Acer drives the notebook wave

If the Indian notebook market is finally taking off in a big way, the credit goes to companies such as Acer for bringing down prices and focusing on what it means to be truly mobile. Prashant L Rao reports

After creating a splash in the notebook market in 2003, S Rajendran now wants to propel Acer to the top spot in the notebook stakes in 2004

Notebook vendors have never had it this good. After dropping a notch in 2001 and seeing marginal growth in calendar year 2002, 2003 has seen notebook sales surge past IDC’s original forecast of 54,279 units (Source: IDC forecast 2001-2006). Notebook sales exceeded that target in the first nine months of the year with 57,753 notebooks being sold in the Q1 to Q3 period. Sameer Kochhar, CEO, Skoch Consultancy says, “We expect the notebook market to cross the 100,000-unit mark for the first time in calendar 2003. 2002 was less than half that number.” Falling notebook prices and innovative bundles have driven this remarkable resurgence, and a good deal of the credit for this accrues to Acer for driving this process. Not surprisingly, Acer has benefited the most among the top five notebook vendors in 2003. In the past year, Acer’s notebook sales risen fivefold (the closest competitor in terms of sheer growth was IBM with a twofold jump). This is the story of how Acer got there and drove the market to new heights by putting pressure on market leaders to bring down the prices of entry-level notebooks without sacrificing performance or usability.

The heat is on

Acer India has always been a price warrior. The company has driven the notebook market by putting pressure on market leaders with a slew of competitively priced products. Acer was the first off the starting post with a sub-Rs 60,000 notebook in 2001-02 and more recently with a sub-Rs 50,000 model introduced in the last week of September 2003. The preponderance of sub-Rs 55,000 notebook models from all the majors is due in no small part to Acer’s aggressive attempts to move the notebook from being a luxury niche item to a mass-market product. This has led to a drop in average unit price, which has been crucial in expanding the notebook market. “Low price is the single biggest factor leading to an upsurge in buying and consumer interest,” says Kochhar. This is underlined by the fact that Acer’s sub-Rs 50,000 Celeron notebook, the TravelMate 240, accounts for over 70 percent of its notebook sales. “Sub-Rs 50,000 is the sweet spot for a bulk of the notebooks that are moving in volumes,”

According to Sameer Kochhar, the Indian notebook market may have crossed the 100,000-unit mark for the first time in calendar 2003

says Kochhar. It’s not just at the entry-level that the company is raising the ante in terms of value for money. In late September, Acer brought out the TravelMate 250 series, which sported 15” TFT screens at sub-Rs 80,000 levels. Earlier, notebooks with 15” TFT screens used to cost Rs 1 to 1.2 lakh.

Truly mobile with Reliance

Bundling is a popular method for driving sales and Acer has played that card to its dvantage. Think about it—what is it that a notebook-toting road warrior really needs? The answer to that question is an Internet connection. Star hotels do offer WiFi but they charge an arm and a leg for it. Senior executives complain that coverage in hotel rooms is still spotty at best with a notebook having to be placed in a particular corner of the room for it to connect to the hotel’s wireless network. By tying up with Reliance Infocomm, Acer has solved that problem in one stroke. The Reliance Data Kit (RDK) offers Internet access anywhere in the country and anybody purchasing the Acer-Reliance bundle, comprising of a notebook and the RDK, is assured of Net connectivity on the move at regular dial-up rates, a far cry from the Rs 200 per hour or so charged by hotels. The tie-up was announced on November 16, 2003 and the notebook sold in this arrangement is the TravelMate 240, priced at Rs 49,999. The alliance has been wildly successful with 1,500 notebooks being sold in the first month the bundle was placed on the market. The alliance’s momentum continues. “We reckon the figure to be in excess of 3,000 units today,” says S Rajendran, GM-Sales and Marketing, Consumer Product Group, Acer India.

Re-engineering Acer India

All this was possible only because the company reorganised itself into two divisions with one of them, the Consumer Product Group, focusing solidly on notebooks. “Earlier, marketing and sales were two separate entities. Product management, media management, positioning, et al was in the hands of the marketing department while the sales folks were purely into driving top line growth. We merged both and split them vertically,” says Rajendran. Today, product management and sales come under both the Enterprise Product Group and the Consumer Product Group (EPG and CPG). “Essentially, CPG is like an independent profit centre,” says Rajendran. The creation of the CPG brought the notebook business into focus for Acer and helped it build a channel. Today, the CPG sales team looks only at channel sales. In the past, the sales force used to focus more on tenders and large enterprise deals, missing out on channel sales in the process. The results are there to see—Acer’s sales grew fivefold in the Q1 to Q3 period. “Taking Q4 into account (figures are yet to be collated) we estimate that sales would be around 7,500-plus units,” says Rajendran. In 2002, when CPG did not exist, that number was less than 1,500 units.

Going retail

Acer isn’t resting on its laurels and its next step is going to be a retail push. The company intends to set up 50 ‘Acer Malls’ and ‘Acer Point’ stores at various locations, including Coimbatore, Lucknow, Cochin, Chandigarh, Ahmedabad, Nagpur, Pune, Bangalore, Hyderabad and the four metros by the end of January 2004. It expects to triple this number to 150 retail outlets by end-2004. These stores will carry the company’s home PCs and notebooks. Some will be full-fledged Acer Malls with non-competing products from other companies being sold alongside Acer brands. Acer Points will either have a section or a corner devoted to Acer’s products. Acer is going to provide storeowners with branding, banners and external and internal signage and it will train store sales executives under its Acer Certified Sales Professional (ACSP) programme.

Disruptive forces drive markets and in 2003 Acer was the disrupter in the Indian notebook market. By its actions the company prodded market leaders to follow suit. While it was rewarded for its initiative with a remarkable sales boost, the bigger story is that the overall market bloomed after years of stagnation. Next year will be the make or break year for Acer in this segment. If it can build on the momentum acquired last year, 2004 could be the year when Acer goes from market motivator to market leader.

Centrino yet to fly

After all the hype surrounding WiFi, wireless notebooks are yet to make a splash in India. “The ecosystem is not there. A compelling price point, along with a decent configuration is what is needed. There’s a misconception in the market that Centrino notebooks are slower than P4 mobile models. On the contrary, 1.3 or 1.4 GHz Centrino models outperform P4 mobile 2.2 GHz notebooks,” says Rajendran. “Wireless as a phenomena has yet to take off in India,” agrees Kochhar of Skoch. Centrino-based notebooks should enter the mainstream in the later half of Q1 2004. The first half of 2004 will see the Celeron moving to a new architecture with a larger L2 cache and lower power consumption. That will bring some of the Centrino’s benefits—faster computing with lower power consumption—to the mass-market sub-Rs 50,000 notebook segment. That said, wireless still has miles to go before it becomes a mainstream option in the Indian notebook market.

prashant@expresscomputeronline.com