2016 was always going to be the year of democratised VR, not mass adoption

Estimating shipments of products in new areas of IT is a bit like being the only lighthouse in view above banks of thick fog. It’s the only light you can see, so you’ve nothing to lose heading for it. We’ve been there with pocket PCs, Smartphones and Tablets. And while the fog has cleared for these products, the true state of the market for the much anticipated Virtual Reality headsets is still shrouded in mist.

At CONTEXT, as part of the work with our VR Research Group made up of major PC, HMD, and software vendors, our first predictions estimating the total number of VR headsets shipped in 2016 are conservative compared to some estimations from this time last year. If the basic HMDs are included, the lowest possible total global shipped units start at 8.5m, with true figures probably being closer to 12m+ once the plethora of minor Chinese brands are included. Theo Valich of global consortium VR First commented: “While we are seeing that the adoption of VR is waiting on content, the growth of VR in the emerging markets in Asia-Pacific is not being properly covered. The number of VR start-ups on both the hardware and software side is almost exponential.” The shipped units for the high-end headsets such as the HTC Vive, PSVR, and Oculus Rift CV1 are <15% of the total market, but to get a true picture of what has happened in 2016 and will develop in 2017, it is important that all types of headsets are included.

There are many factors to be considered when attempting to get a handle on the true state of the VR headset market. For a start, 2016 was never going to be about mass adoption for companies such as HTC and Oculus and here are several reasons why: in terms of the headsets designed for use with a PC, a very powerful machine is required and that rules out all but the most dedicated gamers and developers. Awareness of the category is only just starting to become widespread, and even for those with the required hardware, there is a lack of major hit AAA titles to drive sales.

In a recent survey, CONTEXT showed that only 10.5% of members of the general public in the EU had heard anything significant about VR, compared to 79.9% of gamers, with 26.5% of people having not heard anything at all. The issue facing the VR industry right now is that there is a transformative effect of trying it out that needs to happen; simply describing the experience is akin to attempting to explain the taste of Cola to a Martian. As a result, even the cheaper headsets – and yes, we are including the Google Cardboard – can make a profound impact on consumers. In 2016 anyone with a Smart Phone was able to experience VR for the first time, and thanks to Google and others there is a wealth of apps to demonstrate what VR can do. In the early stages of VR, such products are vital to raise awareness. Taking the analogy to the extreme, why would anyone spend $1000 on a sound system when they’ve never heard music on a transistor radio?

In summary, CONTEXT expect VR headset shipments to increase in 2017 for all types of VR headsets, with new industry verticals opening up. We’re seeing more and more VR technologies going through the ICT sales channels into a huge variety of sectors, including healthcare, education, elderly care, military, as well as major public entertainments. With current VR price points, the democratisation – and therefore unit shipments – can only increase, and all types of headsets will continue play a significant role, not just premium products.

by JW

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Tech Predictions: 2017

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In 2017 European PC sales in the business segment are likely to benefit from a gradual pick up of Windows 10 refreshes. In Western Europe in particular, the commercial PC segment is expected to also benefit from the need for enterprise mobility solutions which will be a co-driver in sales of both notebooks and mobile 2-in-1 products.

The consumer PC segment is expected to remain more challenged across Western Europe. There is a possibility that component shortages, which impacted product availability in 2H 2016, will lead to price increases in the first half of 2017which could affect demand. However, on a positive note, the market is likely to benefit from continuing high demand for gaming PCs. While this segment remains small in terms of volume, new technologies – including virtual reality – will also drive growth that will have a positive effect on revenue and margins.

From a wider, macroeconomic perspective, PC sales in a number of EMEA countries are likely to continue to be affected by uncertainties including currency fluctuations and political instability.
Marie-Christine Pygott, Senior Analyst, PCs

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View on Apple
Although you never know what Apple will pull out of the hat when launching new products, the last few years have been quite staid. The last “new” new Apple product was the Watch: but this was heavily trailered so, when it finally arrived, it wasn’t a surprise. We have waited in vain over the years for an Apple TV, and recently yawned when the new MacBook’s Touchbar was announced. In 2017 we have the prospect of yet another phone, the iPhone 8, and not much else.

