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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

Whither India Netbooks – Channel Perceptions

In India the Netbooks were launched about 16-18 months ago, however, growth in terms of sales has been seen only in the last couple of months. One of the major reasons for the growth has been product promotions by the respective vendors by introducing a low-cost “cousin” of the notebook during the economic crisis period. Though the ratio of notebooks to Netbooks remains low the channels see the growth as a positive trend. Netbook volumes are being driven by businesses.

While the Netbook market is still in its nascent phase in India, the channels in India feel that there is a latent market opportunity within three different segments driven by either usage or price-points.

First Segment: Mobile Segment
Initially the netbooks are being purchased by “new-age customers who have a desire to stay connected at all times”. These are:

  • Students,

  • Frequent travelers,

  • Sales and marketing professionals


The market is seeing its usage in the corporate segment as businesses “are placing orders for Netbooks for those employees who were non-users of computing products earlier or for employees who are traveling. We are starting to see orders in batches of 10 netbooks to 25 netbooks for internal teams within SMBs and other businesses”. The low-cost is not the only factor for this segment driving sales, but portability, small size, internet connectivity and smooth functioning of Office applications are other reasons. The channel partners feel that netbooks successfully address an entry level price-point for the segment.

Second Segment: Second PC Household Segment
There are essentially two different types of consumer segments that are either purchasing netbooks or are currently investigating purchasing netbooks. The first type consists of students and children within households:

“Netbooks are essentially being purchased as a second PC by consumers in India. Netbooks may never become the choice for most Indian consumers, who are yet to buy their first PC, however parents are buying Netbooks for their younger children/toddlers for their educational needs or in lieu of video gaming products. This shift from notebook to Netbook preference is due reasonable price, low risk and easy maintenance.”

They see its usefulness in day to day activities like simple office applications or for music, entertainment, instant connectivity to social networking websites, video chatting, video streaming, E-mailing.

The second type of consumer segment is also buying Netbook as a second PC but who require and have a pressing need to segregate work units such as specifically for accounting or for side-business such as real estate or life insurance. They view that the basic applications for which a Netbook are web based applications, simple office applications like Word, Excel and PowerPoint presentations. They see its usefulness in day to day activities like financial transactions and E-mailing.

Third Segment: “White Goods” Segment
Currently a Netbook is “tagged” as a computer/computing device and its price point is in the INR15,000 – INR20,000 (US$330 – US$450) range. Once the price point comes below INR10,000 (US$220) the market will likely explode. And that time the vendors should sell Netbooks as “white good gadget” and not as a computer. It will establish itself as an essential item to purchase by females within households, a “must-have” gadget/device/appliance. “We have seen many women of the household buying a Netbook but hesitatingly”.

Why hesitatingly? Channels feel that Intel should bring in some concrete marketing and promotional activities to create awareness for its Atom Processor as many consumers are more processor conscious. If consumers are buying a PC it is because they have the money to buy one and therefore they try to go for a notebook. This trend has been witnessed in the non-metro cities like Nashik, Cochin, Chandigarh, Lucknow, Allahabad , Ranchi to name a few where many consumers are buying their first PCs. With no space constraints and no travel needs, the consumers in Tier 3 and beyond cities follow the mantra of “Bigger the Better”.

Consumers buy cell phones based on price, plan and usage requirements. They do not know and do not care about the processor inside a cell phone. Netbooks although fitting a space between mobile phones and notebooks due to its inherent initial marketing is forcing the consumer to inquire about processors. “It is perceived as an advanced version of a PDA and a far better alternative to high end mobiles”. Channels themselves are selling PCs based on type of processor. Many channels in India believe that either Intel should create more awareness of its processor or take the discussion of processor completely out of the equation and lower the price points.

All major vendors such as Dell, HP, Acer, HCL and Lenovo have launched their Netbook models in India. Brands like MSI, Simmtronics Asus, Benq, Samsung, LG and Sony also have a presence in the Indian market. Many channel partners are of the opinion that if the respective vendors bring the price somewhere below INR10,000 with restructured margins there is no second thought that the demand for Netbooks will grow by leaps and bounds as it aims to provide mobility solution for users including traveling salesmen, housewives, teenagers and consumers who require a stylish internet-surfing device. Then it would not be used as a computing product but also be able to penetrate the market as a “white good gadget” fulfilling needs like video streaming, audio communication & entertainment and gaming. It would clearly become a single product substituting the mobile, MP3, MP4 players, DVD Players and PSP consoles.

A planned intelligent marketing strategy for netbooks is required.

Gitika Bajaj
Techaisle
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Will Netbooks Get Squeezed Out?

