Intense trading conditions have made price the key basis of competition, due to minimal product differentiation between operators
Melbourne, Australia (PRWEB) December 16, 2014
Aggressive price discounting and the rapidly increasing popularity of online sales of computer and software products have negatively affected the Computer and Software Retailing industry. As a result, industry revenue is forecast to decline by an annualised 2.6% in the five years through 2014-15. According to IBISWorld industry analyst Claudia Burgio-Ficca, “intense trading conditions have made price the key basis of competition, due to minimal product differentiation between operators.” The resulting downward price pressures have eroded profit margins and have led to the exit of some industry players. In 2014-15, industry revenue is forecast to rise by 0.9% to reach $5.1 billion, aided by growth in discretionary income and an increase in the number of households with at least one computer. The releases of Sony's PlayStation 4 and Microsoft's Xbox One in late 2013 have also boosted revenue in the short term, although this is likely to be short-lived, as gaming console sales generally exhibit a significant decline in the years after the release.
Cloud computing and software developments have improved the functionality of existing hardware over the past five years. As a result, they have slightly extended the replacement cycle of existing computers and laptops. Furthermore, “software providers' rapid adoption of cloud services has effectively reduced industry operators' software retail sales,” says Burgio-Ficca. Consumers' increasing reliance on smartphones for daily internet browsing has also dampened demand for desktop and laptop computers. In the next five years, revenue will be supported by a steady increase in discretionary income, which is projected to fuel retail spending growth. However, demand for computer and software products is likely to be hindered by fluctuations in consumer sentiment over the period. Traditional retailers will continue to develop their online channels as a key sales driver. Intensifying price pressures will continue to erode profit margins, which may be further exacerbated by the increased price transparency brought about by online shopping.
The Computer and Software Retailing industry exhibits a low level of market share concentration. Concentration over the past five years has been dampened by the prevalence of non-employing operators in the industry. According to ABS data, 50.0% of industry enterprises were non-employing businesses in 2012-13, although this share has declined from a high of 52.8% in 2009-10. The industry has moderate barriers to entry and capital intensity, which may deter new operators from joining the industry. Moderate competition across the industry reflects the dominance of larger players such as Harvey Norman. Industry concentration is forecast to increase over the next five years due to expansion of larger players' networks. This will be to the detriment of small independent players, as increased competition may lead to their demise, or acquisition by larger operators.
For more information, visit IBISWorld’s Computer and Software Retailing industry in Australia report page.
Operators in the industry primarily retail computer and software products including desktops, notebooks, laptops, tablets, scanners, printers, keyboards and packaged software (excluding game software). The sale of computer game consoles is also included in the industry. These products are purchased from domestic manufacturers and wholesalers. Operators then sell these goods to the general public for private use or to corporate clients for business use.
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IBISWorld industry Report Key Topics
Key External Drivers
Industry Life Cycle
Products &amp; Markets
Products &amp; Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology &amp; Systems
Regulation &amp; Policy
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