Last week, I was waiting for a flight at Sao Paulo’s International airport.  And as a gold member of the Star Alliance Network, I was waiting in the TAM lounge.  Let’s get one thing straight, the TAM lounge is so much better than the best United lounge I have ever entered. I had 4 wines to choose from, a complete hot and cold buffet table; the sort you might actually want to eat and as much old school reading material as I could want. But, the lounge was full.  Bursting.  Over 100 people sitting and standing and, yes, I counted, there were 17 open ipads (maybe one was not actually an ipad, but like vacuum cleaners, all are really hoovers)…
And PC’s – well, there was the one I was using and… that was it.  Have I become a dinosaur? Have the chattering classes of upper middle class Brazil all forsaken the PC?  Is the ipad the new pc, the new business tool or only for holiday making, wealthy people?  OK< I will let Jon and Kathleen make the social comments, but, really I was amazed!
Now, I was just reading the latest IDC reports and saw, that for the first time, world-wide, pc shipments were down a smidgen year over year, or was it sequentially or was it some other cut of the numbers? Well, the key point is that they said that PC shipments were down and that maybe ipads were to blame.
Now, where does Brazil sit in all this?
Again, going back to IDC for the 3rd quarter 2011, I saw that Brazil, for the first time, became the 3rd biggest market for pc’s in the world.  I missed that!  I mean we have USA and then China and until Q3 it was Japan. Now, it’s BRAZIL with 3.9 million pcs in one quarter. The biggest number ever for Brazil in one quarter.  A few more facts: 51% notebook, 49% desktop (One of the highest desktop numbers in the world today)? And a full 70% consumer, 25% corporate and 5% government and education.  Very high consumer numbers…
So, we have something like 15 million PC sold in Brazil in 2011.  And ipads and tablets sales in 2011? Well, sales were probably 300K only (bought at stores in Brazil) and maybe another (wild guess) 200K imported in suitcases on returns from international business trips.
PC growth is still high in Brazil. They are cheaper, they are more accessible, credit is available, people crave them and the numbers are becoming huge.  So, what about the numbers of pc’s and ipads I saw in the airport lounge?
Here, I think it gets interesting.  The people in the lounge in the first week after New Year were of a specific class or social economic group:

• Wealthy (traveling the first week after New year on holiday is the most expensive time)

• Lot’s of family members; not just males on business.

• And, as TAM gold card members, they, or their fathers or husbands are used to making lots of trips – probably internationally, where ipads can be bought for 40% less than in Brazil…

So, my very informal study suggests we have two, distinct technology markets today.
The first is that there are literally 10’s of millions of poorer, working class people who are earning more and wanting to join the internet and pc technology club. These people are buying their first home desktop pc. Or replacing an older one or maybe buying a cheaper notebook pc. This group is huge and still growing as poverty shrinks in Brazil
The 2nd group is a select affair.  These people are richer, worldly wise, fashion conscious, technology savvy, knowledgeable and probably think they are cool. They are individuals, mums, daughters, sons, and fathers. They want their own ipad based, content and internet experience.  They are a small group today (500K in one year), but they will multiply very, very quickly.
So, no, ipad numbers are making very little difference to pc numbers in Brazil. Ipads and PC’s are attracting two very different audiences. The cool group already have a PC saturated life style. One day, they might buy a cool new ultrabook (but really, these machines score only poorly in the cool stakes compared with Ipads), what they really want is a new cool experience given by the ipad.  The rest of the 198 million people in Brazil are still gaining access to simple, cheap technology, many for the first time.  They want a PC. Even a desktop if it’s available on credit over 24 months. And a connection to the internet.

Paul Ayscough runs his own strategic, sales, marketing and representative company for Technology in Brazil. Before that he set up ATI’s Latin American operations. He loves what he does and wants feedback.

If you have ideas for future articles, please email him at paul@ocptech.com.br.

