No, this isn’t 1987, although, the topic reminds me of challenges faced 20 years ago.
Back in the 1980s, desktop PCs were huge, expensive machines. I specifically remember the engineering lab at the University of Waterloo –- the only room where students (engineering only) — could access computers. Back then, many may have wanted a PC, but few could afford one. It was also a time when resellers could make a lot of money selling one machine, if they could convince customers to open their wallets.
Fast forward to 2007, the demand for PCs is solid. Total desktop PC shipments were estimated at 3,038,600 units in 2006. Roughly one in 10 Canadians bought a desktop last year. Almost all Canadians need a PC at home and at work. However, due to declining unit prices, finding resellers who are willing to provide PCs can be challenging. In the past three years, the average unit price dropped from $999 to sub-$600. As prices declined, so did revenues, and took the incentive to sell the machines.
As the industry continues to mature, the channel is facing a harsh dilemma: “Why bother selling a desktop PC?” In the beginning, the question was posed as there were no buyers, but high revenues. Now, we have buyers, just no revenues.
Here are my arguments for offering PCs. There are several major benefits for customers: strong product demand, secure form factor, and a way to improve customer service.
First off, Canadians, essentially, need one PC, if not two. Demands from work, family and friends, coupled with curiousity help fuel this interest. Although sellers don’t make a lot of money per unit, because of declining price points, the sale is relatively easy.
Secondly, in the desktop versus notebook debate, desktops offer multiple benefits including component upgrades and security. Upgrading a display or hard drive provides additional revenue opportunities. It is also more difficult to steal a desktop from an office without being noticed. Also, I don’t frequently hear stories of exploding desktops.
Finally, providing a necessary product is an opportunity for resellers to provide superior customer service. The argument of not making money on hardware sales is valid. Price points have eroded revenues. But that doesn’t mean that a company has to focus solely on the PC market, but rather, offer the products as part of an overall solution. Add the PC to security services for example, with the focus on the solution, not on the desktop. The key is to build the relationship with the customer. Not to say, “Why would I bother selling a desktop?”
Unlike 1987, when the majority couldn’t afford a PC, in 2007, by and large, we can afford a PC, and we need one. We also want our trusted IT advisor to help us get the best one.
Michelle Warren is an industry analyst with Partner Research of Toronto