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In turf war, IT product sales make e-inroads

  • 2012-04-26
  • By Linas Jegelevicius

BUYER BEWARE: Many e-stores have impressive Web sites, but no inventory in the warehouse, says Jurgis Gylys.

KLAIPEDA - The number of computer users has shot up by 10 percent over the last year, and computer sales have surged 20 percent in that span. “The computer and Internet have been the satellites of our modern life. The increasing numbers show that more and more people see obvious benefits of the technologies,” says Valdas Kisonas, director of Informative Society Expansion Committee at the Ministry of Communication and Transportation.

Expansion and customer care matter most
Eduardas Grybovas, head of Gfk Retail and Technology Baltic’s Vilnius office, an IT market research company, says that recent years saw a very important change in the market – a redistribution of household electronic appliances shifting to digital electronic gadgets. The stationary computer, a miracle of the not so far past, giving up its spot for the sleek shiny laptop, he says, is among the trends.

“The latter is significant in the market. It was caused by a significant decrease of laptop prices, roughly 10 percent over the last year,” says Grybovas.
“Surging laptop computer sales have mostly contributed to our record-high turnover, 412 million litas (119 million euros) last year. This was a 31 percent increase compared to the previous year,” Regimantas Buozius, director general of Acme kompiuteriu komponentai, known as ACC, says. He says the company is considered to be one the largest IT product sellers in the Baltics, and is set for another landmark in 2012 – turnover of over 500 million litas.
He says expansion has been crucial to growth: “We’ve been working in seven markets, serving approximately 2,500 clients. It gives more opportunities.”

The structural changes, led by investments of several million litas, Buozius says, have upped the hurdle for rivals, especially in terms of service quality and supply. “That many professionals, ranging from smart and customer-caring store sellers to high-tech savvy management employees, joined our team in 2011, has also been crucial,” the director notes.

Company works with well-known brands
He revealed ACC is to target the business segment more actively. “That is the segment where laptop sales have skyrocketed over 25 percent in a year,” the ACC director says. He adds: “Business doesn’t need abstract business offers. What it needs is concrete solutions. That is what we offer, complex solutions which we help implement.”
The company’s last opened affiliate was in Yerevan and the ACC CEO says the prospects of the Armenian market seem “very promising.”

The expansion has come with luring in new electronic appliance brands, like Acer, Griffin, Haier, Panasonic, Edifier, Vanguard and some others. “Today ACC represents over 200 different suppliers and brands,” the director says. He adds matter-of-factly: “These new foreign brands we got into the Baltic market have quickly discovered their niches, both in Lithuania, the Baltics and abroad.”

He says that the worldwide known companies’ trust in ACC is even more important as, with it, new business opportunities emerge. Buozius says that Dell products have been on top of the customer cart for some time. “The brand leads both in private and business sectors in Lithuania,” Buozius says.
Being the only Dell-authorized distributor in the Baltics, ACC takes pride in being acknowledged as the most effective distributor of Dell products in the European, Far East and African regions in 2011.
The Lithuanian company has also drawn attention of the IT giant Microsoft, which chose the venture to be its official license distributor in the Baltic countries.

The CEO says that the annual Computer Equipment Wholesalers Industry report, which ranked ACC 10th among 1,000 European IT companies, has mostly heeded the foreign partnerships in its evaluation.
“Our team of 200 professionals has been pursuing one task since 1998 - becoming the leading IT enterprise in the business sector. Today we are already a reliable business partner for foreign companies and we see even more business opportunities, both in Lithuania and abroad,” Buozius maintained.

Shelves gather dust during austerity
However, small household appliance sellers complain of sluggish sales even in the post-crisis market.
“Sure, you cannot put a 40 square meter computer store on par with such IT market leaders as ACC or Topo Centras. Even computer sales cannot set off losses in other product segments,” Virginijus Jankauskas, a household electronics appliance store owner says.

“Austerity measures, among other things, have caused an excess of electronic goods in the market. This could be said of computers. With many companies downsizing, many offices were left semi-empty, and companies wouldn’t spend a cent on new gadgets. Even with the economy doing better, many small enterprises, our traditional customer, don’t rush to renew their office appliances and stick with the fixed-up old stationary computer,” Jankauskas said to The Baltic Times.

Changes in customer habits
Skytech, another seller of digital and computer appliances in Lithuania, launched its first store in 2009. The venture notched up turnover of over 15 million litas last year, twice the previous year. The company has recently opened new stores in Siauliai, Vilnius and Plunge.

