Aug 13 2012
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While flipping through the morning dailies during Ramadan, consumers in Oman found lucrative deals in the consumer electronics space amidst numerous festive seasons' greetings and auto dealership offers, captivating an average individual's wandering eye. SARCO, the authorised distributor of Samsung announced a 'buy-one-get-another-for-free' deal in some of its LED 3D television segment. OHI Electronics had offered up to 50 per cent off on select items at its Bose store in Qurm City Centre that also retails brands such as JVC and NEC. While special offers are the order of the day during Ramadan, both these electronics retailers admit that promotional offers of this magnitude were not there a year ago.
"We wanted to promote high end products like LED TVs as we have new models in this range coming into the market in the coming months. Another objective was to gain a competitive edge in a market that has seen a marked rise in the uptake of high-value consumer electronics products in the last one year due to improvements in individual purchasing power. Parallelly, prices have come down to match UAE levels, as electronics manufacturers increased their focus on this market," says Ajay Ganti, CEO, SARCO. A couple of years back, many of the consumer electronics products were available in the UAE at least ten per cent cheaper than in Oman, he points out. One cannot discount the marked drop in prices of gadgets due to newer models hitting the Oman market as well.
Devan Thuppali, general manager, OHI Electronics probes deeper and has a different take on this. "Stock piles of electronics items in the GCC itself have increased in the recent days, as many of these brands are facing a difficult period in the European and US markets. And the best way to build brand equity is through visible items like TVs that will have a trickle-down effect on other products."
The RO200mn consumer electronics market today is a hotly-competed segment, despite forming only a third of the business for any electronics distributor in the country, the rest stemming from home appliances segment. With cutting-edge technologies and mobility convergence devices enticing a burgeoning youth population, the market positioning of consumer electronics brands change on a quarterly basis.
The consumer electronics brands present in Oman, along with its distributors are cashing in on the increasing consumer spend that has led to the sector witnessing a growth of around 12 to15 per cent in the last one year. Industry onlookers peg the growth of the electronics sector to touch around 20 per cent in 2013.
"Some time back, Oman contributed less than eight per cent towards GCC's consumer electronics market, but now this has gone up to ten per cent," says George Alexander, head of electronics division, Oman Marketing and Services Company (OMASCO). In fact, the robust growth of the sector prompted regional electronics retailers like EMAX and Sharaf DG to decide on entering this market, while a third retailer is also said to be eyeing the sultanate.
But a flipside to these robust sales that are driving the sector's growth is the pressure on margins for retailers and distributors. "The channel mix is critical in defining margin pressures. End user prices will continue to soften and while this pushes larger volumes, distribution costs are on the rise," says Sachin Malhotra, country head, Jumbo Electronics, Oman.
Distributors and retailers point out that the industry currently contributes around 25 per cent towards the overall turnover of the retail sector, and still has a long way to go. The volume of its sales and range of products available in the market are still no match for comparison with larger peers like the UAE.
Rise and fall
Distributors opine that until recently, Oman was not looked at seriously as a market for consumer electronics as it dwelled in the shadow of the UAE. "As the volumes being distributed in this market were less, higher prices were commanded to maximise profits," explains Ganti. But in the last three years, principals of international brands realised that the key to success in any market is adopting universal pricing, especially in the wake of the fiscal crisis that prompted them to concentrate more on the emerging economies instead of banking on markets like the US and Europe for growth.
"When the re-export market in the UAE shrunk, electronics manufacturers began looking at Oman in a serious way," says Jayaprakash Menon, general manager, Bahwan Electronics. The Oman market was also slowly opening up to technology upgrades like 3.5G in the communications space and the rising consumer interest being the added incentives to look at the country as another key growth area in the GCC states.
Till date, in Oman, mobile devices, TVs and computers are the highest contributors towards the sector's overall revenue. According to the latest 2012 second quarter report of Business Monitor International, computers and laptops account for about 28 per cent of the consumer spend on consumer electronics in Oman. Smart phones and tablets account for about 27 per cent, while the audio and video segment that includes 3D televisions and home theatre systems, account for about 45 per cent of the spend on consumer electronics.
By looking at these numbers one cannot discount the popularity of smartphones, 3D TVs (introduced by brands such as LG, Samsung and Panasonic last year) and tablets. "The Galaxy S, S II and Note alone took our market share in the mobile segment from single digits (in 2008) to 45 per cent that we occupy now in Oman," says Ganti. In the TV segment, the company enjoys a share of 40 per cent.
Varghese Matthew, proprietor of FusionLogic, an Apple reseller reveals that despite the absence of the brand's standalone outlet in the Oman market, its market share has tripled in the sultanate in the last three years. This was due to the popularity of iPhones and iPads. Gaming consoles like the Playstation 3 are popular in the market, though its market share is not as high as LCD and LED TVs. But home theatre systems have not seen a high uptake as LEDs and smart phones.
