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When the chips are down
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The Personal Computer market in the city has hit a trough and what lies ahead is a plateau, writes PRAKASAM K. UNNI.
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Most sellers of Personal Computers in the city would like to forget 2001-2002 in a hurry. With falling margins, declining sales, unhealthy competition and a record number of sellers going bust, the business now faces an uncertain future. It is estimated that compared with 2000-01, when 600 to 700 computers were sold in the district every month, sales had decreased by 30 per cent this time.
Following the September 11 attack on the WTC in New York, corporate buying had come down drastically. "Not only has corporate buying decreased, payment from many corporates is also pending, leading to a cash squeeze," says L. V. Murali of Vigneswara Traders and Computer World. Government spending too had come to a standstill owing to strained finances and strikes.
The Government usually buys computers in January, February and March. The recession in the Information Technology industry with layoffs and scant job prospects too had taken their toll. "Parents are not as enthusiastic as before to buy computers for their children. They do not see IT as an industry of promise anymore," says S. K. Harikumar of Logtech Infoway.
Padmakumar of Trynet Systems affirms, "Parents are not taken in anymore by their wards' arguments that buying a PC is the key to a glorious future." Every year, the market has seen its share of `buy-on credit-sell-collect the money and scoot' operators. But a record number of sellers have gone bust during 2001-02. A shrinking market had seen many sellers sell PCs at a loss in an effort to increase goodwill and clientele. This unfortunately did not happen and businesses went down. Those who resorted to borrowing money at exorbitant rates of interest to sustain their sinking business saw them sink faster into the quagmire.
Though the PC first reached the city more than a decade and a half ago, the market has exponentially grown only during the past six years. L. V. Murali, who has been in the business for 12 years says, "The first six years were dull. But the arrival of the Internet and multimedia changed all that."
The advent of the Internet has seen a change in the nature of the buyers too. "Unlike now, whoever came to buy a PC earlier was knowledgeable and used the computer for learning, business and development. Selling a PC required more effort, fetched more profit and left all happy," says S. K. Harikumar, a Compaq dealer and the largest seller of assembled PCs in the city who has been in the business for eight years. "But today, owing to the unhealthy competition all around, both buyers and sellers end up feeling they have not had a fair deal."
Assembled computers continue to corner the lion's share of the Home and Small Office computer market here. In spite of huge advertisement budgets, branded multinational PCs such as Compaq and HP have not made any remarkable breach in the assembler's domain. Local brands such as Zenith and HCL have fared slightly better because of lower difference in prices with assembled PCs. Brands are estimated to have a share of less than 15 per cent of the Home and Small Office market, even though they have a strong presence in the corporate segment.
But loyalists in both camps would swear by their choice. While customisation and prices work in favour of assembled PCs, reliability, performance and better integration of components are reasons cited by buyers of branded ones. People who face frequent transfers in their work opt for branded PCs to ensure continued service at their new place of posting.
Owners of assembled PCs are by and large happy with their choice though there are instances of dissembling assemblers, `disappearing' sellers and lousy after-sales service. Says M. J. Babu, an engineer working in Kuwait, "By going in for an assembled PC, I can ensure that I get exactly the configuration I have in mind. I study the products, compare prices and evaluate the sellers." But B. Thankappan Asari who runs a DTP centre and press at Aanad near Nedumangad, bases his choice on trust. "I am not aware of the quality and prices of the various products in the market. I bought my first PC seven years ago. Ever since, I have relied on the seller to make my choice for me," he says. What he says is revealing.
Assemblers who have built a climate of trust by trying to make a relationship instead of a mere sale and have not resorted to unhealthy pricing have managed to stay afloat in the ongoing slump. Buyers of branded PCs, in spite of high prices and service charges after the period of free service, feel they have made the right choice. "In branded PCs, there is full-scale integration of all the components that makes for better performance. There are no disparate, non-compatible elements," says P. Vijayakumar, an officer with the Union Bank of India. K. Hariharan, with the State Bank of India, feels the heavy Annual Maintenance fee he pays for his branded PC is worthwhile.
Students of Engineering and IT in the city often go in for assembled PCs. They feel a sense of power in choosing each component on its merits and seeing it all put together. They religiously acquire the knowledge for this by reading hardware reviews in computer magazines and on the Web. But there are some who differ.
Jose Francis of the College of Engineering here is one such. Asked why he chose to buck the trend, he says, "Branded PCs perform better as they are well-integrated systems. They will last longer too." Even as the Branded versus Assembled debate goes on, both the players have resorted to `buyback' of used computers to tide over decreasing sales. "Branded companies do not offer `buyback' schemes. But dealers do it to increase sales. The used machines are then sold to DTP centres, training institutes and the like," says Murali.
Harikumar says that upgrading and exchange of old computers account for about one-fourth of sales. "But, there is more profit in re-selling an old computer than in selling a new one."
Customers, buoyed up by media reports of a fall in computer prices following the lowering of duty ceiling on computer components to 30 per cent, are in for a rude shock. "Most components were already being taxed at less than 30 per cent. This decrease will apply only to a few low-cost items such as speakers," says Harikumar.
Opening up of Internet telephony and summer holidays for schools are expected to change things. "Usually, four to five months after the year-end exams, we have brisk sales," says Harikumar. "However, the market has reached a state of saturation," he adds, echoing a feeling prevalent among most sellers -- that the PC market has hit a trough and a plateau is what lies ahead.
Illustration: O. Sundar
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