At CONTEXT we’re constantly striving to bring insight and actionable market intelligence to the IT channel. Over the past three decades that central mission has seen us expand into 16 Western European countries, and even further afield: to Russia, Dubai, Japan and Brazil. We’re delighted to be taking the next step of our journey in South America by launching the first ever distributor panel in Argentina. It’s been a tough year for the channel there so far, but this is an opportune moment to offer CONTEXT’s unique market analysis, so that channel organisations can make crucial business decisions with greater confidence going forward. Continue reading
Category Archives: IT Distribution
On 18th July a new forum for the channel in Italy called #DISTRICT was inaugurated in the trendy and recently renovated tech district of Milan – the initiator was G11 Media and Channel City, who invited CONTEXT to present our reseller and channel research and use the occasion to announce the distributor of the year awards for 2018.
Italy is the country, from our recent research, where resellers most like coming together at events. So in the Italian business culture it is clearly important for people to engage with each other, and keep up to date with the latest trends. The brains behind this new format, Marco Maria Lorusso, made it clear that the topics would be current, relevant, presented by experts, short in duration and long on exchange.
With that as the set-up, there was a clear hunger at the evening’s session to learn about what resellers are thinking through the results of the ChannelWatch survey. Italy is a model of engagement between distributors and resellers – it is the major European country where the participating distributors managed to achieve the highest number of reseller responses to the ChannelWatch survey – an impressive 1,610 responses. The distributors emphasised their interest in resellers expressing their voice. In a world as fragmented as the reseller community, it is important to have such opportunities, and in CONTEXT we are keen to develop the involvement of both distributor and reseller communities in all countries in this process of articulating what resellers are doing and thinking.
The results of the survey have been sent to the Italian distributors who participated in the survey – without their support it would not be possible to gain such powerful traction in the market, and we are grateful to them for this. The full ChannelWatch report will be published in early September and will be available for sale to all those interested in using this process to understand and engage with resellers in the technology industry.
Here is a link to the keynote given by Adam Simon, Global Managing Director of CONTEXT, at the evening on 18th July for those who want to have a sneak preview of the results!
Throughout 2018 CONTEXT has been marking its 35th birthday – we have used this anniversary year to look back and celebrate the growth of a company from small beginnings to being a serious force in the IT industry. On the occasion of the latest GTDC EMEA Summit last week –where vendor and distributor leaders meet and debate the most current issues in the industry – Jeremy and Howard Davies, CEO’s and co-founders, took the occasion at a CONTEXT vendor dinner to look forward to the next 35 years. Continue reading
Much of the value CONTEXT offers its clients comes from the insight we distil from data collected at every point in the channel supply chain. One of the main sources of this sales and pricing data is the distributor. So we took time out to get some deeper analysis with Ilona Weiss, CEO of ABC Data.
ABC Data is a leading IT hardware and consumer electronics distributor for Central and Eastern Europe, covering markets including Poland, Romania, Hungary, the Czech Republic, Slovakia, Lithuania, Latvia and Estonia. The Warsaw-headquartered company sells thousands of products from over 400 suppliers, so it has great visibility into what’s going on.
Cloud drives growth
Smartphones and cloud services offer some of the biggest opportunities for 2018 and beyond, according to Weiss. in 2014, ABC Data bought Apple distributor iSource, which is a leading distributor of Apple devices in Poland. Moreover, ABC Data is extending its vendor portfolio all the time with new additions such as the Chinese giant Xiaomi. Being the first distributor of Xiaomi in Central and Eastern Europe, ABC Data was largely responsible for boosting the sales of this brand in the region. Recently, in close cooperation with the vendor, ABC Data has opened the first official Xiaomi store (called Mi Store) in the biggest shopping mall in Warsaw. The plan for upcoming months envisages extending the range of the Chinese company’s products in the distributor’s offer.
ABC Data’s cloud platform is a more recent investment, launched in 2017, but also seeks to tap a demand among business customers to drive innovation and growth through digitalisation. With ABC Data, cloud partners have access to a wide and diversified range of offerings, such as virtual servers, storage, tools for creating proprietary applications and solutions enabling data archiving and back-up. These are sourced from both global and local suppliers. Recently, ABC Data signed a contract for the distribution of Microsoft CSP (Cloud Solution Provider) products in the entire CEE region. As Ilona Weiss explains, cloud computing is the future of modern IT. It is gaining more and more recognition among companies and institutions in Poland, as well as from resellers and integrators associated with ABC Data, who are interested in selling cloud solutions provided to them by ABC Data.
This chimes with the findings of the CONTEXT ChannelWatch Survey from the end of 2017 that reported nearly half of global resellers are preparing to sell cloud services — especially back-up (53%), storage (47%) and business apps (35%). Like many of its counterparts, ABC Data is seeing a great deal of interest from the vendor community as business models become more cloud focused. With channel partners and vendors increasingly looking to offer combined solutions, Weiss sees an opportunity to grow by developing value-added distribution services in this space.