Except, after much speculation, Apple has acknowledged for the first time that it is investing in autonomous car technology. In a letter to US transport regulators, Apple said the company was “excited about the potential of automated systems in many areas, including transportation”. Apple was first rumoured to be working on an autonomous vehicle in early 2015, when reports suggested that the company already had 600 employees working on an electric car design. Later that year, more rumours suggested that the company hoped to launch an electric car to the public by 2019.

So maybe Apple can surprise us next year. The race for electric vehicles is hotting up, and with the word being that Apple has been in talks to buy luxury-supercar maker McLaren, we may just see a prototype iCar roll onto the stage in 2017 after hearing those words, “one more thing”.
Jeremy Davies, CEO & Co-founder

Enterprise
CONTEXT will be closely tracking the evolution of storage systems and converged architecture: as cloud-managed wireless network service companies slowly but surely replace in-house wireless LAN appliances, we expect continued strong growth on these two fronts. Companies to watch: Cisco Meraki, Open-Mesh, Zebra (part of Extreme Networks), Ruckus.

Sales of solid-state drives (SSDs) have increased throughout 2016 and, for the first time, surpassed those of hard disk drives. As the price of SSDs fall and their capacity increases, 2017 will see this trend continue. In 2014, we predicted that 90% of storage components would be SSDs by 2020, and the industry is well on track to achieve this.
Gurvan Meyer, Senior Research Analyst, Enterprise Team

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Displays
Large Format Display sales in 2017 are expected to continue to grow strongly with demand being driven by the education and corporate sectors. For AV providers, the corporate business market continues to be a huge growth opportunity, with a big shift towards interactive products for meetings rooms, as corporates increasingly collaborate over multiple sites, with numerous remote attendees.  The education market is also expected to be a key driver of growth in the LFD segment with educational institutions increasingly adopting display solutions to change and enhance the ways they communicate with students, staff and visitors.
Lachlan Welsh, Senior Analyst, Displays

Imaging
Printer hardware sales will continue to contract overall, though some segments are expected to register growth in 2017, such as business inkjets with higher end products due to be released in 2017 to compete with laser devices. The shift from hardware to contract sales continues, therefore, the importance of partnerships and focus on channel partners will prevail. HP’s acquisition of Samsung printer business is expected to complete in the second half of 2017, as companies join their efforts aiming to disrupt the A3 copier market business.
Zivile Brazdziunaite, Senior Market Analyst, Imaging

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3D Printing
2017 will continue to see the two sides of 3D printing – the personal/desktop side (those under $5,000) and the industrial/professional side – evolve separately.  Desktop 3D printers will become even more affordable (some already cost as little as $300!) while the some of the world’s biggest brands will increase their presence in the Industrial/Professional market where technology will continue to advance and improve.

Desktop market leader XYZprinting has already expanded its brick-and-mortar retail presence – at Best Buy, Toys-R-Us, and Barnes and Noble in the US, and Darty, Dixons and Media Saturn in Europe – and it is expected to continue with aggressive price points in to promote further retail expansion around the globe. Next year will see HP fully enter the 3D printing world with the first shipments of their professional Multi-Jet Fusion 3D Printers, and a new business is to emerge from GE after their acquisition of two of the top five metal 3D printing companies in 2016.  HP and others will champion a change of focus in the plastics 3D printing market from rapid prototyping to mid-range production.
Chris Connery, Vice President Global Analysis and Research

VR & Gaming
The world of eSports will continue to grow in both popularity and recognition, as a movie is planned starring Will Ferrell on the burgeoning phenomenon. Vendors and retailers will pay more attention to PC gaming as the category offers them the chance to make up for losses in a sector which has been declining in the last few years. High average selling prices for gaming products, excellent attach rates and margins for gaming accessories, and the availability of unsecured consumer borrowing will be major drivers. Virtual reality will also continue to grow in the consumer space, although still at a modest pace. However we expect to see more HMDs going into the B2B and corporate reseller channels for which products such as the Hololens are a gift.
Jonathan Wagstaff, Country Manager UK & Ireland

Smart Home – Battle of the Giants
Back in October 2015 we predicted that new forms of control for smart home devices would stimulate growth in the market. We highlighted three: voice activation, gesture recognition and mind control. The first two are already here: voice control has exploded since Amazon launched the Echo in 2016 and 5 million devices have already been sold. We predict that this trend will grow quickly in 2017 with the Amazon Echo continuing to sell and the launch of Google Home in 2017. Google will apply a massive marketing budget – in the US they are already paying for end-of-gondola slots for Google Home devices.

