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RSS feedsAccording to Chambers' Concise 20th Century Dictionary, peripheral is an 'adjective of or relating to a periphery; not of the most important; incidental; minor - a peripheral unit'. This definition not only spells out succinctly what we mean by peripherals, it also highlights the problem facing the peripheral computer products market.
When asked about the peripherals market, one distributor replied: "It's a boring subject." But any area that makes money deserves the attention of keen business people - and peripherals do make profits.
The best way of defining a peripheral is simply to think of it in terms of its definition: a product you add to the main system to provide additional functionality or efficiency. While printers can also be considered a peripheral, they occupy a space of their own as they are an essential part of the system, not an incidental element.
On the fringe
The same could be said of items commonly considered peripheral, such as scanners, digital cameras, projector units, joysticks, mice and other control devices, many of which are used in gaming. While we focus on these distinct peripherals, it is important to note that printers, monitors and external storage units can also be considered a part of the peripherals market.
Although a market with such an amorphous definition is difficult to classify, the general health of the PC and server markets gives a clear indication of the huge potential for peripheral sales. PC shipments in western Europe dipped in the first quarter of this year, but peripherals vendors know that the entire installed base of users remain potential buyers of their products. It's a market that never dies.
Ian Vickerage, managing director at distributor Imago Micro, said the market is healthy with many areas growing quickly, especially projection screens, LCD displays and high-quality speakers. In other respects, this market is no different from any other. "We will see continued growth in the immediate future and prices will continue to fall while quality goes up," he said.
Simon Russen, European marketing manager at Acco, which owns the Kensington and Gravis brands, said sales of peripherals in the home market are particularly strong at the moment, especially when the products can be used to support games and education.
The increased power of PCs and complexity of games has boosted sales. Russen is also optimistic about the potential impact of Microsoft's planned entry into this market with its XBox console later this year.
Instead of looking at the market for peripherals as a whole, it makes sense to think of it as a series of individual markets that are grouped together under one heading, and to examine each one separately. However, there is one aspect of the market we can consider as a whole: the channel.
The nature of most peripheral products lends itself to the retail, mail order and online sales routes, and most vendors and distributors agree that there is a steady increase in sales through these channels, whether direct or indirect.
Adding value to add-ons
Vickerage said resellers have a role to play in many parts of the market even if the products seem to belong in the retail environment. "These products are audio/visual and customers want to see and hear them in action. This calls for demonstrations so resellers can add value in a big way. Also, plasma and LCD displays are often integrated into larger solutions which may need systems with specialist software to drive the displays, so a lot of value can be added there."
Mick Duffy, marketing and sales director for PC peripherals at Philips, said users need to see the products. "Mail order has been very important, but the growth of the internet has led to mail-order firms moving to web based sales. Seeing before buying is still a vital part of the selection criteria for most users, so resellers with good demonstration capabilities have an advantage. The challenge for resellers is to convince the customer to buy from them rather than go back to the web for the lowest price," he said.
Good sales skills and advice on applications is key to achieving this, said Duffy. Resellers also need to work with manufacturers that are prepared to offer demonstration unit deals and are willing to train staff in how to sell their products.
Adrian Mills, product manager in the peripherals division at Samsung Electronics, said that in certain specialised sectors of the market, such as CAD/CAM and design, a monitor from a third-party vendor is still the preferred option and buying from a specialist is even more likely.
"If a customer needs to buy a high-spec monitor he can turn to mail-order services or buy on the web. But when in need of advice or demonstration, they can't replace personal service," he said.
Jolanda Medendorp, marketing and communications manager at InFocus, one of the leading producers of projectors, said more resellers are selling projectors. "Projectors are increasingly being sold by PC resellers next to the traditional audio/visual channel. Research by Decision Tree Consulting in April showed that PC channels will have higher volume share than audio/visual or presentation specialists in 2000, and e-commerce will take share from PC and office dealers," she said.
Dermot Hegarty, UK operations manager at printer vendor GCC Technologies, is more circumspect. "Many peripheral manufacturers are thinking along the lines of a direct business model in the not-too-distant future," he said.
The mentality of buying direct through mail-order is growing in this country, mirroring what has already occurred across the Atlantic. "Any smart peripherals vendor will already have made allowances for this shift and will undoubtedly have a web store implemented and be ready to run. This change will not be overnight, but it is something that resellers and manufacturers ignore at their peril," said Hegarty.
Frank Lavery, managing director at specialist storage distributor Primary, also warned resellers against complacency. "The sector is commoditised and is becoming dominated by retail, mail-order and e-tailers. Resellers with the ability to integrate products into corporate IT strategies will be the winners," he said.
The shift towards the retail channel presents challenges for vendors, retailers and traditional business resellers. "Overall, the consumer entry-level products are very commoditised. The battle is fought solely on price and differentiation is achieved through added value, such as warranty deals. Retail dominates and you cannot sell purely on technical specification," he said.
"Consumer motivators are very different to the business audience. Factors for retail include added value such as warranty and service included, sales promotions and visual appeal and design," added Lavery.
Retail is certainly the main route in the games market, said Acco's Russen, and some products are bundled more often. "Retail is the dominant channel and online ordering is increasing. Gamers in general are early adopters and are comfortable ordering online. Most OEMs that sell to the home user now offer joysticks and gamepads as part of their overall package," he said.