It’s 32c (90F) here in Sao Paulo and everyone is now getting ready for Christmas.  And getting ready for New Year; a big deal here in Brazil.  And don’t forget, it’s also the start of the long summer holidays.  OH, I almost forgot, don’t forget we cap it all off with Carnival in mid-February.  So, it’s just one long, long, 2 months of sea, sand and sangria (well Caipirinha actually).

Summer has arrived and the going is easy, unless you sell computers or graphics or CPU’s that is. So, what’s happening as we easy ourselves into the New Year?

• - Let’s start with the economic situation. Brazil is still doing quite well. The Euro and the dollar issues touched us a little. The rise of the US$ against the Real by a full 20% in September did contribute to a nervous slow down.  But credit has always been hard to find over here, so the credit crunch has little meaning to Brazilians. However, there is a feeling that Brazil’s growth has slowed from 6% or so last year to only 2 or 3% this year. And the same is expected for next year. Not a crisis, but definitely a slowdown.

• - And the retailers in general?  Well they were nervous. Christmas just did not arrive until this week.  Last year overall retail sales in Brazil came out 17% higher than the previous year. Yes 17%.  This year, the consensus is 5 – 8% higher – but it’s not a done deal yet.

• - And in the PC centric distis and retailers?  Well, it was not an easy year. It all started OK with January – June running 10% to 15% better than 2010. Then it all stopped. I mean stopped dead. July – November was a really difficult period for the PC distribution and retail channel. Seems that sales were off anything from 20% to 30% from the first half of the year.  What happened?  A mini recession? Or maybe it was that all the money was sucked out of the economy and into buying Iphones and Ipad’s.  These two took off something loco, 50% and 100% growth rates...  But for the rest of us, for these 5 months, the old desk top PC stalled.  Distis were sitting on stock, bills were not getting paid. Orders were hard to find. Some went bust. Most went into the red.  But, Christmas seems to be coming, but terribly late.  Most the trade has had a couple of good weeks.  Let’s hope it continues right up to Christmas and New Year.

• - Graphics cards:  Well, sales declined in 2011.  Total standalone, desktop GPU shipments into Brazil declined from something like 230K in Q1 to 200K in Q2 to 170K in Q3.  The question is all about Q4. The tea leaves are showing that things are improving, but not enough to make it a good year. Q4 might be back at 190 – 200K.  That stops the rot, but as Q4 is seasonally strong, it’s not exactly a strong endorsement for the sector.  So, year on year, we are looking at something like 20% decline in units overall.  Now, the good news is that most of the decline seems to be in low end, low value, entry level products.  Mid-range is down a smidgen only. High end is strong.  And revenue is probably only down 10% overall.

• - Consoles. Well, Christmas is really strong for MS as their made in Brazil X-Box 360 sells at 38% price discount to a year earlier. Nintendo and Sony have responded with 30% price cuts, which must be hurting as they are still importing with the full import tax burden. And console sales are very strong.  But, as I opinioned a few weeks ago, it’s more than that.  What we are seeing is a sea change in the sector.  Until this year, 85% of consoles came in via the grey market or inside a suitcase when coming back from summer vacations at Disney world.  With the new prices closer to prices that can be found in shops in the USA (we were talking 4X more expensive, not we are only 2.3X more expensive)  the attraction of the official market is improving.  The numbers are not yet in, but we are expecting to see ‘official retailers’ gaining up to 50% of the share in the run up to Christmas. It was only 15% last year, so this is a true paradigm shift. (That is the first and last time I will use that work in a sentence).

And so to other thoughts.  It’s been 2 years since I started OCPtech here in Brazil. We have lots of new clients join us in the last 6 months.  But as Christmas arrives, my thoughts turn to the reason I moved to Brazil – to be close to my 11 year old daughter. And all she wants for Christmas is an Ipad2.  But daughter, it’s not as flexible or powerful as a great new desktop PC. But Daddy, it’s cool and it’s what I want and my friends are all getting one for Christmas; do you want me to be left out of all the fun… And not be able to keep up with my studies? And? PLEASE!!! Brazil is becoming as consumerist as any country on earth!

