Who would choose to manufacture in the UK, let alone products in a market as competitive as PCs, with its razor-thin margins, and peaks and troughs of demand to contend with?
Remarkably, companies such as Chillblast, Mesh, Novatech, PC Specialist, Stone and Zoostorm still assemble PCs on these shores, and not just traditional desktops, but laptops too. Some even offer their own-brand Android tablets – albeit sourced from China – and other products as well as they bid to keep up with a fast-changing computer market.
However, it’s a far cry from the 1990s when Time, Tiny, Evesham and others were expanding fast as sales grew in double figures, every year – before they went under, to be joined, over the years, by Dan, Multivision, Panrix and other once highly regarded PC makers.
Over the past 15 years, there have been two main “extinction events” in the UK PC industry. The first during the recession of the early 2000s, which coincided with a the shift from desktop PCs towards laptop computers.
The second began in 2007, coinciding with the most recent recession and, since 2010, the sustained fall in sales of PCs as tablet computer sales boomed.
How on Earth do they stay in business?
In the case of Novatech, it does so with a workforce that includes a significant percentage of casual and part-time staff to enable it to meet peaks in demand, combined with a strategy that has shifted in emphasis over the past three years from consumers towards small and medium-sized businesses, says Tim LeRoy, marketing director at Novatech.
The unique selling point for them is that by manufacturing in the UK, it can build custom PCs for SMBs faster than a company shipping in finished goods from Eastern Europe or Asia, while providing a higher degree of customisation and service.
“We realised that we needed to do that about four or five years ago and our B2B business has grown about 70 per cent in the last three years, adding 3,500-4,000 business customers in that time,” says LeRoy. “We can build for purpose and for price, and have it delivered inside a week and support it.”
With a turnover of just under £40m, though, Novatech will soon be hitting the wall where taking the company to the next stage will require a major investment in production and service, which, if it doesn’t pay off, may endanger the whole company.
Other once major vendors, such as Mesh and Evesham, also found size and scale a double-edged sword. Mesh went into administration in May 2011, falling victim to the downturn in PC sales as tablet computers took off. Acquired by PC Peripherals, its turnover today is about one-tenth of what it was five years ago.
Evesham, meanwhile, hit the wall after the government’s Home Computer Initiative (HCI) programme was suddenly withdrawn in mid-2006 – a lesson about relying too much on government schemes that hasn’t been lost on surviving PC suppliers.
What is clear, says LeRoy, is that running a chain of retail outlets, like Time or Tiny did, is no longer viable. As it saw its sales in long-term decline in its three retail outlets, it closed them before losses became an issue.
Furthermore, says LeRoy, many big web outlets are aggressive towards any sign of price competition from anyone – slashing their prices whenever they detect discounting by another merchant.
“We did an experiment last year on some graphics cards because every time we drop the price a little bit Amazon, Dabs and eBuyer would be on to it pretty quickly. So we dropped some below margin and, within 24 hours, Amazon had scraped the site and dropped its prices below margin as well,” says LeRoy.
Hence, trying to compete solely on price is a mug’s game. “You have to go after who values what you do best, ie great advice and support. And that’s no longer consumers, it’s business,” he adds.
Going niche is another option, but the best niches are already occupied. Viglen, for example, no longer sells direct to the public. Rather, it sells direct primarily to schools, but also businesses and the public sector instead – you can’t configure a PC on the Viglen website.
Elonex, meanwhile, which was once one of the biggest British PC makers, simply gave up and now makes more money from patent licensing than it does from selling tablets – its only remaining product line.
Perhaps the most valuable asset a PC maker outside the giant vendors has today, therefore, is a good reputation. They may enjoy lowly single-digit market shares, but while they have customers coming back for more – and telling their Facebook friends and Twitter timelines – there’s no reason why they can’t continue to grow.