GPS sales slow

Johannesburg, 06 Jul 2009

TomTom is cutting prices to beat the GPS sales downturn, while market leader Garmin says it will not cut prices, as they cannot go any lower.

The personal device global positioning system market slowed by about 20% in the first quarter of the year, compared with the first quarter of last year, says Richard Fearon, CEO of Avnic Holdings. Avnic is Garmin's exclusive distributor in SA.

However, the company had expected sales to be worse than that, as the US saw sales decline 40% and European sales were down 30% during the same timeframe.

Fearon does not see prices decreasing over the next few years, due to the cost of hardware and maintaining maps. Garmin has pulled out of the bottom-end of the market, he says, as the company only wants to be in profitable areas of the personal navigation segment.

Fearon says Garmin has more than 80% of the installed personal navigation device base in motor vehicles. Garmin has been in SA for about 15 years, initially in the aviation sector. Personal devices started to become available in the retail sector and began taking off in the past three years.

Garmin and TomTom are the only two major companies in this space, notes Fearon. He says Mio is small, and JNC is small and losing ground.

Challenger

As GPS units become more affordable, with the average price down about R1 000 from two years ago, more people will be able to afford units, explains TomTom regional manager for sub-Saharan Africa Joost Jetten. He says sales in the first five months of this year were down about 10% on the first five months of last year.

Jetten says when the regional office, in Fourways, was set up, TomTom had less than 5% of the market through its previous distributor, the Core Group. Last year, Rectron landed the contract to distribute TomTom in SA, after the Dutch company terminated its two-year relationship with the Core Group.

The surprise termination of the two-year relationship between the Core Group and the Dutch manufacturer occurred after TomTom indicated it wanted to have a physical presence in SA.

Jetten says that, according to the latest research from independent company GfK, TomTom had 51% of sales by volume of GPS devices going through tills in the month of May. This is up from the 24% it had in December.

GfK Marketing Services SA confirmed TomTom has been increasing its market share in SA, but would not divulge actual figures. This is because GfK, which measures sales of electrical items such as GPS at till points, works on a subscriber base, and will only tell subscribers what sales are.

Jetten says penetration of devices in the motor vehicle population in SA is low, at about 7%, but he believes penetration of 25% is possible, which equates to about 7.2 million cars.

Mobile competition

Arthur Goldstuck, MD of independent research company World Wide Worx, says TomTom has been pricing its product attractively, as well as positioning it as a “cool” item, which has buoyed sales. Garmin, as the market leader, has a staid image, he says.

In addition, future sales will be weighed down by the growing incorporation of GPS in cellular phones.

GPS standalone units, says Goldstuck, are “on a growth path, but probably doomed except for specialist purposes” such as outdoor.