You may be in a saturated market or you may be looking to get into making something that will go into a saturated market. Before you do, here are some things to consider.
The IT and consumer electronics space is getting saturated day by day, due to entry of new vendors, new product categories that cannibalise other product categories, multiple iterations of the same product, counterfeits of best-selling products, and so on.
Channel Post spoke to industry experts to find out how vendors and the channel can work together in order to ensure they make money in such a competitive market.
Is Your Market Saturated?
“Most markets in the Middle East have attained a saturation level in terms of volume business as most of the globally well-renowned players have already established a strong presence across the region,” explains Fouad Rafiq Charakla, the Research Manager at IDC MEA. “The recent few years have witnessed a good deal of innovation. However, once a successful strategy is witnessed, it doesn’t take long for others to replicate it and intensify competition all over again. In this case, businesses need to innovate more rapidly or continuously, which is very difficult and at the same time, very risky.”
However, Suchit Kumar, the CEO of Fondiversal Technology says that the market is not as saturated as you might think. “The regional market still has room and scope for more players and products. It is in the sense how one looks at the market,” says Kumar. “Basically, you need to define the business model based on the product and segment and you will still find a bite of the pie. It is about finding the niche and re-inventing the wheel.” According to Kumar, one positive way of looking at it is that all these people would not be in this market if there was not money to be made.
Africa: The New Sunrise Market?
Charakla says that Africa is indeed a bright spot within the MEA region, especially considering the low level of penetration of consumer electronics and especially IT devices, which clearly indicates the vast potential for growth the highly population region holds. “Accordingly, IDC has also seen growing investments by vendors and channels into the region to expand their presence within the African continent,” adds Charakla.
At the same time, however, industry experts believe that translating this potential into business is a challenge. This is because factors contributing to the growth of demand for these devices, such as education, IT literacy, as well as affordability, continue to remain relatively weak in Africa.
“Every market has a scope and Africa has two advantages. Firstly, they are more closer in vicinity to Dubai and secondly the growth potential is immense considering the government spending on IT and development,” says Kumar. “As the economy would grow it shall increase the buying power and infuse more consumer spending. In that context I agree that Africa shall be the sunrise market.”
Challenges in a Saturated Market
There are obviously a few negative points to mention about going into a saturated market. The first one is that others have already established themselves. There are well known sellers who already have a customer base and created their sales and distribution channel years ago. Older businesses generally rank higher than new ones and are more difficult to compete with.
“Margins are shrinking with more competition. The challenge is not to see margin as a stand alone factor but on the overall business the ROI with mix of product range and category,” adds Kumar. “It is about breaking the price barrier mind set of low price means low margins. This is the prophecy of low volume. For extrapolation of revenue and profits one has inhibit change and come out of margin myopia and look at the larger picture of business.”
When you make your brand or company stand out in glorious Technicolor, you liberate curiosity and insight, and evoke determination. You rid your business of its dull pallor, blind spots, boredom and bureaucracy. According to industry experts, the regional market suffers from the tyranny of best practices. Companies mimic the strategies of others, seeking out what worked best for competitors and attempting to apply similar tactics to their own businesses, without first considering whether differentiation might create a better result.
So the ultimate question is “Is there enough margins for the channel in the IT and consumer electronics arena?”. “This depends on the business model of each channel. Relying solely on the different between the cost and selling price of products is not feasible anymore. Channels need to generate other streams of revenue generation to ensure they maintain profitability,” says Charakla. “These primarily include volume rebates, marketing support or even value added sales. Certain large resellers even generate revenues by selling shelf-space to vendors.”
The Way Forward
Industry experts believe, a well planned and executed strategy can reap a number of opportunities, including growing market share, reputation, healthier margins, profitability, and so on. “Additionally, a greater number of channels also become eager to partner with the company to become part of its success and profit from it, offering the company a wider choice of partners,” adds Charakla.
Charakla says that vendors should keep on trying to shift focus away from the hardware specifications of devices and bring the spotlight on to how the device would help in enhancing user experience, be it in terms of productivity, entertainment or other purposes. “IT and consumer electronics comprise of devices which are rapidly evolving. Hence, as mentioned earlier, the biggest challenge vendors will continue to face in this arena are the need to continuously innovate, at the same time ensuring minimal risk incase a certain innovation does not attain the planned success,” explains Charakla.
Kumar also agrees that product strategies are the core for brand development and company goodwill. He says that a right product strategy can help respond to changes in customers’ perception and demand. “It will also help the company develop a long term and profitable relationship with the customer. Value business is important part to ensure the success of volume business as well as it help average the price. So it is important to sell a whole basket of product mix including higher end and value for money products,” concludes Kumar.
