How to sell peripherals- part 2

Colour is what's driving the sale of peripherals in today's economy, and much of that demand is in the consumer market. PC vendors have been pushing digital photo-manipulation, offering digital cameras and scanners as part of a bundle. The excellent quality of low-cost inkjet printers has helped this market develop, and it looks set for further growth.

The growing use of PCs in the home as gaming units has also driven sales of high-powered multimedia devices such as speakers, joysticks and, in particular, specialist sound and graphics cards. Specialist external storage devices and screens have also seen some spin-off business from sales in the small office/home office market.

In the business-to-business sector, specific applications-driven growth areas are also boosting sales of peripherals. One example is document management, often part of a supply chain management system, which is driving sales of scanners.

Once confined to document management applications and pre-press work, the scanner has now become an integral part of the home office system, particularly with the growth in digital manipulation of photographs and the advances in delivering high-quality, low-cost colour output.

Andrew Kelly, general manager of peripherals at reseller Computer 2000, predicts that the growth in colour and internet use will drive scanner sales. "The internet drives colour, and company intranets are driving a move towards 'distribute and print' rather than 'print and distribute'," he says. "As that becomes the driving force, the need for scanners and digital senders should grow."

Although it is a healthy market, there are too many companies competing in the scanner arena at the moment, says Kevin Lamb, sales and marketing manager at Taiwanese scanner vendor Microtek. "The market is healthy, but margins are under severe pressure due to the competitive environment," he says. "The largest volumes are being sold in bundles, which means they also come in at the lowest cost.

"The retailer expects a minimum purchase price, which only encourages poor build and image quality, giving customers a poor initial experience of a scanner," explains Lamb. "As a result, some manufacturers have disappeared in the last 12 months. I believe more will go the same way during the next year, leaving a slimmer and better-equipped manufacturing base."

That remains to be seen. But there is little question that some vendors are going to suffer. While scanner sales are growing, not every PC is sold with a digital input device. The high-end vendors may be better protected from the margin pressure.

A scanner in the works
Companies such as Fujitsu, and Bell and Howell are focused on the higher end of the market, using new technologies to enhance their products. Fujitsu, for example, ships a system called Virtual Rescan that enhances the quality of poorly defined images when they are scanned into a digital system.

In other areas there are moves to share scanning devices. Kofax, the software company that developed Virtual Rescan, has a system called Ascent Capture that enables remote capture of documents, while Axis Communications has developed a product that enables scanners to be used as shared devices on the network.

Scanners are simply a way of digitising images so they can be stored on a computer. But one of the scanner market's weaknesses is that many documents and images originate in digital form and so will never need to be scanned.

One of the devices driving the increase in digital origination is the digital camera. This market has been paraded as one of massive growth potential for the last two years. But while sales have been steady, they have not been dramatic. However, the idea seems to be catching on with consumers and has undoubtedly been helped by the advances in low-cost colour output, particularly from vendors such as Hewlett Packard and Epson.

While digital cameras sell well through distribution, they are sold as part of retail bundles in the IT market. Otherwise, it is a photographic channel product. While most of the focus is on getting digital images into the computer, one developing area that could fuel more peripherals sales over the next two years is digital video and other web camera-related applications.

Lights, camera, action
Although IP-based transmissions need to improve to really set the market alight, web cameras are becoming more popular and are fairly inexpensive already. 3Com launched its HomeConnect digital webcam in February and, at £130 including VAT, is in easy reach of most computer users.

Another leading vendor pursuing this market aggressively is Philips. It recently launched a range of universal serial bus (USB) video cameras aimed at video email and VGA snapshot applications. Both enable users to capture high-quality video at between 15 and 30 frames per second, and set up video conferencing, either point-to-point or over the internet. Microsoft Netmeeting and a photo capture and manipulation package is also included.

Agfa's recent introduction, the CL18, is similar. Small, portable and inexpensive (£99 excluding VAT), the company is selling it as an entertainment and enhanced communications device. "It is ideal for small businesses that want to add live action to a web page or talk face-to-face to a client hundreds or thousands of kilometres away," says Terence Hsu, international sales and marketing manager for digital cameras at Agfa.

Nick Ruczaj, marketing manager at 3Com UK, says it is easy to see how these products might catch on, particularly among consumers. "The use of email and chat sites is growing, and video email extends these alternatives by offering low-cost, face-to-face contact," he says.

Portable webcams that can be used for video email or to relay live video pictures back to base or up to a website could easily become a major trend as people use them to visually share experiences. But, once more, this is mainly a retail and mail-order market, and most resellers will not make money from it.

In the US, Apple has just signed a deal to sell its iMac DV running iMovie combined with the Canon ZR-10 video camera in the Wolf Camera chain of photographic shops. Retail is where most of the webcam and vmail business is heading.

