The consumer electronics conundrum

A rapid rate of change is par for the course in the consumer electronics (CE) market. New products and features are released on an almost monthly basis, with vendors and consumers in a flurry to keep up. This raises the question of whether consumers are, in fact, staying abreast of the new features vendors and manufacturers are racing to deliver.

According to a recent report by research house Forrester, they are not. Forrester says consumer electronics products are becoming so complex, buyers will most certainly become frustrated by attempting to exploit the features they offer. Consumers just can`t keep up.

David Musikanth disagrees. He is director of marketing and corporate sales at national distributor Lightedge, and argues that users are comfortable with CE despite increases in the number of features.

"Everything is moving towards plug-and-play," he says, "so consumer devices are becoming easier to use. Bluetooth and wireless used to be crazy concepts, now they are considered easy and simple to use within the consumer space. If you look at the camera and photography market, most consumers don`t even look at normal analogue cameras anymore, but rather at digital."

The media centre is still marketed as a PC, where it shouldn`t be.

Francois Lottering, Proline brand manager, Pinnacle Micro

Even if they were confused, this would not keep consumers from purchasing complex electronics, says Robin Olivier, director of local Apple centre Digicape. "I don`t think confusion chases people away. A large part of the economically active South African market is very brand conscious, so their purchasing decisions are driven by brand rather than features."

If this is true, one might expect such brand loyalty to leave little space for lesser-known brand names that command lower prices, but this does not appear to be the case. These imports do have an impact on the revenue streams of local vendors, however. The cost of keeping up with the rapidly moving trends in CE is also affecting vendors` ability to decrease costs. Again, cheap imports are compounding this problem for local suppliers.

"Competition has never been fiercer in the CE sector," says Corlette Wessels, who is in charge of consumer electronics at IT distributor Comztek. "An over-traded market sees a huge number of products vying for mind- and wallet-share. End-users often settle for the cheapest they can find without realising that the products they buy may not be as high in quality or have as well-established a support infrastructure as name brands. This is particularly true for products such as MP3 players, cameras and networking or wireless communication products."

Competition has never been fiercer in the consumer electronics sector.

Corlette Wessels, head of consumer electronics, Comztek

While this competition is bad for vendors, it is good for consumers, who are enjoying lower prices. Additionally, not everyone agrees the market is over-traded. Musikanth says: "The market isn`t over-traded yet. It is becoming increasingly so, as more and more suppliers enter the arena. But consumer needs are always expanding, so technology needs to keep up and this creates new opportunities for vendors.

"This is great for the consumer, as it creates ridiculously low prices in a short period and expands the range of products available. We`ve seen this in the USB flash drive market."

Unfortunately, not all CE is enjoying the same uptake. While MP3 players and flash drives are becoming ubiquitous, products such as the home media centre are experiencing sluggish growth. This can be attributed to the fact that many home users do not understand the reasoning behind purchasing a new machine for media, when most already use their PC for some sort of entertainment - from gaming to listening to music, watching movies and viewing photographs.

So what is behind the slow start for the home media centre, despite the fact that Bill Gates and Microsoft have been touting it as the "next big thing" for some time?

According to Wessels, the concept of the home media centre is slowly gaining headway in SA, but uptake is not as rapid as in the American and European markets. Here again margins play a role and it is difficult in a sector as commoditised as IT for vendors to push new technology such as media centre PCs.

She says: "Consumers expect more from their systems, which are often required to handle a more diverse range of tasks, from business computing, gaming and entertainment to image, music and video production. They are reluctant to purchase one system for handling media and another for day-to-day work."

Locally, there is almost a culture of mistrust and that`s the reason why SA is about three months behind international trends.

Robin Olivier, director, Digicape

The problem lies in how the media centre is marketed, suggests Francois Lottering, Proline brand manager at Pinnacle Micro. "The media centre is still marketed as a PC, where it shouldn`t be. This makes home users think that they can still use it for everyday tasks and work," he says. "Vendors are not explaining that it [the home media centre] is purely for entertainment. Even though the media centre uses PC technology, it should not be marketed as a PC. Look at the success of Multichoice`s PVR product - it was not marketed as a PC so it has enjoyed a better uptake."

Musikanth and Olivier agree that vendors need to be creative in displaying the benefits of the home media centre.

Musikanth says: "Consumers need to see the home media centre in action to understand its benefits. We are trying to set up units at various touch points, such as universities. We need to coach the consumer and there hasn`t been enough activity and marketing as yet. The concept of the home media centre is brilliant, but the South African public needs time to adopt the product."

Olivier concurs with this assessment of the South African consumer, adding: "South Africans are difficult to appeal to with new products. People like their comfort zones. In Europe, consumers are more open to trying something new. Locally, there is almost a culture of mistrust and that`s the reason why South Africans are about three months behind international trends, although they do follow suit when they realise that a product is the new must-have."

Media centres are only one example. If vendors want to grow the market for their products, or even just win market share from competitors, they will need to increase marketing and education activities. While they`re cutting prices to stimulate existing retail sales, this will inevitably put even more pressure on profit margins.