Paul Ayscough runs his own strategic, sales, marketing and representative company for Technology in Brazil. Before that he set up ATI’s Latin American operations. He loves what he does and wants feedback.

If you have ideas for future articles, please email him at paul@ocptech.com.br.

While there were no shooting or pepper spray events in Brazil this week for the pagan festival of Black Friday, that does not mean that all came off smoothly.

It’s a new concept in Brazil; Black Friday I mean.  Shootings have been around for years.  Only introduced 2 years ago, Black Friday is starting to grow into a significant date on the retail calendar.  Here it has absolutely nothing to do with the day that the stores leave the red and arrive in the black, but instead is a date, imported from the USA (as many other great things are such as Coke, Mickey Mouse and Obesity) that means discounts on all manner of goods, though so far mostly electro domestic and electronic.  Now there is one thing for certain, Brazilian stores and etailers love special dates.  It all started with mother’s day, then father’s day, now you have children’s day (or is that week) which has become the most important date outside of Christmas.  But wait for it, now they are pushing grandma and grandpa’s day and girlfriend and boyfriend day (which is different to Valentine ’s Day)!  So, Black Friday is another date, another excuse to push product on to the over leveraged consumer.

But as I have said so many times before, this is Brazil and things work differently here.  Let’s start with ‘ease of access’ to the key on line stores.  The major site that was pushing Black Friday is called “Busca Descontos” – translated as “find a discount”. Between midnight and 2.30am on Black Friday, they were allegedly receiving 210 thousand clicks or queries a second!  And, obviously the site was down most of the time (probably accounts for why they had so many hits).  They were later quoted as saying “we never expected that level of traffic.  We were taken by surprise”…

Other sites also had outages and problems.  The key here is that every other ‘special date’ is different to Black Friday.  As you lead up to children’s day, Mother’s day or Father’s day, you have one or two weeks when you can access a shopping site and place an order. In fact, it’s key as you want the toys, flowers or socks delivered before day in question.  With Black Friday, all is different.  It’s all about grabbing the ‘door buster’ deals available at midnight, so 210,000 people all waiting up until midnight to try and purchase that one 40 inch LED one second before someone else does.  But no one seemed to think through the site logistics for that one…  So lots of unhappy potential customers…

Now, another issue is just as true for online stores as it is for bricks and mortar.  And that is the spirit of Scrooge who seems to be alive and well and running retailers and etailers just in time for Christmas.  And, just to confirm, I mean the Scrooge that you see for the first 89 minutes of the 90 minute film.  Now, to paraphrase an old saying, “no one ever lost money underestimating the stupidity of the average Joe”.  And even though there were many complaints, there seems little that the law can do about it.  What exactly am I talking about? Classic really… Take a TV set that normally sells for $1200 dollars.  Today, Black Friday, it’s advertised as “a $1500 value for only $1199”.

Clearly the TV was never really $1500.  But the retailers are hoodwinking the consumer to think it was. Then there is the issue of credit to further confuse the consumer.  This same TV (which has a real “value” of $1200) and was discounted to $1199 from $1500, is also offered on Credit. Only 24 X $79!  A total paid over 2 years of $1896. Depending on how you count that, we are talking about a 60 – 70% real rate of interest.

But the fun did not stop there. The biggest travesty was a total lack of understanding by many retailers & etailers of the spirit of what constitutes a decent Black Friday deal in the first place. Most stores and on-line sites did nothing special with prices – they just sold the same goods at the same ‘discounted prices’ as the day or week before.  All they did was just wrap the whole thing up in a big black bow and call it Black Friday. Unfortunately, the Brazilian consumer is not yet as sophisticated as he or she needs to be and some, maybe many fell for it.  Maybe by next year it will have all changed for the better. Though somehow, I doubt it!

Paul Ayscough runs his own strategic, sales and marketing consultancy and representative company for Technology in Brazil. Before that he set up ATI’s Latin American operations. He loves what he does and wants feedback. If you have ideas for future articles, please email him at paul@ocptech.com.br.