New investment areas
As for the rest of 2018, she claims that many businesses in the region will be investing in new desktops and particularly notebooks as part of the upgrade cycle. The trend will be particularly acute in the SMB space. Meanwhile, in the consumer market, the growth of digital entertainment is expected to lead to growth in the video gaming sector, which is very promising, she says.
Despite a turbulent past couple of years in the regional IT market, things are on the up and Weiss is optimistic about the future. The main cause for this is the room to grow in the above-mentioned areas of cloud and mobile, but also value added distribution and e-commerce.
Indeed, following the acquisition of the S4E company in mid-2016, ABC Data Group has significantly improved its position in the VAD area. In the coming months the group has plans to concentrate on further consolidating its position on the services market and adding value by, among other things, consistent development of its specialist products and services portfolio and by expanding its educational offer.
On the other hand, 2018 marks the 20th anniversary of the creation and first tests of the ABC Data’s sales platform – InterLink, today available in 9 language versions to thousands of B2B clients in the CEE region. It has played a key role in popularising e-commerce solutions and online shopping in Poland and in the region. ABC Data’s CEO believes that it is precisely the innovative, intuitive and trouble-free e-commerce platforms and m-commerce solutions that are the mainstay of this business.
This is why the company is constantly focused on the development of further functionalities of the InterLink sales platform. Recently, the feature of fast online payments was added. Currently, the company continues to develop the mobile version of the platform, m-InterLink, available to ABC Data’s partners in individual CEE countries. The m-InterLink application was launched last year and has gained a wide acclaim among the Polish customers.
The Company is also constantly increasing the scale of ABC Data’s operations in the CEE region. The result of these activities is the systematic improvement of sales. Only in the first quarter of 2018, ABC Data achieved a 41% increase in sales revenues in Slovakia, a 26% increase in Romania and a 16% increase in the Baltic countries. – This is why I’m not afraid for ABC Data’s future – says Weiss – We are the only company in the industry that operates directly in eight CEE countries, and we are still developing our business – she summarises.
1999 was a momentous year for CONTEXT. Not only were we facing the Y2K bug, but at midnight on 1 January 1999, the national currencies of participating countries in Europe, aka the Eurozone, ceased to exist independently. Their exchange rates were locked at fixed rates against each other.
By then we had built up a pretty successful pan-European price tracking and comparison service, PriceWatch. It had depended for years on our ability to monitor prices and VAT rates across different countries and currencies thus enabling customers to perform apples to apples comparisons across a huge swathe of IT products, from desktops to printers to displays.
The service started in the late ’80’s thanks to a chance comment from Unisys: was there anything we could do about tracking prices as the work involved was causing them a headache? We obliged, and started turning out huge folders, updated monthly, filled with pages of indexed specifications and prices, which then graduated into – gasp – an accompanying 3.5” floppy with the data in digital form. Many a CONTEXT old-timer will remember the wrapping and binder duty into the late hours of the night to meet deadlines.
The big question we faced was this: with the introduction of the Euro, was that the death knell for our European Pricing Service? The pundits said yes. Why would any manufacturer pay for data on prices when transparency was assured thanks to the common currency?
Of course, we need not have worried. In fact, if truth be told, the manoeuvring by vendors attempting to rationalise VAT rates and prevent grey market activity gave us more work than ever before. The PriceWatch service grew, and is now an extremely successful component of the suite of information products we provide today across the globe.
Has Russia become a nation of gaming fanatics? At first look it appears so: CONTEXT figures from the graphics card market show growth of 250% year-on-year in distribution sales for Q1 2018. That’s an increase of €7m to €30m to reach second in Europe behind Germany.
These figures came after an already strong 2017 year for graphics cards across Europe. The market grew by 90% year-on-year for Q1 2018, according to our distribution sales-out data. Nvidia GTX 10 series sales account for 75% of the European year-on-year market growth and Asus has the vendor top spot. Power, performance enhancements and new features have caught the eye of consumers, who waited a relatively long time to change out their older graphics cards as previous 800 and 900 series for Nvidia disappointed in terms of real gains.
But this isn’t the whole story.
A crypto-mining revolution
While graphics cards are a key component in gaming PCs, they’re also vital to the mining of crypto-currency. Can you guess which country is embracing crypto-mining with great enthusiasm? That’s right, Russia.
The truth is that mining for digital currency is an intensive task requiring large amounts of energy to power computers and cool machines. In fact, the process globally now consumes the same amount of electricity every year (33TWh) as Denmark, according a one recent report. Russia is at an advantage in having a cold climate in many parts of the country, plus cheap energy: ideal conditions to build farms of graphics cards to mine crypto-currency.
