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GfK looks at the latest set of IT economic figures

Can IT escape the cloud over retail?

Mehryar Hamid, GfK’s Account Manager, IT, looks at the poor performance of the UK economy.

The latest set of economic figures published by the Office of National Statistics (ONS) came as a major setback as the UK economy experienced its third consecutive quarter of negative economic growth.

In Q1 2012, despite the fact that the Gross Domestic Product (GDP) had contracted, the service sector which includes the retail industry was actually in the positive. However this was not the case in Q2 as not only did the overall economy contract, the service sector was in the red as well. So as we move into the second half of the year, things seem to be quite uncertain and the outlook remains increasingly gloomy.

In line with the overall economy, the UK IT market hasn’t fared much better either. Even though sales volumes were up 0.5 per cent for the first six months of the year in comparison to 2011, sales value was down 3.8 per cent. Moving into Q3 2012, the figures for July have been even less encouraging with both sales volume and value down 6.6 per cent and 3.4 per cent respectively.

The positive news, however, is that the retail channels were up 2.8 per cent in volume and 11 per cent in value in comparison to July 2011. This growth has been driven primarily by the web-books (aka tablets) and e-assistants product groups, which for the month of July accounted for approximately 33 per cent of the total spending on IT products in the UK retail channels. Another positive development in the market is the strong growth of internet channel as year-to- date sales grew 5.5 per cent in comparison to the year before. For the month of July 2012, online sales accounted for 27.8 per cent of the total retail sales in the UK IT market.

The PC side of the market continued to contract in July 2012 with all the traditional form factors such as desktops, notebooks and netbooks in decline when compared to the same time last year. The economic climate, saturation in the market and the lack of innovation have all had a significant impact on this market as has the fact that newer devices have failed to generate the level of traction that the industry had hoped for. Another major factor behind the declining numbers is that as these ‘bulkier’, less design-led devices begin to fall out of favor with consumers, sales of the more portable web-books have begun to cannibalise the sales of these older generation devices.

However as we approach the back-to-school period and move towards Christmas, there is definitely potential for the PCs, web-books and e-assistants product groups to push the IT market into a reasonable position by the end of the year. The expected launch of several highly anticipated products in the coming months can only add to this surge.

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