Beating the consumer spending slowdown

The business angle

There are close ties between the consumer electronics space and the SMB space. Put simply, due to their size and focus, SMBs invest heavily in
consumer electronics.

According to Research firm Yankee Group, consumer technologies can increase the productivity of SMBs outside the office by 30 to 40 percent.

The industry analyst claimed that the SMB work environment has not changed significantly in the past 30 years, but the impact of ubiquitous connectivity is changing the work/life balance of enterprise and SMB workers, empowering the ‘anywhere’ culture.

“SMBs are stuck in a productivity malaise using technology no more helpful than a bikini in a meat locker,” said Steve Hilton, vice president of Yankee Group’s Enterprise Research group. “Ubiquitous connectivity is becoming a reality, and SMBs must adopt consumer and business technologies to improve employees’ work/life balance and drive productivity.”

Blogs, wikis, smartphones, wireless laptops, instant messaging and online travel services have the greatest impact on SMBs, according to the report, increasing productivity by 25 to 50 percent for SMB mobile employees. But voice-only phones, Second Life, Slingbox and YouTube decrease SMB employee productivity.

Yankee Group explained that, to maximise employee productivity, SMBs must force IT staff to support the ‘just-making-its’ and ‘common folk’ in their organisations just as much as the ‘movers and shakers’ and ‘aspiring executives’.

“There’s little doubt that the current economic situation has caused a slowdown in spending by both consumers and small business,” said Phil Newton, managing director of BenQ Australia. “However IT essentials are still must-buy products. Numerous small business operators are looking to upgrade their systems rather than replace them which is driving peripheral products. The TV market has been very buoyant and is clearly bucking the global downward trend mainly thanks to the Olympics and the football finals.”

Kim Ward, national sales manager at Brother, agreed that current static spending by consumers has affected the consumer electronics market and said the trend will continue well into next year.

“Household consumption has dropped from 2007 and is predicted to drop again in 2009. As rising household costs such as interest rates, petrol, food etc, bite into household budgets, retails sales will be cut. Something has to give and the discretionary items will be the most affected,” said Ward. “Some of our resellers in the IT/office and printing space have been experiencing signs of a contraction as discretional spending is also being affected by the rising cost of living.”

However it is not all doom and gloom for every aspect of the consumer electronics space. For example analysts ABI Research has forecast that consumers will increasingly demand digital content, social networking and IP services delivered through embedded networks in the devices they buy. This will result in an increased demand for networking products as leading device categories for embedded networking in consumer electronics shift from the early market leaders – game consoles – to TVs and DVD players.

“While many TV manufacturers have been evaluating the integration of networking features into devices for some time, only recently have manufacturers such as LG, Sony and HP begun to ship products en masse with embedded networking,” said Mike Wolf, research director at ABI. “Japan
has had networked TVs for some time, but other regions are beginning to receive such merchandise as TV manufacturers begin to see the value of future-proofing their products with IP connections.”

Portable devices such as media players and game consoles will have mostly wireless networking connections such as Wi-Fi, according to the report, but fixed devices such as TVs, set-top boxes and other device categories are expected to have a mix of Wi-Fi and Ethernet connections.

“Networking connections have gone from being ‘nice-to-have’ to ‘necessary’ for some categories of devices such as portable media players and gaming consoles,” added Wolf. “We expect that, as more devices get tied to content services, other categories will follow the same route, and we are already beginning to see this today.”

Graeme Reardon, A/NZ regional director of Cisco’s Linksys division, said: “Our business is growing quite well in a flat to potentially declining market of consumer spending. This is testimony to the fact that we have the right products at the right time.

“I’m sure if you were speaking to someone within one of the mass merchant retailers they would say they have seen a slowdown, but specifically from our range of products we are in a very lucky position. We are hearing about the slowdown in consumer spending, but because of the new products we have released we are actually seeing our business increase and that is because when consumers go to purchase networking they are seeing a choice with a number of new intellectual properties available.”

Reardon said Cisco has been saying for sometime that the network is the platform for a range of other offerings and it has built its vision for the company around that ethos.

“As more and more pieces of equipment come out they will be enabled to go on a network. Therefore having a robust, secure and reliable network will be critical to support these infrastructures coming onto the marketplace,” said Reardon. “Whether it is your standard run-of-the-mill products you have today
such as phones, PCs and printers into sharing multi-media video content into your TV from the Internet, this is where the network becomes more and
more critical.”

Reardon said the key to networking equipment is hiding the complexity of it so it is simple for the average consumer to set up, run and monitor applications on their network.
“One of our big focuses recently has been on our mass merchant retailers. Some of them are finding things pretty quiet at the moment. However, with the Olympics there was some good sales with some large screen TVs,”