NPD Group Report: Channel Revenue Rose 9% in First Half of 2021

Revenue through the IT channel rose 9% during the first half of 2021, according to market researcher NPD Group. Despite concerns of headwinds throughout the rest of 2021 and into next year, NPD’s outlook, released Thursday, is cautiously optimistic.

Based on NPD’s B2B Distributor Track and Reseller Tracking Service, channel revenues surpassed $50 billion through June of this year. The 9% year-over-year increase is an improvement over the first half of 2020, which comparatively rose 5%. Revenue during the first six months of last year were hammered from the pandemic.

NPD’s Mike Crosby

“We’re actually accelerating now to near kind of pre-pandemic on the growth,” said industry analyst Mike Crosby, director and B2B technology industry analyst at NPD Group. While he said the data shows that the channel collectively is on a positive trajectory, looming concerns persist. Among them, the recent rise in COVID cases resulting from the Delta variant, as well as ongoing supply chain constraints.

“If there’s an operative word, what I’m seeing right now is just in general is uncertainty,” Crosby told Channel Futures. “It’s fragile and I think we just have to watch all these other variables pretty close.”

NPD shared some highlights of the first half of 2021. Among them:

Supply Chain and Labor Constraints

Concerns that the Delta variant will impact pandemic’s recovery linger, as does uncertainty about when the labor shortage will subside. Both are poised to play a role in when supply chain shortages ease. Inventories have also been impacted by suppliers that deleveraged because of economic uncertainty, according to Crosby.

But there is an upside to tighter supply of semiconductors and other components Crosby said. Because demand for products such as PCs remains high, average selling prices have increased. The shortage in low-end systems has resulted in customers settling on higher-end SKUs.

“ASPs are up because people are buying higher up in the lineup,” Crosby said. “There are still some shortages, and it’s going to stick around for a little while. But overall, again, demand is very strong.”

A case in point is Lenovo, which last week reported a strong first quarter for its fiscal year 2022. Lenovo posted $16.9 billion (USD) in revenues, up 27% year-over-year. The company’s Intelligent Devices Group (IDG), which accounted for $14.7 billion in revenue, rose 28%. Profits for that group of $1.1 billion, surged 43% year-over-year.

Lenovo reported that ASPs rose 6% from customers purchasing premium PCs, including lightweight notebooks, workstations and gaming systems. “Thanks to years of investment in premium and high-growth PC segments, we continue to improve our average selling price and the profitability,” Lenovo CEO Yuanqing Yang said during the company’s earnings call last week.

Yuanqing emphasized the shift to PC-as-a-service as a key driver of growth. While PC-as-a-service offerings have existed for some time, NPD Group’s Crosby acknowledged that it is starting to gain momentum. “It was fairly niche until now,” Crosby said. “I think you’re seeing it become more mainstream now as more CFOs and CIOs are looking at this closely.”