The Trends Behind The Figures - AvNetwork.com

The Trends Behind The Figures

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Reid Rasmussen Of Fusion Consulting, The Company Behind InfoComm’s New Asian Market Definition And Strategy Study, Offers A Snapshot Of Key Regional Trends In

SCN Asia: Tell us a little about your background and how your company came to be responsible for InfoComm’s Asia MDSS.
Reid Rasmussen: I grew up in Asia, going to school in Hong Kong and Korea before moving to the U.S. to further my career. In 1985 I came back to Asia and created a market-research company and built that up, before selling the business to Dataquest Asia- Pacific in 1994. Then Dataquest was sold to Gartner and I became their Asian operations director. I left Gartner to start another research firm looking at technologies such as projectors and displays, then joined Fusion Consulting about a year ago.

InfoComm was looking for a company that had the right capabilities to do its first Asian Market Definition & Strategy Study, and Fusion had those. So it was a nice coincidence that Fusion got the InfoComm project at around the time that I joined the company.

SCN Asia: A key finding of your report is that the pro-AV market in Asia- Pacific will grow by 10% per year between now and 2010, with many regional variations in the rate of growth. How do you explain these variations?
RR: We expected to find big differences across the region and we certainly found them. Japan is by far the most mature market in the region,

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Most analysts agree that Asia’s infrastructure has not kept pace with the region’s stunning rate of economic growth but, if nothing else, rush-hour drivers at least provide a sitting target for digital signage. growing at a snail’s pace. Then you have China, India, Vietnam, and to some extent Indonesia and Thailand, where you have fast-growing, developing markets. And then you have those in the middle that are seeing fairly good growth but that are maturing— places like Korea, Hong Kong, Singapore, Taiwan.

In general, the feeling on the part of people we talked to was that our numbers were fairly conservative. Some people are talking about 30% growth for India, 20% for China and so on, but we decided to inject some realism. We settled on estimated growth rates of 19% for India and 14% for China.

Compared with Europe, the regional differences area much more dramatic. The differences in language are radical, as are the differences in size: you’ve got China with over a billion people, compared with Singapore that only has four million. And there are other important economic factors. In India and Indonesia, you have very low per capita incomes of maybe $1,000 a year or less, combined with very high import duties. People can’t afford to spend more, but they have to because of the duties, and that results in a lot of price sensitivity. On the other hand, you have places like Australia and Singapore that have much higher per capita incomes, combined with little or no import duties.

SCN Asia: What, if anything, might hinder Asian market growth in the near future, and render your report’s predictions over-optimistic?
RR: Asia-Pacific has experienced very fast growth over the past 10 or 20 years. Here, 5% growth is considered a depression! The bad news is that the infrastructure just hasn’t been able to keep up with that growth. Asia is notorious for traffic jams and for good reason. And there is a lack of skilled, human resources that is part of that infrastructure problem.

Systems integration only really began to be offered as a service in Asia in the 1990s. So if you can find someone who has more than 15 years’ experience in pro-AV in Asia, you’ve got one of the most experienced people. The whole services matrix is very young. And in the same way that you can’t speed up the process to make a 20-year-old Scotch, there is no shortcut to giving someone 20 years’ experience of working in pro-AV. Talk to anyone in the tech industry here and they’ll tell you that for years, their biggest headache has been finding and keeping good staff.

The good news is that there are people coming out of universities now with good technical qualifications, so we will see a new generation of skilled people coming into the industry. And while infrastructure is an issue, the thing that’s really been driving the market these past few years has been economic growth. If there’s going to be a restraint, it’s going to be a spanner in the works economically.

SCN Asia: In contrast to the U.S. and Europe, where the value split between AV products and services is fairly even, your survey found that in Asia the ratio is more like 80:20 in favor of products. How do you explain that finding?
RR: Whether you’re talking about AV, IT, or telecoms, software and services represent a much smaller proportion of the market in Asia. There’s much of a ‘do it yourself’ approach to how people do things. Customers sometimes feel that they are just as capable of co-ordinating a project as a systems integrator would be. In Europe and the U.S., there’s a recognition that you need an expert. Here there’s a recognition that you need arms and legs—and expertise only in certain niche areas. There are countless examples of enormous AV projects— one in particular that comes to mind is a new stadium in India— where you ask who’s pulling all the systems together and they say they’re co-ordinating it all in-house. The suppliers are working in isolation.