Qualcomm and Freescale today amnounced plans to launch "Smartbooks" - a family of internet connected devices. The name is an obvious attempt to distance themselves from the Netbook category. So what are smartbooks? The primary function is to connect to the internet. The cost Qualcomm claims will be lower than Netbooks. The battery life will be longer. They will run a Linux based OS as opposed to Windows XP or Windows 7.

But is there really a market for all these devices? or are vendors segmenting the market so finely that each segment is a mere sliver? Let us consider the full spectrum of mobile devices today from smartphones to notebooks.

mobile computingAs shown in the chart, the space in the lower left quadrant copmprising of smartphones, smartbooks and netbooks is a key competitive battleground with potentially Netbooks getting squeezed. while both smartphones and netbooks exposed a latent need for lighweight mobile computing devices, how that space consolidates is too early to tell.

One things is clear though - the traditional business computing space is not likely to be cannibalized by these devices for two reasons

1. These devices will likely be used in addition to traditional notebooks. Further these devices (netbooks excepted) will not be running Windows which is a major problem for business adoption

2. The impending release of ULVs or ultra low voltage processors will lead to lighter business PCs running industry standard OSs (Windows)

Fighting for a slice or a sliver?

Whether or not these devices will succeed depends largely on the appetite for consumers and businesses to adopt multiple devices. Given the overlap in functionality buyers will be hard pressed to make choices about which device suits them the best. Currently smartphones and netbooks have the greatest momentum. At techaisle we believe that smartphones will win. The scenario where a smartphone such as an iPhone or an Android based phone get paired with a large screen and a keyboard is an intriguing one and could well destroy the opportunity for other types of devices. Even if that doesn't happen, the market appears poised to fragment as more devices appear. While that may increase the size of the pie, vendors could be left fighting for slivers rather than slices.

Abhijeet Rane

This email address is being protected from spambots. You need JavaScript enabled to view it.
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Notebook v/s Netbook - A market segmented

Yes - Netbooks are all the rage right now but we at techaisle don't believe in the doom and gloom scenarios pointing to the demise of notebooks. This is akin to a donut shop that starts selling bagels. Yes there will be people that come in and but a bagel instead thereby cutting into donut sales or maybe the better analogy is of a shop that sells donuts and mini-donuts. Same product shrunken in size.

[gallery]

But is the netbook now the new notebook? Should PC makers be concerned about cannibalization? Conventional thinking might suggest that to be true. After all, digital music cannibalized (and pretty much destroyed) CD sales, DVDs cannibalized VHS tapes and the list goes on. In all those cases however the new technology delivered a different and unique experience that older technology could not deliver - ability to create your mixes in the case of digital music, buy one song at a time and better viewing experience with DVDs. Cannibalization = replacement but for that replacement to happen, the product has to offer something unique. This is clearly lacking among netbooks whose only claim to fame is being a cheap, lightweight and small device.

So why are netbook sales increasing. We believe two things are happening:

1. Highly price sensitive customers are taking advantage of lower prices sacrificing computing power, screen size, gaming ability etc.

2. A new segment of mobile device buyers are entering the market expanding the market for mobile computing devices.

This is perfectly logical looking at the evolution of the PC market which has increasingly fragmented over time as user needs evolved

1. Early desktop market - Homogenous needs/users - primarily business use. all desktops nearly equal in capability. Minimal price variance observed

2. Continued evolution of desktops - greater price variance, home and small business markets start opening up, growth in ISV base, hardware options, geographic markets

3. Emergence of laptops - addresses latent mobility needs. Few laptop suppliers, premium prices and limited adopters driven by mobility trading off desktop capabilities for mobility

4. Expansion of laptop/notebooks -  better hardware, greater price ranges observed for notebooks. Consumer, SB notebook market emerges. Mobility remains the primary driver but better price performance drives cannibalization of desktops. However, not all desktops will be replaced (at least over any reasonable forecast period). desktop replacement by notebooks will hit a wall at a point where the desktop value proposition exceeds that provided by notebooks

5. Expansion of mobile computing - Mobile computing becomes pervasive through a multitude of devices, netbooks being one of them. Inclusion of phones as viable mobile computing devices expands available price points, user experiences and user needs/behaviors

So while netbooks have been able to expand the market today by attracting new buyers and addressing latent mobility needs (need for small, lightweight device), market expansion will be limited by what we call the "value proposition differential" - the subjective and objective differences in user experience between products. This is a concept that Apple understands very well as evidenced by the success of iPods and iPhones

In other words, while pricing and weight got the market started, it will not be enough to sustain the growth of netbooks.
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