CHRISTMAS – MINING THE GOLDMINE

I recently took a trip to Sydney and found myself browsing in David Jones. As I navigated my way between signs proclaiming 50% off and ascended an escalator in this temple to consumerism, several bauble-bedecked Christmastrees came into sight… and it was only October 4th.

Apparently Christmas was coming and the goose was already getting fat. Now it’s November and we are all gearing up to get into full festive swing. Which means it’s time for The Channel to take a look at the IT products that are likely to be popular this Yuletide.

BonanzaDespite the recession, some are getting ready for a big Christmas season this year. Cameron Breingan, Product Manager, IT and Portable, for JB Hi-Fi says: “I think this Christmas will be just as strong as last, if not a little better. Last Christmas was forecast to be a disaster, but came through very strong. My belief is that a lot of us have consolidated our finances this year and put money aside in anticipation of tough times. With the current outlook more positive than negative, we may find people that have more savings than ever before choose to ‘reward’ themselves over Christmas.”

Added to this, Breingan says the recent recessionary times have actually highlighted the tendency for New Zealandersto “consolidate their home environments”. “If we are going out less, we want to be entertained at home,” he explains. Consumers, then, are interested in ways of experiencing their digital media better – be it HD TV, music, photos or film.

Nonetheless, consumers are more price-sensitive these days. Sandra Hanchard is Analyst at Experian Hitwise, the leading online competitive intelligence service, which leverages partnerships with multiple ISPs and opt-in panels to anonymously monitor users as they visit more than a million websites. She has seen evidence of this sensitivity to price as users search for brand names and products online.

IT distributors Dove Electronics and Ingram Micro also agree. Dove’s Auckland Branch Manager, Rick Jansen, says “the general consumer will benefi t this year as competition for their dollar is fi erce”, while Ingram Micro’s Windows Server Group Marketing Manager, Desmond Ling, sees that the focus has shifted more from ‘want’ to‘need’ and notes that sales of higher-ticket items are down.

BargainsThe data from Experian Hitwise shows that bargain hunters are already out in force.

“Price-sensitivity is certainly reflected in online behaviour in New Zealand, with bargain websites, One Day, Vouchermate, PriceSpy, 3 Deals, Off the Back being amongst the top 20 ‘shopping & classifi eds’ websites visited,” explains Hanchard. These results were from the beginning of October and are likely to increase. As with last year, Hanchard notes that the ‘auctions’ category in New Zealand is far more dominant than it is in Australia, the US and the UK, both throughout the year and during Christmas. “This partly refl ects the strength of Trade Me in the online shopping landscape, and the price-sensitivity of New Zealand shoppers,” she adds.

But, as anyone in retail knows, price is not the only governing factor. While customers are more price-sensitive, JB Hi-Fi’s Breingan suggests: “Value is clearly going to be important, as well as an understanding and sense of control of the sort of commitments we are making. If we don’t have that certainty of income in the long term, we may want to make shorter-term investments.I think everyday good value in price may be more appealing than long-term interest-free deals at the moment.”

Chris Allsop, Marketing Co-ordinator, Apple Division of distributor Renaissance, says that although price is always a significant factor in any purchasing decision, sellers need to add to the perceived value of the product rather than simply discounting. “Make sure staff know the benefits and features of the products and how they will enhance a user’s experience. Tell the whole story of the product!” Customers should be aware of the real value of the product and made to appreciate its worth, rather than simply wanting it at a lower price.

Having said that, Dove’s Jansen does pointout that customers are shopping arounda lot more, so price does certainly matter. “Customers are very price-conscious at the moment and are very well educated purchasers due to the internet.”

OnlineExperian Hitwise’s Hanchard has also noted an improvement in the way we are using the internet to find the informationwe require. “Consumers have become more specific and sophisticated in their search behaviour, with search strings containing more keywords and product codes.” She suggests that retailers who are leveraging search marketing to attract buyers online should ensure they are including specific product codes in their pay-per-click campaigns.

Added to this, Renaissance’s Allsop says online shopping really boils down to two things: price and availability. “Consumers purchasing online are looking for the best price and the quickest delivery,” he explains, so if you want to win market share through an online platform, make sure it’s low-cost, slick and easy to use, with an excellent back endprocess that enables fast shipping.

Repair and upgradeIn the spirit of price consciousness, a couple of those interviewed byThe Channel magazine have noticed a trend towards repairing and replacing broken products. This in turn has led to a trend in upgrading, particularly among Generation Y and younger. JB Hi-Fi’s Breingan says: “A lot of the product we sell spans gender and generation, but iPods are always popular with the kids. With the volumes that go through the market there is a defi nite trend to ‘updating’ to the latest and greatest models whenever they are launched.”

Dove’s Jansen also says last year’s products will continue to be popular in their upgraded versions, such as Windows 7, the new iPod range and the new PS3 slim.

Year to yearAccording to data gathered by Experian Hitwise, many of last year’s hot IT and electronics products are likely to be aspopular this year. “We’ve seen the top product categories perform consistently every Christmas for the past 2-3 years,”explains Hanchard.

She adds that the most popular product categories within the electronics sector during Christmas are likely to be mobile phones, games and consoles, computers, mp3 players and household appliances. This year in particular, headphones, navigational units and set-top boxes are also likely to be popular gift categories.

JB Hi-Fi’s Breingan also notes that “visualproducts” from TVs to gaming are always hot items come Christmas time. “We are still seeing improving value in larger screen sizes across both LCD and plasma. New backlighting technologies are making LCDs thinner and more energy-effi cient as well as enhancing picture quality. Onboard digital tuners bring HD quality images within everyone’s reach via Freeview HD.”