With this in mind, we see four, and potentially five, giants battling for the smart home in 2017: Amazon, Google, Apple (with Homekit), Samsung (with Smart Things) and Microsoft. The ace up their sleeve for Amazon is entertainment (access to Prime Music), for Google it is search, for Apple and Samsung it is interoperability (potentially using the TV), and for Microsoft it is building out from the PC. We are optimistic that consumers will benefit: with a more coherent offer, small start-ups will no longer be able to create proprietary systems and existing systems will make themselves linkable to the big five in order to survive. It is too early to place bets on a winner, but Amazon has rapidly taken advantage of being first-mover. Gesture control will grow and develop in 2017, but mind control will need to wait for another year!
Adam Simon, Head of Retail

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Eagle Flight Over Paris

On November 29th, CONTEXT hosted a special VR breakfast in cooperation with Exertis France, AMD, MSI, Oculus, and Ubisoft in the Musée de l’Armée in les Invalides in Paris. Retailers, distributors and vendors gathered for the morning to hear the results of the latest CONTEXT European VR survey.

The VR survey was designed by members of the CONTEXT Virtual Reality Research group which includes companies such as Exertis, AMD, Oculus, John Lewis, Dell, CONTEXT, Retail Week and the University of Reading.  The research highlighted the expectations of European consumers towards VR and the potential barriers to purchase of VR products. It also showed in which channel the consumer were expecting to find VR products and how much they were ready to spend. The survey gave to the various industry players a clear understanding of what concerns they should address and what they should communicate in order to allow the technology to gain greater penetration of the market. A representative of FNAC, Laura Gaztambide, eCommerce Coordinator of Video Gaming, shared FNAC’s own experience on VR products and future plans to develop this market further.

Prior to hearing the results of the VR research, attendees watched a briefing on the European gaming market presented by Jonathan Wagstaff, UK & Ireland country manager at CONTEXT, and a detailed presentation on Ancient Rome made by university professor Matthew Nicholls who has made a full virtual reconstruction of the Eternal City, the outcome of 8 years of work. This helped the attendees to assess the educational potential and usage that VR is opening up.

Guests also had a chance to try Ubisoft’s Eagle Flight VR game flying over a virtual Paris, and were welcomed by a kind note of support for the VR industry from President Francois Hollande who was proceeding to an Army review in the Invalides on the same morning.

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by SA

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Is Black Friday dead? A US perspective

Guest blog by Chris Petersen, CEO of IMS, Inc.

Is Black Friday dead, or just rapidly waning? Data indicates the demise of the premier kickoff to holiday shopping in the US. It’s not just about the economy and consumer confidence, although those are key factors. The retail phenomena unfolding right now is about universal changes in consumer behaviour, regardless of socio-economic status.

Black Friday has declined in US retail … will the same trend happen in Europe?
In the not too distant past, stores were the premier focal point of holiday shopping. Black Friday was an event created by bricks and mortar retailers to entice consumers to come shopping on the Friday after US Thanksgiving, which always falls on the 4th Thursday of November. Since many US customers take off from work on Black Friday, it became the quintessential retailer marketing event to lure shoppers to the stores with “best deals” of the season. The theory was that if shoppers came early to find a deal, they would come back to stores for the rest of their shopping.

Not surprising, the UK and other European retailers adopted Black Friday as a promotional event to kick off the holiday selling season and draw traffic to stores. CONTEXT’s analysis of distribution trends in 2015 was very predictive for UK retail sales spiking for Black Friday. Will the trend continue in 2016?

Black “Friday” — death by a thousand clicks
Increasingly retail stores have been jumping the gun on Black Friday by offering Black Friday sales before the actual Friday. The result in the US is that there is no longer a singular event. Black Friday has suffered scope creep, and it literally has become a “Black Week” of promotions and deals.