What has also played an important role for the rise and fall of certain brands in this market in the last year is their evolving strategies across segments to identify competencies. LG, which was not very highly visible in the mobile segment last year, introduced the world's first 3D smart phones to this market and was one of the first to introduce 3D TVs as well. The strategy that LG followed, especially in the mobile segment, has resulted in robust sales for the brand in the Oman market, points out Jayanta Borpujari, general manager, Al Khanjar Infosystems, the authorised distributor for LG phones in Oman.
Similarly, Philips, which concentrated on LCDs, shifted its focus to carve a niche in audio, when it noticed that it was not doing too well in the TV segment. Last year, the company introduced premium range iPod docking sound systems, along with the sporty edition of its head phones and ear phones targeting the youth. This was a category the electronics giant was known for during its initial days. Company executives at Mustafa Sultan Electronics say that this has put the brand back in the spotlight for its consumers in the local market.
The strategy that Philips adopted to lessen its focus on LCD TVs may have been seen as a right move due to the high competition in the TV segment and the growing popularity of LEDs. Other brands are seen taking a similar approach. Samsung has announced that it would exit the LCD segment. "Brands like Panasonic have decided that they don't want to be part of the rat race. So a change in approach will be visible to the market in the next six months. There will be no price erosions in the 32 inch LCD segment and offers will be concentrated on the 50 inch LED panels," says Alexander.
In the laptop segment, the rise of niche products like ultrabooks is resulting in a slow death of netbooks which are already getting phased out in favour of its tablets. Similarly, the digital camera segment for brands like JVC is proving to be competitive with the advent of smart phones and tablets, which can double over as camera, says Thuppali.
The numerous technology upgrades resulted in the market being flooded with many new gadgets. Products like 3D TVs and tablets are five to ten per cent cheaper for consumers this year. A smart phone is available for as little as RO40 while prices of some LCD models have dipped by around RO50 in some models. Consumers still have much to look forward to with new gadgets of technology convergence set to hit the market in the coming months.
3D TVs without glasses and 3D laptops are already a buzzword in the market, but OLEDs are the next generation in TV segment. LG is banking on the introduction of its LTE range of handsets while Panasonic is looking to introduce smart phones. Dealers across the board agree that the influx of new technologies and lifestyle gadgets has resulted in a large number of impulse buying in the last one year in the Oman market.
As Oman's consumer electronics market strives to attain the kind of success its larger peer the UAE has gained, the sector still has a long way to go before it can even be compared to its neighbour.
Distributors point out that the per capita incomes of those in the UAE are much higher than those in Oman that results in more purchases of high value items. The tourist influx is also higher in the UAE when compared with Oman during which large purchases take place, hence the size of the market itself is no match for Oman.
"Buying behaviour in the UAE is influenced by the trading hub image and purchases are dominated by a floating population and major exports to CIS countries and Africa. Oman does not see as much sales as UAE," says Ujjawal Tankha, operations manager, EMAX Oman. "Due to the consumer segments variations and major differences in consumer preferences in the UAE, as it has a large mixed population, there are at least 35 models of flat panels available. The same numbers do not find market acceptance here in the sultanate," says Alexander.
One also cannot discount the fact that regional sales offices of many of these brands for the Middle East are located in Dubai which is the preferred market to get the first batch of electronic products. However, distributors like SARCO say that when it comes to product availability, Samsung has not discriminated between Oman and UAE markets and that some mobile phone models are in fact five per cent cheaper in the home market.
While product availability is sometimes challenged by the lower volumes being supplied to this market, distributors here are faced with their own set of internal issues. Over the years, the distribution system seems to have definitely improved as brands are slowly seen opting for more than one distributor to aid their growth in the market. Samsung, for instance, has SARCO as well as Mustafa Sultan Electronics distributing its mobile phones, while LG has chosen Al Khanjar for its phones when at the same time, television sets are sold by another dealer. But in many ways, this system is vulnerable due to the absence of a good number of malls in which retail branded stores can be established.
The supermarkets and hypermarkets offer good visibility to the brands, especially if outlets are established in their premises, but distributors point out that finding qualified sales staff to sell their products at outlets has proved to be a difficult task. "Some of the people I interview for outlets do not know much about the products and their specifications. They will not be able to advise the customer properly," says an industry executive.
A close look at the landscape of Oman's consumer electronics market points to substantial growth. The entry of electronic retailers similar to EMAX is definitely an incentive to the average consumer as wider variety of products at competitive prices will be made available now. At the same time competition for supermarkets will also heat up, while margin pressure for electronics distributors increase.
Some are optimistic that Oman will emerge a strong competitor to the UAE in the coming years, while others feel that this is not a realistic expectation from a country with a small population. But the sector is definitely seen making significant strides in the GCC electronics industry, which is a strong indicator of the fact that for Oman's consumer electronics market, buoyant times lie in the near future.
© businesstoday 2012
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