“2011 and 2010 cannot be put in a comparison, as we were just fledging then, seeking the trust of clients. Last year, we already were flexing muscle, producing stronger and more robust sales. Generally, growth could be credited to favorable IT market trends, as we saw an increased demand for tablets, laptops, cameras and hard discs,” Arsenij Musajeb, the Skytech director, says.
Marius Andruska,  Skytech deputy director, notes that more and more Lithuanians prefer authorized software over the counterfeit stuff. “This shows that the Lithuanian customer realizes and evaluates the importance of intellectual property,” he says.

Benefits of extra services
The businessmen also notice that Internet sales have been catching up with sales in conventional stores. “Right now, it is 35 versus 65 percent, in favor of the traditional store, but we expect the proportion to be decreasing next year,” Musajev says.

Despite the increasing trends, he says the IT sector is not shake-proof. “Several smaller IT companies filed for bankruptcy recently, or merged with larger ones in order to cling on to the market,” the entrepreneur notes. Lowering digital appliance price margins has also been one of the reasons for bankruptcy. “If a laptop used to cost roughly 2,000-2,200 litas a year ago, now you can get it for 1,400-1,600. Big IT sellers can make up the lesser-priced markups, while small ones cannot,” the director says.

He says the prices will continue spiraling down.
“That also means that customers will be able to obtain new products easier and try out them quicker,” he notes.

Traditionalists are grumpy
With traditional stores slowly but steadily giving up their position for e-stores, there are increasingly more people willing to buy a laptop with one touch of the mouse. “The trend is very natural and irreversible, as e-IT stores do not need to pay rent and do not require a big staff, which all translates into lower prices.  Even for the most well-known brands. No need to say prices are what matters most nowadays,” says Jankauskas, a computer store owner.

However, some traditional store owners point out that most e-stores teeter on the brink of survival and often provide lousy services and shady products. Topo Centras, one of the IT market leaders in the country, saw a nearly 30 percent surge in sales last year compared to 2010. The chain also operates its e-store and is about to launch other one. “However, the latter decision has been made not because the e-store provides big earnings, but rather in order not to lag behind the market trends,” Aurelijus Rusteika, board chairman of Topo Grupe, said to The Baltic Times. He adds: “Most e-IT stores are still loss-making and render limited possibilities, especially in Lithuania.”

The CEO says the company has invested several million litas into its Internet sales efforts.
However, few concur with him. “It is inevitable that sales in the future will move to the e-zone. And, no doubt, the largest traditional appliance sellers grasp that very well and, therefore, invest heavily into their elaborately prepared e-stores. Frankly, most heads of large IT centers are vexed over the e-penetration. For a simple reason: e-stores offer lower prices, as they have the possibility to slash their margins and markups. Not your traditional large IT store,” says Arunas Kumpis, head of Kainos.lt, a popular site for comparing prices.

He says when he launched his site in 1996, he was stunned to see that e-store and conventional store prices would differ so sharply. “Sure, the difference has been trimmed, but it is still there, and it plays the most important role for many customers,” says the site operator.

“No doubt, acquiring goods on the Web is a lot cheaper, as e-stores do not need to lease sales premises, hire extra staff and pay for other things,” says Dainius Liulys, director general of Pigu.lt., a trendy e-sale site, and president of Lithuania’s Electronic Commerce Association.

Questionable sellers
Jurgis Gylys, director of Imk.lt, another e-household appliance store, discerns “frenetic competition” in the e-sector. “It is no rarity when other e-stores offer products at record-low prices, when, actually, the goods aren’t in their warehouses. This is a widespread trick among dishonest e-sellers,” Gylys noted to The Baltic Times.

Asked to say how many e-vendors are in the IT market, he grins, saying, “First we should clarify the definition of the e-vendor. There are hundreds and thousands of them who launch a site for a couple thousand litas and run it alone, conjuring up an image of a mega e-store. When it comes to serious players, I’d put the number at several dozen.”
He calls the process “natural,” saying Lithuania is still learning e-commerce secrets and fair play from its neighbors. “Even Latvians have advanced a lot more in e-commerce, let alone Estonians. [Our] lagging could have been managed a long time ago, like in Latvia and Estonia, if the largest traditional IT chains had entered the e-trade zone more quickly,” Gylys maintained.

He, however, doesn’t doubt a bright future for e-commerce in tech retail.