EXCLUSIVE: Lenovo Consumer Business Unprofitable, Move To Online Subscription Model

PC giant Lenovo is set to implement a radical new subscription based direct sell structure in an effort to lift sales in both the consumer and B2B markets in Australia they are also set to deliver a portal for their B2b partners to sell subscription based services directly to their customers.

Currently their retail consumer business is unprofitable.

ChannelNews has been told that the Company is looking to “significantly” expand their online business and that both consumers and B2B businesses are now able to subscribe to the new service. At this stage they are set to stay in the consumer retail business.

Ajit Sivadasan the global VP & GM of eCommerce, Digital Transformation at Lenovo

According to Ajit Sivadasan the global VP & GM of eCommerce, Digital Transformation at Lenovo who recently paid a visit to Australia future growth for Lenovo is via online and not “necessarily” via consumer retail stores.

As part of the new offering participants will get access to a PC as well as a smart phone storage and cloud based software, such as Office 365 or Adobe Creative Suite, directly from Lenovo.

He said that during the past three months Lenovo has added 30,000 SMB subscribers in three Countries including Australia.

These Companies are now subscribing to PC’s and related services direct from Lenovo.

The Chinese Company entered the Australian consumer PC market three years ago and today has around 17% market share.

According to Sivadasan the Australian consumer business while growing is not profitable.

He sees online as the “way to go”.

As a result of the retail losses, the Company restructured management with Brendan Lau the former Director of consumer moved into a new role he is now looking after Smart Devices and the emerging IOT market.

Shortly Lenovo will start selling intelligent light bulbs and cameras both into retail and online.

During a recent visit to Australia senior global executives evaluated whether the Company should stay in retail or move to only running an online operation in Australia.

ChannelNews understands that Lenovo is currently generating around $40M in online sales from the Australian and New Zealand markets and that their business is growing.

As part of the restructure Nick Reynolds the former Regional Marketing Director at Lenovo in Sydney, was moved into a new role as Global Head of Digital, Web & Social based in the USA.

His job is to help grow Lenovo’s online presence.

According to Sivadasan the new model is set to be “disruptive” and those B2b resellers who get on board will benefit.

As for Lenovo’s opposition he believes that they will struggle as they continue to sell via retailers.

He claims that the new model is similar to what carriers like Telstra and Foxtel are currently offering where services such as smartphones, data and streaming services are all bundled together into one monthly package.

In the future participants will be able to get access to a top end Lenovo Android smartphone for business that is currently in development claims Sivadasan.

Currently Lenovo has over one billion people coming to their web sites globally.

When asked why Lenovo was staying in consumer retail in Australia Sivadasan he said “What’s the point of having good retail partners when you can’t make money. We can scale the rest of Lenovo’s business (online). We are currently selling between 10,000 to 12,000 units a quarter in Australia.

All I have to do is sell another 5,000 units online and we will cover off the losses in retail”.

He said that the current model of spot selling a product into a retail category and then running a promoting was a winner for retailers but not Lenovo.
He said that a “new strategic direction” was emerging for PC manufacturers like Lenovo and he believes that the future for PC Companies like Lenovo will be based around subscription and online selling.

He said that around the world whether it be at Best Buy, Dixon’s or JB Hi Fi in Australia Lenovo was struggling to make money selling via retail.
“We have struggled in the US to make money for a long period” he said.

He also admitted that margins are “tough” whichever Country Lenovo operated in.