More importantly, consumers don’t see Black Friday as just “stores” any more. Amazon and other online retailers have creatively capitalised on “Black Friday” by offering daily online deals across an entire week, or more. This has created a new trend for “Cyber Monday” which is the first Monday after the traditional Black Friday. In the US, workplace productivity actually drops on Cyber Monday as people at work scramble to get better deals on stuff they didn’t buy or couldn’t get on Black Friday. Cyber Monday is projected to be the single largest volume day of the entire holiday shopping season.

Did the same trend happen in the UK and other countries? Compared to the US, the UK has a higher % of sales occurring online, especially for technology. Many of the UK promotional ads in 2016 now in fact show the Black 5 days of deals: Thursday, Friday, Saturday, Sunday and Cyber Monday.

The net result is that today’s consumer is an empowered consumer. They are not bound by place or time of event. This translates into a much diminished effect of single retailer store events like Black Friday.

Large retailers have privately confided that Black Friday needed to “die”. The traditional approach of cramming all deals into a single day dramatically lowers prices and margin. It would be healthier for both if retailers and consumers could evaluate offers and spread shopping over a period of time. In fact, that is how today’s omnichannel shoppers are already behaving – shopping multiple days in multiple ways.

So what happened in the UK for 2016?
Were Black Friday sales up again this year? Or, did consumers shift more of their shopping purchases to Cyber Monday? How much of their Christmas budget have they spent? The final store sales numbers won’t be tallied for a couple of weeks.

However, CONTEXT is conducting consumer pulse survey right now. We are asking consumers when they shopped, and how much they purchased on Black Friday and Cyber Monday. It will be interesting to see how much they expect yet to spend in the rest of holiday season.

 

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Touch Bar Blues

I’m on my third MacBook Pro.

I remember the thrill of ditching Windows for my first MacBook Pro and feeling ultra-cool as the Apple logo lit up on the cover. Google and the Cloud liberated me from hard wired office email and document sharing standards, and I could remain Excel-Word-Powerpoint productive with the rest of the company. I truly had the best of all worlds.

Connectivity wasn’t an issue. In the beginning there were a few problems attaching to older projectors as sometimes the adapter didn’t work. But that was early days, and soon, whipping out a Mac or a PC in company and customer meetings was a non-event. When my 15″ inch storage got too small, I installed a 1TB replacement SSD. And when I thought the next 15″ got too big and heavy, I sacrificed quad core for dual core in the 13″ version, and never noticed the difference. Importantly, I was able to connect to all my devices as before.

I was looking forward to the new MacBooks.

I was hoping both the 15″ and 13″ would lose some ounces, svelte the design, get faster, and blow the lid off storage capacity, all topped by an OLED touchscreen display. And the assumption – of course – was that I’d be able to integrate seamlessly into the office just as before.

Well, it isn’t to be. Shame. I don’t need a touchbar, and I cannot even connect to my iPhone 7 without an adapter. I’m going to need another adapter to connect to my back up drives (yes I do use Cloud backup but I play it safe) and I haven’t even begun to think about how I connect to the company projectors, let alone the myriad versions in customers offices around the globe. So until USBC is truly universal, and upgrading means I have no connection issues, my trusty 13″ will do a perfectly adequate job for a few more years.

I’m fine with Apple pushing us early into new standards, but it should be taken easy. Progress on PCs today is not what it was ten years ago. The latest is not today necessarily the greatest. Much less in a company environment. So I’ll wait. Meanwhile, that HP Spectre looks very nice… does that make me a “MacBook refugee”?

by JD

 

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Despite continued uncertainty over Brexit, consumers must spend now to avoid price hikes

UK consumers’ confidence in their ability to weather the uncertainty around Brexit continues to slide as we approach the most crucial shopping period of the year, according to the latest Retail Pulse UK Survey carried out by CONTEXT. Across a range of criteria, the Great British public are shying away from spending. On top of this, UK retailers are getting ready to raise prices early next year as the pound continues to perform poorly. This means consumers have a choice to make; buy now – even though they’re unsure about their finances – or delay purchases and pay more later.

The CONTEXT Retail Pulse Survey is published quarterly, and examines consumer sentiment towards the UK economy and personal finances. The report for Q2 2016 showed that people 65 years and above were very bullish on Brexit—indeed, many of those surveyed likely favoured withdrawal from the EU. But just five months later, confidence in the future prospects of the economy from this age group has fallen significantly. While 42 per cent of UK 65+’s expected positive economic performance in July 2016,  feelings have swung massively in the opposite direction with 44 per cent now believing the economy will get worse.

