NPD Group Blog » Reseller Sales Close Out The Optimism Trifecta

Reseller Sales Close Out The Optimism Trifecta

Thursday, January 28th, 2010
By Stephen Baker, Vice President, Industry Analysis

NPD today released some good news about sales to small and medium business through the reseller channel, what us old timers used to call the DMR (direct marketing reseller) channel. Sales in December were very strong, posting growth of 7 percent year-over-year, the first time this segment has shown positive growth in more than 15 months.

Combined with strong point-of-sale data from NPDs Retail Tracking Service, where IT sales overall were up 14 percent and positive performance from NPD’s Distributor Tracking Service, where December sales were up nearly 16 percent, it does appear that sales are looking up across all the major customer segments heading into 2010. Of course, we do want to temper the improving results we have reported with the recognition that comparisons against the generational meltdown during the fourth quarter of 2008 are likely to be a bit flawed and that we do need to see these trends continue through the first quarter of2010 to be certain that these are not just false positives.

However, inside the reseller data we see a number of positive data trends that leave us with some level of optimism. Unlike consumer sales, reseller improvement was more broad-based and not just the result of the PC land rush we saw post-Windows 7. Sure both desktops and notebooks performed admirably, but unlike the consumer market where those two categories accounted for 50 percent of consumer spending in December the reseller channel is more diverse depending on PC clients for only about 16 percent of total volume in December. More exciting is the up-tick in average prices that are becoming more pronounced through this channel. With unit volume remaining tepid the gradual growth in ASPs we have seen leads one to believe that SMBs are buying core products that are essential to their business growth and are willing to spend on those as opposed to just general spending on IT products. A couple of examples will serve us well here. First is the server market, where we saw ASPs move to over $3000 in the fourth quarter. This is part of a trend that extends back into mid-2008 as we have seen share move into higher-priced servers (over $4000 products accounted for over 20 percent of sales volume) a strong indicator, when combined with the low levels of unit growth, that strategic buying of core hardware continues while less crucial purchases continue to be postponed. In networking devices we see evidence of this trend as well. While the fourth quarter always tends to deliver higher ASPs in 2009 wired network devices saw a 22 percent jump over third quarter selling prices, far ahead of the 2 percent increase we have seen in the fourth quarter of both 2008 and 2007. The net result was a nice revenue increase in December for wired network devices despite anemic unit volume growth, which has been traditionally the engine that drives revenue increases in IT.

All these measures put together while, we want to emphasize again, are at least partly the result of seasonality and the weak comparisons to 2009, ought to at least give the marketplace the confidence to expect better times ahead as we move into 2010.

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