Digital video camera sales may find their way into the business market once quality has improved, but there is still a long way to go. Pictures remain jittery when used across the internet, and bandwidth is an issue.

However, in retail, they will become more popular this year and the Christmas period may fuel additional multimedia product sales. Both sound and vision will become more important as users view Webcam transmissions or watch the web movies emerging from some production companies.

Creative remains the leader in this space, but vendors currently seem keen on the speaker market, and more are designing speakers with two potential host devices in mind: the music system and the PC.

The quality and features of some of today's speakers are impressive. Philips's latest units come with dynamic bass boost, sub-woofer, magnetic shielding and surround-sound. They are designed to look good, with a metallic silver finish that may appeal to users who have both a multimedia PC and a portable CD or cassette player.

Other entertainment products are also expected to benefit from the general growth in home use. Simon Russen, European marketing manager at Acco, says the arrival of USB products has helped product development and ease of use a great deal. "USB connectivity is now commonplace, which makes installation quick and easy. Gravis is launching its first 'tilt' controller this autumn, which allows the user to turn or steer in a game by turning or moving the controller," he says.

Some exciting new developments for game players include a shock gamepad with vibrating controls, such as rumble in the Nintendo 64 and dual-shock in Playstation, and force-feedback gamepads. Games are starting to exploit contextual sound so that when Tomb Raider's Lara Croft moves from sand to gravel for example, the sound of her footfalls change. Sound, once more, will become more important.

PC-based projectors
But before webcams and associated multimedia products take off, another opportunity is emerging - the market for PC-based projectors. Like the presentation market, sales of projection systems and of large-format plasma screens are being aided by the move towards digital video.

Projector products are still improving and recent offerings are attractive indeed. Philips, for example, recently launched an XGA projector that offers features such as motorised zoom and focus, and a high-definition screen that makes long projections in glaring sunlight a possibility.

Other vendors are focusing on availability and cost benefits. Like scanners, projectors are being put on to the network. For example, InFocus has developed LightPort - a software technology that allows the projector to be managed on the network like any other peripheral.

InFocus is also promoting a technology called DigitalConnect which enables connection of projectors to their PCs using either digital or analogue signals through a single connector. This eliminates the need to convert an analogue-only video signal to digital format before transmission.

In living colour
The boom in the consumer market has also boosted the sales of colour printers and multi-function devices that combine colour printing with scanning, fax and copying facilities in various combinations. These products are becoming more affordable and will eventually put scanner vendors in particular under some pressure at the low end of the market.

Products such as Samsung's SCX1000 are typical of the kind of offerings that are emerging. SCX1000 is a flatbed scanning device combined with an inkjet printer and copier. Nigel Collard, product marketing manager at Samsung, believes that it has vast potential. "I see it as a colour copier substitute or as a colour copier with added value. It is an all-in-one solution and I think it is going to have mass market appeal," he says.

The increase in retail consumer sales has also given add-on storage vendors a much-needed lift. Products such as Zip and Jaz drives have sold well, but where you once may have sent or received a file by Zip, it is no longer prohibitively expensive to attach it to an email.

New products are emerging, and connectivity and ease of use are key, says Grant Morgan, managing director of Impleo, a company that offers DVD, CD-RW, Zip and Superdisk products as part of its Dash range. "The real advantage is that the entire range can be used with any PC, because of intelligent cables that give you a choice of connectivity. This means users can, for example, have a USB cable for the laptop and a parallel port cable for their home PC, or vice versa."

Prices for these units are affordable, starting at £145. But with low prices and low margins making volume purchase and sale a necessity, only retail, mail-order and online stores can probably afford to carry them.

There are better prospects in the area of high-end storage being tuned into peripheral-type devices. Although storage area networks (Sans) are not yet well developed, nor affordable enough to make this happen, network attached storage (Nas) devices are doing this to some extent. Both Nas and San are creating a need for storage peripherals to become more complex, with embedded servers, network attached circuitry or Fibre Channel.

The key facts

• scanner sales are rising, and the market is differentiating between the low-cost models sold to consumers and high-end applications driving high-end product development
• digital camera sales continue to grow because of the emergence of colour digital imaging as a consumer and small office/home office application
• webcams are starting to look more attractive in the consumer market, but IP-based video technology may need to improve before the business market takes off
• projectors are becoming more affordable and new technology is differentiating products well
• low-end storage has been boosted by higher consumer adoption of PCs and Nas, and San technologies are driving the development of high-end storage peripherals
• USB has helped the market by making connectivity easier
• contextual gaming accessories and multimedia products promise to keep the sales of entertainment peripherals moving.