It’s almost a chicken-and-egg situation. Customers tend to do things themselves because the level of services and capabilities is not where it really needs to be. And it’s not where it needs to be because there isn’t the demand!

SCN Asia: Your report emphasizes the importance of product pricing when dealing with the issue of U.S. or European manufacturers seeking to establish a foothold in Asia. Are there specific factors at work here?
RR: When we were talking to channels and vendors, far and away the most advice they had to give revolved around pricing. Asia-Pacific, across the board, is a market where pricing is very important. In the developing markets, you have a lot of very priceconscious buyers. In the more mature markets, you have a lot of very stiff competition where price is a key differentiator. So regardless of which market you’re looking at, it’s very important to get the pricing right.

One of the biggest headaches for companies selling in Asia-Pacific, especially for distributors selling U.S. or European products, is web retailers based in the U.S. and Europe. If I’m sitting in Indonesia, which has 30% import duties, and I say ‘I think I need to buy a projector’, I go onto the web and I find that a 2,000-lumen projector can be had for US$400. That doesn’t seem too bad, but then I go to the local Epson or InFocus or Panasonic dealer and they tell me it’s going to be US$1,400, and the impression I get is that they’re ripping me off. But if you take the cost of shipping to Indonesia, combined with the import duties, plus any other bureaucratic costs you might have had to pay, the price in Indonesia is going to be dramatically higher. So the online retailers, while they’re not offering a product to Asia-Pacific, are helping to set unrealistic expectations of what prices are going to be.

But it’s not just a question of going in with the lowest prices, because if you do that, you run the risk that you won’t have enough incentives for channels. And support is also very important because of the lack of infrastructure that I talked about. You’ve got users who are less tech-savvy and in some cases literally less educated than in other parts of the world. People need help to use products properly.

SCN Asia: What about companies looking to begin manufacturing in Asia? Do you have any advice for them?
RR: The key thing I would say is that conventional wisdom is not always the best wisdom. By that, I mean that people have in mind that China is the cheapest and best place to do manufacturing. But it often isn’t. There are a lot of hidden costs to manufacturing there. For some it’s the cheapest, but for others it might not be, and there might be other places that are cheaper in the long run, or better in terms of capabilities.

It depends on what you’re making, and in what quantity. Do you need skilled or unskilled labour? Where are you going to be shipping products to once they’re crated? How important is logistics support? The places you may not think of as the cheapest might actually be the cheapest in the long run. Malaysia, the Philippines, Thailand and Indonesia, for example, all different have advantages that China doesn’t have.

I’ve seen people going with conventional wisdom without carefully investigating, then discovering they could have procured better elsewhere. So look at all the options and weigh them up carefully before you go ahead.

SCN Asia: Does the same thing hold true for distribution partners?
RR: It’s always important to find the right partners, the right people. There aren’t that many good channels to choose from. There isn’t the selection you would find elsewhere in the world, so many times companies will jump at the first partner that comes their way. Relationships are very important in Asia-Pacific, so it’s important to understand potential partners and establish a good relationship with them, and establish what connections they bring to the table, and what connections you can bring.

The last thing—most importantly— is just understanding the market. I’ve seen so many people who make a one-week trip to Asia, and suddenly they’re an expert on Asia. And just because you’ve done something in Japan that has been successful, doesn’t mean you can replicate that in China. Remember that Asia is not just dramatically different from other regions in the world, but each country within Asia is different, too.

Reid Rasmussen is Strategy Director of Fusion Consulting, an Asian-based business intelligence company with headquarters in Singapore, Hong Kong, and Shanghai. Fusion Consulting is a member of the Global Intelligence Alliance.

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