A pile-up of inventory put the brakes on the consumer electronics sector and led to price cuts early last year, and a slowdown in consumer spending struck a further blow.

However, the situation improved in the second half and manufacturers, technology companies and partners found themselves back in harmony.

Taiwanese consumer electronics company BenQ suffered a major setback due to the first-half challenges in 2009 and saw growth figures fall to single digits. But the company was quick to recover in the second half as it pushed its growth rate up to 50 per cent by controlling inventory and costs and launching new technologies.

Manish Bakshi, General Manager, MEA, spoke to Emirates Business about the strategy adopted to steer the firm through those difficult months.

What challenges did BenQ, with its total focus on the consumer segment, face in 2009?

Consumer spending was obviously affected due to the global recession, but the real problem was the lack of synchronisation between factories, technology companies and partners.

At the end of 2008, the production timeframe at the factories was high as shipments were taking at least 30 days or more to reach Europe and the Middle East, which was a big issue. By the time products reached the region, the recession had hit consumer spending.

Technology companies started adjusting their sales and targets for February and March last year. This caused a lot of inventory to pile up at the factories. It took the first half of 2009 for every technology company to adjust to this scenario. As synchronisation between technology companies, partners and factories happened, the industry started settling down. As co-ordination happened on stocks, then factors such as pricing and operational costs could be addressed.

This is one reason the second half of 2009 started turning positive. It was the re-export segment that benefited, but the retail sector was still affected.

Did this market readjustment improve the business scenario for BenQ?

In the second half of 2009, BenQ experienced 50 per cent growth compared to the low single-digit growth in the first half. Companies and buyers became buoyant, which is why even in 2010 we are expecting an annual growth of 25 to 30 per cent.

For BenQ there was also the launch of new technologies in the second half of 2009. We launched the LED backlight monitor, which was a first. There was the 3D technology announced on the projector platform and the LAN control, which enables 200 to 300 projectors to be hooked up from one central room. These solutions saw interest from educational institutions and hospitals.

In the projector segment, there was also the short throw technology, which reduced the distance by 50 per cent, meaning that a consumer could have a bigger viewable area. This technology is suitable for small rooms. In netbooks and joybooks, BenQ launched products in new sizes. For example, the netbook was launched at 10.1 and 11.6 inches while the joybook was available in 13.3 and 14.1 inches. Acer is the only other vendor that has similar sizes in the netbook space. Our focus was also on utility from the joybook with consumer ultra-low voltage (CULV).

The processor in this product gives 11 hours of battery life. New technologies along with market readjustments helped us grow in the second half of 2009.

What are the main factors required to synchronise operations of a technology company, its partners and the factory?

There has to be constant co-operation between these three areas. The consumer electronics industry was badly affected by a backlog of stock. By the end of 2008 and the beginning of 2009, demand was low in a lot of territories, and clearing up stock was an issue.

Money had to be put in to control the situation and eventually prices fell, which is why the industry panicked. But as soon as this realisation set in, there was an adjustment in the manufacturing and production units. Therefore, the whole pipeline underwent a change.

Do you expect this scenario to continue or is there likely to be a further change?

There will be no change as the market scenario has changed, especially in the second half of 2009. Consumer demand has increased, especially in the re-export market. Even the corporate markets are starting to make purchases again.

Why is the re-export market more buoyant than the retail segment?

Dollar fluctuations with local currencies, especially in Nigeria and CES states such as Kazakhstan and Uzbekistan, were an issue at the beginning of last year. This settled down after the first quarter of 2009 but in the first eight to nine months, confidence among buyers remained low.

As a result, payments were affected in the re-export market. If inventory piles up for buyers outside the country, payments will slow down. But when problems settled down for the seller in Dubai it helped to revive the re-export market.

As a brand, we are present in retail and re-exports. BenQ, as essentially a consumer brand, is dominant in both areas. In countries such as Saudi Arabia and Egypt, there is high local consumption that is at least 65 to 70 per cent retail.

In the re-export market, all our products are sold apart from LCD TVs, which are consumed more locally. Here transportation becomes an issue as portability was a challenge. On site services are essential here and these cannot be handled by an exporter.

On the retail front, do you plan to open additional BenQ zones in the UAE?

The BenQ zone concept has been launched in Dubai and we had plans to open one in Cairo, but this stalled because of the global recession. However, this year, we plan to open a zone in Cairo and then in Riyadh.

The BenQ zone concept was created to increase awareness among partners and dealers. Training is provided and the zone is not used for wholesale purposes. Partners also get a chance to touch and feel new products before launch.

What are the main growth areas for BenQ?

In netbooks, TVs and cameras, we have already started seeing growth of up to 100 per cent. Countries like Kuwait and Qatar are showing positive signs. In terms of revenue, LCD monitors and TVs are the growth areas while TVs, projectors, cameras, netbooks and LCD monitors provide profits.

In terms of units sold, growth on a monthly basis from TVs is 40 to 50 per cent while for cameras it is eight to 10 per cent, projectors 15 to 18 per cent and netbooks six to seven per cent.

Do you plan to offer netbooks through telecom operators?

We are already working with Vodafone in Egypt and plan to launch in the UAE along with operators. Brands like Acer have already taken this step. Other potential markets are Saudi Arabia and South Africa, which are dominant operator markets and consumer demand is dependent on operator deals.