This isn’t necessarily being done by private enterprises and entrepreneurs with an eye for a quick buck. State-run bank Sberbank recently admitted buying a huge number of graphics cards, even apologising for the shortage which caused prices to double. Russia certainly wouldn’t be the first nation state to embark on a crypto-mining spree to swell its state coffers: North Korea is also said to be investing significant resources into operations in order to skirt international sanctions, although many of its efforts are said to be illegal, relying on botnets of compromised computers to mine currency.
In fact, most of the European markets have seen triple digit-growth in graphics card revenue on the back of rising crypto-currency valuations. So how is the market responding?
Last year we saw the launch of a new “mining” series of graphics cards tailored specifically to this new use case. However, interest has been disappointing and we’ve not seen anything in our distribution sales-out numbers to compare to the growth of standard models. The GTX 1060 and 1070 remain the number one cards for crypto-mining in their power/price combination.
It will be interesting to see how the market evolves this year. Clearly, graphics cards makers believe there is some mileage in developing tailored solutions for the new crypto-mining market, and will be disappointed to see how little impact they’ve made early on. Some will argue they shouldn’t change a winning formula. But either way we’re likely to see some stronger marketing efforts for the new “mining” series going forward.
We meet in Berlin, in the shadow of the Brandenburg Gate, archetype of 20th Century history, with its memories of terrible conflicts but also the place of a remarkable peace which flowered in the ruins of the grim wall. Are we still in the war of technology retail? Or are we establishing a peace where the key players across the industry lay down their arms and look for ways to collaborate, and build an enduring omnichannel retail space in Europe?
Collaboration has been an important theme of the TCG Summit in the last 5 years. It is an aspiration waiting to be turned into reality. Alessandro Stanzani of Canon gave an impassioned plea for more data sharing – he gave statistics showing that 51% of online shoppers leave the Canon website and head straight for a retailer. If the manufacturer and retailer shared this customer information, the retailer could welcome the arrival on their website with a Canon banner, prepared and ready with precious browsing information from the customer’s previous online visit. This model exists already – it is called Amazon. As Henk de Jong, EVP at Philips put it “Amazon teaches us that data sharing is an important practice which we should do.” However, the internet giant has an advantage of being an integrated company, whereas retailers and manufacturers are frenemies. They collaborate most of the time, but in those activities where they compete – manufacturer online sales being the most flagrant example – the trust disappears and the motivation to build a powerful technology ecosystem withers.
Small trust building projects is the way forward. This is the Amazon approach – innovate quickly, assess and then progress. Some retailers retort that, before they share data, they need consistent support from all suppliers. This may happen, but it won’t happen quickly enough and by that time, the innovation and acceleration which were the themes of the conference, will have eaten up more traditional retailers who have not adapted fast enough to the new realities. As Enrique Martinez, CEO of Fnac Darty said in his opening remarks “yes, there will be more consolidation of retailers in the market.”
“Let’s start with sharing product availability data,” was the suggestion of Rick Londema, SVP at Sony Europe. “By sharing data there is so much space to gain cash and optimise inventory.”
Some are already collaborating with different partners to combine datasets, as mentioned by Helmar Hipp, CEO of Cyberport, the German etailer who are “using data and algorithms to predict customer trends.”
Chen Zhang, the CTO of China’s JD.com, the third largest internet retailer in the world, stretched our horizons beyond Europe and reminded us how digitally advanced the Chinese are. He shared JD’s progress in unmanned warehouses, customised manufacturing, dynamic pricing, drones and even delivery robots. And returning to the theme of collaboration – by working closely and sharing data with Nestle, they have reduced delivery times from 5-8 days to 2-3 days and increased on-shelf availability from 73% to 95%.
As in previous years, the TCG Summit has the power to surprise, motivate and enthuse its attendees about the future of technology retail. Martin Wild, a relative newcomer to the industry (Chief Innovation Officer of MediaMarktSaturn since 2011) resonated with urgency and a call to action to innovate and accelerate. “We are just at the beginning of change – we have to be open to transform everything in order to remain relevant.” And he proceeded to show us the depth of innovation at MediaMarktSaturn – from renting products to customers as part of the shared economy and outsourcing this to a 3rd party, piloting AR (70% of customers in the pilot said they liked it and wanted more), and building collaboration with other retailers (notably Schwarz group) to invest in start-ups for smart retail technology.
The future of technology retail is indeed to innovate in order to accelerate, but also to collaborate – this means sticking to your knitting – “the biggest instore experience is through the motivation of the 6,000 people who work in Fnac now” said Enrique Martinez. But it also means investment as MediaMarktSaturn is doing, all this against a background of Amazon’s spend of $18bn on IT and $27bn on R&D, and similar or maybe even greater sums by the Chinese retailers.