Anxiety about the economy is also creeping into everyday purchasing decisions by all age groups. Consumers in the UK are now two times less likely to invest in electrical products—including smartphones, TVs, and notebooks— than they were in July. This is due to increased worries about the state of personal finances, with one third of all those questioned agreeing they will cut back on electrical purchases due to just this one factor alone.

The CONTEXT Retail Pulse Survey reveals the current trepidation felt in the UK. With the European Commission slashing its growth forecast for the UK for 2017, many expect inflation to rise. Factor in a weak pound, and an uncertain jobs market, it’s no surprise to see UK consumers thinking of cutting back their spending on consumer technology.

Taken as a whole, the Survey suggests a potential negative impact on retailers this holiday season, with Black Friday almost upon them. There is – however – a bright spot: stores looking to make a success of the imported American event and the run-up to Christmas should look to young professionals aged 25-34. According to the CONTEXT Survey, 22 per cent of this age group think their personal finances will improve—the most positive sentiment of any age group—and 19 per cent say they will spend more on electricals in the next quarter.

There are also other indicators in the CONTEXT Survey that suggest UK consumers may be willing to spend, despite their uncertainty. Household saving now stands at 5.1 per cent, a return to the low levels last seen just before the global financial crisis. Unsecured borrowing is also rising, reaching a 10.3 per cent year-on-year increase. This could indicate a more carefree attitude to spending amongst younger demographics. Those savvy enough to see price rises coming could increase the overall spending and make this holiday season a success for the industry.

by AS

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Windows 10 Pro adoption beginning to rise

Thirteen months after its launch, adoption of Microsoft’s Windows 10 operating system is slowly beginning to increase amongst business users. By August, Windows 10 Pro (excluding the Windows 7/Windows 10 downgrade version) made up 24% of Windows Business PC sales in Western European distribution, up six percentage points compared to July. Whilst adoption in the first half of the year had largely been driven by the Windows 7/Windows 10 Pro downgrade version, July and August were the first months to see the share for “pure” Windows 10 Pro sales grow faster month-on-month than share for the downgrade version, albeit from a much smaller base. The share of Windows 10 Pro was up from 16% in June to 18% in July and 24% in August, while Windows 7/Windows 10 Pro moved from 65.5% in June to 66% in July, followed by a drop to 64% in August. Combined adoption rates for the two versions increased from 81% to 88% over the period.

The rise in Windows 10 Pro share, though moderate for the time being, is good news for the PC industry, which is looking at Windows 10 refreshes as the next larger growth driver in commercial PC sales. Certainly, some of the recent rise in adoption might be driven by the fee that we hear is being applied to the downgrade version, which is likely to cause budget-conscious buyers to move faster to “pure” Windows 10. But anecdotal evidence suggests that there is also a more “genuine” rise in interest for the new operating system, particularly within the small- and medium-sized business segment, as companies are slowly beginning to make the move from testing to deployment. In terms of volume growth, the business segment does indeed see a positive development: Windows Business PCs across our Western European panel were up by +7% year-on-year in the first two months of Q316, and while it would be taking things too far to say that this was entirely down to Windows 10, the new OS certainly did play a role.

Comparing adoption rates of Microsoft’s latest version of Windows to its most successful predecessor, Windows 7, the “pure” Windows 10 still has a long way to go to catch up. The 24% share of Windows 10 Pro that we’re seeing now, thirteen months after its launch date, compares to an adoption rate of 77% for the “pure” Windows 7 version at the same time after launch in October 2009. Things look better however when comparing the two OS’s combined shares of “pure” and downgrade versions: Windows 10’s 88% share in August this year is not that far off from the 98% held by the combined Windows 7 and Windows 7/XP versions in November 2010.

It will be interesting to see if the first few signs of an increase in Windows 10 sales will translate into a more significant growth trend over the next few months. Expectations are for the commercial segment to start refreshes in earnest at the beginning of 2017, with larger enterprises transitioning over the course of the next two years. We will be monitoring this closely.

by MCP

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