making mobile computing more affordable. With low-cost notebooks, vendors are able to reach wider markets, have opened newer segments, and helped in the overall growth of the market. Just because there is an entry-level product does not mean that the consumer will not look at higher-end models or desktop PCs.
In the end, it should be a win-win situation for both desktops and notebooks. |