Scanners are one of the fastest growing segments of the market, with several leading vendors reporting strong sales. This is a competitive sector and Fujitsu, Epson, Bell and Howell, Kodak, Umax and other well-known names are fighting for market share.
Demand for scanners is also growing fast in the consumer market, said Rob Clark, product marketing manager at Epson. Prices are relatively low and the increase in demand for photo manipulation in the home is driving sales and lowering prices as vendors respond to this opportunity.
Keeping customers happy
The high-end market is also growing. David Whitton, business manager for scanner products at Fujitsu, estimates current market growth to be 25 per cent. The reason for this is that applications that need scanning technology have moved up the end-user's IT agenda.
"The applications have proved themselves now, and the key advantage of document management applications is that they are harnessing knowledge. Companies have realised they have to compete by working on customer satisfaction and retention, and document management is a key part of that strategy," he said.
Whitton predicted that the continuing popularity of supply chain management, customer relationship management and knowledge management applications will continue to pull through imaging sales.
Nick Stephens, marketing manager at projector distributor IMC, also anticipated growth in scanner sales, particularly USB-based products, which he claimed increased 400 per cent in the past 12 months as prices fell sharply and the technology improved, and expects more of the same this year.
"Resolution is getting better. Even entry-level scanners produce good results. Firewire has increased focus on technology advancements, such as faster connectivity, while USB2 will appear later this year, but without daisy-chaining capability," he said.
One area going through a huge transition is the projector market, which is now beginning to mature, said Stephens. "Prices are becoming mass-market, starting from £1500. Demand is now coming from many different sectors: from education and the home as well as the corporates," he said.
Projector sales are being helped by the rising popularity of mobile computing, he added. Market analyst Decision Tree Consulting said the western European market for projection systems was worth $1.7bn (£1.1bn) last year and that the fastest-growing area was ultra-portable models weighing between 2.25kg and 4.5kg.
According to InFocus' Medendorp, projector sales will account for 52 per cent of the total peripherals market (excluding printers) by 2002. At present, the UK market consumes 75,000 units and this will rise to 130,000 units within two years.
Change is the only constant
It's a fast-moving market, said Epson's Clark. The company expects to ship close to 10,000 units this year and it has to keep prices low as the market is very fragmented. He believed Epson is the leader but it has perhaps only 12 per cent of the market.
Growth in the projector market is having a profound effect on distribution channels, said Nick Amer, product manager for monitors at Computer 2000 (C2000). "The days of the specialist audio/vidual distributor are numbered if they continue to overcharge the market for entry-level products. The top end of the market still needs solutions, but distributors such as C2000 now sell serious numbers of projectors into the IT market," he said.
Digital cameras are also a strong growth area, with the market set to grow by 50 per cent this year to about 500,000 units, according to Amer. "A convergence of technology is creating new markets and drivers. Last Christmas, the traditional SLR market was eroded for the first time by digital cameras. Ease of use, functionality, ability to print and develop without PCs or by nipping into the chemist will ensure continuation of this growth," he said.
Another product performing strongly at C2000 is the add-on display market, where the flat-screen TFT technology has triggered a surge in sales. Surprisingly, said Amer, prices are fairly stable at the corporate end and recent hi-tech lifestyle products are stimulating retail sales.
Philips' Duffy said the boom in flat screen monitors, projectors and digital cameras is all part of the same trend. "Our research shows consumers are looking for quality, good design, ease of use and interconnection. Applications have become more important: videomail, PC cameras and modems go well together and provide an opportunity for resellers to increase the value of their sales," he said.
There has also been a knock-on effect in the printer market, said Epson's Clark. "There has been tremendous growth in the photo-printing requirements on the ink-jet side. This is in line with the increase in scanner and digital camera sales. People can now email photos and print them."
Add-on storage products have been a useful source of income for many resellers and retailers over the past few years, but the storage peripheral market has become crowded and is changing rapidly. Primary's Lavery said more products are coming onto the market, forcing vendors to move into niches. Distributors and resellers may also have to re-focus. "Resellers need to identify which area they can work in and develop sales strategies to help their customers see the value of the channel," he said.
Paul Sleep, library product manager at specialist storage manufacturer M4 Data, said the lower end of the market is suffering because of usage trends. "Network attached storage is growing as it offers devices that you simply plug a power cord and network cable into and they are up and running. But demand for personal storage devices such as Zip and Jaz is declining. The only reason for this is where once you may have sent or received a file by Zip, it is now not so prohibitively expensive to attach it to an email."
Vendors are grappling with changes in every area of the peripherals market and it remains one of the most diverse sectors in the IT industry. There are many players and no clear leaders across the entire peripherals market.
The situation is not likely to change, but there are challenges ahead for vendors and the channel. IMC's Stephens believed companies that adapt to the changes will do best, as they will be able to ensure their products are focused on specific areas, be they consumer, corporates or educational.
- Peripheral sales are growing in almost every sector. Driven by internet growth, the key areas are digital capture and output of photographs.
- Retail and mail-order are strong routes to market, but some products still need to be integrated with other technologies and thus require reseller assistance.
- Scanner sales are growing at about 25 per cent per year, driven by low-end demand for photo capture and high-end document management applications.
- Digital cameras are growing at 50 per cent per year as consumers adopt the technology. This trend is also driving up sales of higher-resolution colour ink-jet printers.
- Projector sales are rising fast. Demand for portable projectors is particularly high, driven by the popularity of mobile computing.
First published in Computer Reseller News
See also:
All Portable
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