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By 19 November 2013 | Categories: Press Release

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First National Bank (FNB) is expanding the consumer electronics market rather than taking market share from existing players. Lance Harris delves deeper.

An aggressive strategy from FNB to put smart devices in its customers’ hands has positioned the bank as one of the country’s most innovative financial services companies. Yet it appears that FNB’s foray into the IT and telecoms reseller market does not yet pose a significant threat to the country’s electronics retailers, IT Value Added Resellers (VARs) or cellular dealerships.

FNB celebrated the second anniversary of its smart device offer in October this year. In a blog post to commemorate this milestone, FNB Core Banking Marketing Lead, Ilse Smuts, says that the bank has sold more than 200 000 smart devices from brands such as Apple, Samsung, Acer, and BlackBerry during this time. “For many months sales exceeded 10 000 devices per month and if a leading brand released a new device, we had our hands full,” writes Smuts.

Straying from the path

The rapid uptake of the smart device offer has exceeded FNB’s expectations, turning it into a fairly significant player in the IT channel in the process. But FNB’s move into the IT channel has not been without controversy, with some critics charging that the bank is straying from its core business of providing financial services. “When we obtained a telecoms license and when we were the first bank to offer iPads and smartphones, we were criticised and asked if FNB was a bank, a gadget retailer or a Telco service provider,” outgoing CEO, Michael Jordaan said in a speech prepared for his acceptance of the Sunday Times Business Leader 2013 Award. “The truth is, we were seeing a new way for people to bank.”

In a nutshell, FNB’s strategy is to encourage consumers to use lower-cost digital banking rather than traditional channels such as call centres and bank branches. And if the smart device offer lures a few customers from rival banks to FNB, that’s great, too. In both of those regards, the smart device offer is paying off for FNB. However, a narrow focus on banking customers means that FNB is unlikely to unseat any of the country’s dominant IT resellers.

Mythmaking

Arthur Goldstuck, the CEO of market research firm World Wide Worx, says that FNB’s impact on the smart device market is not as profound as many market observers believe it to be. The myth that FNB is the country’s biggest smart device retailer comes from one outstanding quarter when it sold more Apple iPads than any other reseller. Now, there’s a pervasive assumption that FNB is South Africa’s biggest iPad reseller, though the feat has not been repeated, says Goldstuck. FNB is a significant reseller that is making the iPad affordable to a new audience, but it is not taking huge volumes away from more established IT retail and value-added resale channels.

To put FNB’s numbers (200 00 smart devices sold) in perspective, a study by World Wide Worx found that South Africans bought more than 1.4 million tablets between June 2010 to June 2013. When it comes to smartphones, World Wide Worx expects around 5,3 million units to be sold in South Africa during 2013. This is all besides the ultrabook and notebook markets. 

Most smartphones continue to be sold through the mobile network operators, their service providers and their dealerships, says Goldstuck. The tablet market is dominated by the Apple iStores (owned and operated by local distributor Core Group) as well as major retailers such as Incredible Connection and DionWired, he adds. “FNB should be seen as the equivalent of a major store,” says Goldstuck. Its major strengths include its ability to offer discounted pricing and affordable monthly repayments to customers who might not have felt that a tablet computer, notebook or smartphones was affordable to them before.

FNB and other electronics retailers are all benefitting from a wider trend towards the consumerisation of IT in the enterprise, a force that demands IT resellers across the board start rethinking their approach to the market. Rather than dictating from the top which smartphones and tablets users may bring to work, a growing number of companies are leaving the choice up to users.

Consumerisation eats VARs’ revenues

Few companies are standardising on a particular tablet or smartphone – they’re instead using mobile device management tools to manage what their end-users are bringing to work says Goldstuck. Complexity is growing all the time because of the rapid refresh cycle in the tablet and smartphone markets. This means that a growing portion of IT devices are being bought from consumer retailers, often with a company allowance, rather than through corporate VARs. Retailers must up their game to take advantage of this growing market, says Goldstuck. “The important thing is that retailers must spend more time training their staff to support customers,” he adds. “You can’t just hire a sales rep who reads off the spec sheet. If this doesn’t change, people will be less eager to buy their devices through this route.”

For corporate resellers, the trend of consumer IT devices coming into the workplace poses a major threat. Already, tablet sales are being blamed for eroding growth in the traditional desktop and notebook PC markets. A revenue stream many resellers counted on is diminishing at an alarming rate, along with the money they used to make from supporting PC infrastructure.

No turning back

IT consumerisation has taken root in many companies, and VARs cannot do much to turn back the clock. Their focus instead needs to shift towards selling value-added services and solutions that support consumerised IT environments to make up for the loss of PC and notebook sales to electronics stores and online retailers. For example, they should be looking at selling administration and security solutions that address the management complexities and security risks consumer devices bring into their corporate customers’ networks. Other opportunities may lie in providing cloud services – software as a service, for example – to extend the value of the smart devices in the workforce. 

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