Playing with AppleApple products, such as iPods and iPhones, are one of the top categories and are likely to be very popular this year, thanks to their easy-to-use functionality and “the usual cool factor”, as Renaissance’s Allsop puts it. Hanchard says: “The iPhone stands out far ahead of other electronics products that are being searched for by New Zealand internet users. The release of the iPhone 3GS in July this year has helped to sustain and build interest in the smartphone.”

In fact Apple and its wide range of products and accessories was the only brand mentioned by all of those interviewed by The Channel magazine. Renaissance’s Allsop says: “Almost everyone has an iPod, and the vast range and price point of accessories caters for all consumers. These products bring an extra level of enhancement to an already great product.”

Gaming is another popular category this year, as usual. JB Hi-Fi’s Breingan suggests that “a gaming product – one of the major consoles” will probably be their biggest seller this year. This is borne out in Experian Hitwise’s data showing the top electronic search terms as iPhone’, ‘iPod touch’, ‘iPod’ and ‘iPod nano’, ‘Xbox 360’, ‘PS3’, ‘PSP’, ‘Nintendo DS’ and ‘Wii’.

Analyst Hanchard also calls Sony’s PS3 a “strong contender for the most popular product this year”. Coupled with the recent price drop for the PS3, consumers have demonstrated considerable interest in the new ‘slimline’ edition, with     searches for ‘PS3 slim’ and ‘PS3 slimline’ prominent amongstelectronic terms.

Windows 7Another anticipated trend, as mentioned by IT distributors Dove and Ingram Micro, is Windows 7. Whether it will be more popular as an upgrade or on a new piece of hardware, it’s hard to tell at this stage. Interestingly,however, Windows 7 was not mentioned by Experian Hitwise’s Hanchard when considering the top internet product searches. Nevertheless, Breingan of JB Hi-Fi says, “Windows 7 is going to inject a spark into this category [notebooks, netbooks and desktops] as a much improved experience,” while Dove’s Jansen refers to Windows 7 as “a great new  operating system”.

Note the netThere are some other growing trends too. Last year we saw the rise of the niche netbook as it blossomed into its own full-blown IT product category. This year, with the launch of the new Intel chipsets mid-year, we will see a generation of ultra-low voltage (ULV) notebooks and netbooks fl ood the market.

JB Hi-Fi’s Breingan says: “We are going to see a much bigger offering of ULV notebooks across all brands, providing the extended battery life of a netbook (eight-plus hours) but in a full-size notebook chassis. There is a small compromise in overall processing power, but these machines will be more than useful for everyday computing – offi ceproductivity and web-based applications.” Perhaps the only limitations in raw grunt would be apparent for gamers or high-level image or video editing.

He adds: “For me this is the standard that a notebook needs to reach – all day computing. What’s the point of a notebook if you have to plug it into a wall most of the time?” Ling of Ingram Micro agrees, saying that ultra portability and low power consumption are must-have features for this year’s Christmas product purchases.

What’s in store?Much like last year, the trend towards personal storage devices is gaining momentum, particularly the network attached storage (NAS) market, as highlightedby Ling of Ingram Micro and JB Hi-Fi’s Breingan, and personal storage by Dove’s Jansen. The proliferation of personal digital content such as music, video, images and pure data in the home environment is causing consumers to consider the impact that the loss of any or all of this data would have. Redundancy is no longer simply a business consideration, and it is now relatively inexpensive to have a large-capacity storage device in the network performing continuous shadow backups across multiple devices and even streaming content wirelessly, acting like a media hub. This also refl ects the trend for multifunctional convergent devices that can provide all of those media needs.

ConnectivityAs part of this trend the lines between pure audiovisual and IT products continue  to blur. JB Hi-Fi’s Breingan says: “We have LCD TVs with ethernet and/or wireless connectivity able to stream content from a computer or media server or access online information directly.” The expectation to be able to access content anywhere, anytime on any device is now a reality with the right product and know-how. “We have some exciting times ahead as more everyday devices start to interact and share information,” he says.

Mobile phones also play their part in the connectivity space; however it was interesting to note that, apart from the iPhone, no one interviewed by The Channel actually mentioned mobile phones in this year’s top products. Hanchard of Experian Hitwise suggested they would be a popular category, like last year, and, with the fairly recent launches of the new 3G networks, it is likely that those who didn’t cash in at the time will consider the mobile phone category. Another segment of mobile phones likely to be popular, as highlighted by Ingram Micro’s Ling, is hands-free sets, given the advent of the new law banning driving whilst holding a mobile communication device.

In storeTo really cash in on the Christmas goldmine you’ll need to make sure that you make things easy for your customers. Having similar or complementary products adjacent to one another is important all year round, but even more so when the pressure is on in the lead up to Christmas. Added to this, you want to have well-trained and knowledgeable staff to make sure that your customers avoid any Christmas Day disappointments, when the perfect gift cannot be used immediately or want of a set of batteries or the correct cable. JB Hi-Fi’s Breingan says: “It’s important to have good range and product depth, you want to have a fun and easy environment to shop within, [and] staff should have the know-how to highlight complementary products and/or critical add-ons.”

Kiwi generosityBreingan says: “For ‘gift’ products I think Kiwis tend towards the generous and it wouldn’t be unusual to see a $300-$500 purchase for a gift item.” So, with the figures looking good for this year’s festive season and the recessional cloud lifting, you can prepare yourselves for an enjoyable and profitable lead up to Christmas.