Memory Market To Grow In The Country

Despite issues like the gray market continuing to be dominant, the cumulative
import tariff being very high and volatility in price, vendors are trying to
innovate. Now it is up to channel partners to leverage on the lucrative demand
for these products

The memory market in India has shown exponential growth over the past few
years with the entry of new players, increase in consumption of lifestyle
products, vendors' initiative to provide local warranty and significant drop in
prices. There has been a sharp rise in the use of USB drives after the duties
dropped. Prices have fallen by about 25 percent, which has led to their
affordability. Flash cards too, have seen a rollover price recently. All the
players believe such growth is a direct result of the current boom in the
multimedia mobile phone segment. People want to add more space in their mobile
phones using flash cards. Also, their affordability is a major factor that has
contributed to their consumption.

Market in India

Speaking about the memory market in India, Sunil Kukreja, Kukreja
Electronics stated, “Almost all types of memory products for desktops, laptops
and memory cards for mobile would sell in the Indian market and we are retailers
of brands like Kingston and Transcend. The margins while selling these products
account for up to five to eight percent.”

The increasing demand for memory products is also due to the growth in the
overall handset market, and increase in sales of multimedia phones and digital
lifestyle products such as MP3 players and digicams. One of the key reasons for
growth has been the fall in prices of smart memory. There's another reason why
the market is growing so rapidly. Vendors are looking at converting the huge
grey market. Most of the vendors even offer lifetime warranties to woo
consumers. The rising intake of lifestyle products is another big reason. A lot
of today's gadgets are high-tech and memory-intensive, which again fuel this
growth.

“The thrust is on broad types of entertainment like Bollywood, music and movie trailers. We have tied-up with various TV channels to provide online programs” Sunil Kukreja Kukreja Electronics

Most of the players are of the opinion that there has been an increase in
data storage capacity due to rich features being added in gadgets. This
increasing demand for memory cards, especially among the mobile and digicam
segments, spells business for vendors. Portability is another driver. One of the
key customer segments is a student. Users load pictures and music, and carry
them on the move on an MP3 player. They also want mobile data because of the
convenience it provides. Another factor is the upgrade market. Technology cycles
are becoming shorter, as capacities are increasing and this means that the
upgrade market will become significant.

Many vendors are leveraging on channels to reach the consumer. However, the
traditional IT channels are not the only medium to sell. Mobile, digicam and
even gaming channels are also being used. Yet another vendor initiative is to
improve the product. Some vendors are tying up with companies to leverage on the
demand for product applications that will use memory. Mass marketing is also
helping in pushing these products into the market. “Resellers can make at least
15-20 percent margin on flash memory,” agreed Vinay Mehta, Computer Hardware.
Adding to this Devendra said, “The bottomline is good. A partner can easily make
20 percent on USB drives, though this is a bit lower on cards.”

Brands have been advertis-ing aggressively about genuine products and
warranty support, and this is helping to convert the grey market.

Challenges faced by channel partners despite measures by vendors, the grey
market still continues to be dominant and controls over 60-70 percent of the
available market. The cumulative import tariff on cards is still as high as 21
percent, so till this difference is rectified, the grey market will continue to
be an issue. However with a good customer database these challenges can be
counteracted,” added Baid.

“Although most brands have introduced local warranty and India pricing, the
grey market component continues to be high. Apart from higher import duties, the
other reason is rampant counterfeiting by the grey channel. Most of these
products are available only in grey market. Some dealers import these products
but are unable to compete with the big players in the market. We sell most of
our products in the corporate sector and are working on low margins to cope with
the gray market. Also there is no appropriate channel or authorized distributor
for most of the memory products,” added Kukreja.

Pricing and price fluctuation is another challenge faced by channel partners
and sometimes the channel partners incur huge losses. Most of the brands today
are in the process of launching an end-user campaign against fakes.

The road ahead

“It's a huge and profitable market for channel partners to maximize on if
handled well,” said Kukreja. Players in the memory market are evidently
experiencing rise in demand for memory products and upgraded versions of memory
drives and flash drives, thanks to newer graphics-intensive applications,
blackberry and mobile videos. These and other applications demand faster
performance and availability of products with multiple memory slots.

“We believe that flash memory products are now faster accepted as portable
storage devices rather than traditional storage media and has a bright future in
India since none of the laptops or desktops can operate without memory cards,”
said Baid. The major factor responsible for increase in demand for memory with
higher capacities is the need for PC speed and this is a good time for partners
to engage in memory business. With vendors innovating and trying to convert the
grey market, it is up to channel partners to leverage on lucrative demand for
these products.

Rashmi Raveendran