Lenovo has eyes on consumer PC market

The Chinese PC maker has found great success with the iconic ThinkPad brand of commercial laptops, a business it purchased from IBM. And now it's taking the world stage with a new line of consumer-focused notebooks called IdeaPad. There will also be a desktop line called IdeaCentre.

The IdeaPad will come in 15-inch and 17-inch widescreen models beginning this month, with an 11-inch widescreen to be available near the end of March. There's a heavy emphasis on design and an obvious appeal to specific lifestyle applications, including gaming, entertainment, and easy portability.

The 15-inch model is sleek in the tradition of the ThinkPad, but with a linen-like texture on the outer cover, chosen specifically to stand out from the high-gloss route taken by so many other PC makers. The 11-inch model will come in metallic red and will measure just more than half an inch thick. The 17-inch model has specialized gaming, music, and video controls, and comes with an optional high-definition Blu-ray drive.

All have Dolby-branded sound with four speakers plus subwoofer, as well as an integrated camera with face-recognition software so a person's face can be used in place of a password. There is no bezel, or border, on their screens.

Just two years since buying IBM's PC business and a month since ditching the IBM logo on its ThinkPad line--which it was entitled to use for two more years--Lenovo is launching a whole new product category. But the timing of its entry into consumer electronics retail in 15 markets worldwide comes with risks.

With Lenovo being the official sponsor of the 2008 Summer Olympics in its home country, it's a good bet the company will use its position to introduce itself to the world as a consumer PC maker. It'll also be showing off the new systems at next week's Consumer Electronics Show in Las Vegas. But this isn't the most opportune time to be entering the consumer notebook market.

Industry growth numbers are not nearly as high as they used to be. In the third quarter, growth stood at 22.5 percent, according to IDC, compared with 36.3 percent in the third quarter of 2006. And the already-crowded marketplace is getting even more packed, as PC giant Dell has made a splashy entrance into the retail market to tangle with established players like Hewlett-Packard, Toshiba, Apple, and Gateway.

Consumer retail is mostly new for Lenovo. As a brand, it is the third-largest PC maker in the world, thanks to its commercial business. Lenovo hopes the popularity of the ThinkPad will lure consumers into buying a Lenovo for home or school use.

"There's a certain halo effect into consumer, better than you might anticipate," said Craig Marigen, Lenovo's vice president of global consumer marketing. But, he added, "there is a long way to go in establishing a really leading brand for Lenovo."

Good looks help in selling oneself to the masses, but will that be enough? As visually appealing as the IdeaPad notebooks may be, it's tough finding room on the shelves of retail outlets, especially when the low-end pricing of $799 for the 15-inch model and $1,199 for the $17-inch model puts IdeaPads squarely in competition with practically every other major notebook vendor.

That they won't be in-store at Best Buy or Circuit City initially isn't a huge surprise.

"Shelf space is at a very, very dear premium," noted Stephen Baker, vice president of industry analysis for The NPD Group, which tracks consumer PC sales. "There are not a lot of good places for manufacturers to go to drive significant consumer volumes" to begin with. Best Buy and Circuit City are really the only retailers in the U.S. that can be counted on to move massive amounts of notebooks these days, he added.

CompUSA was also part of that group, but the chain was bought out recently, and its buyer plans to shutter it in the next few months. Even Wal-Mart, which does well with desktop PC sales, is struggling to sell consumer notebooks, Baker said.

That creates intense competition among manufacturers, and Lenovo will have to learn the ropes as it goes. Retailers will have to ask themselves what Lenovo brings to their customers that Hewlett-Packard, Dell, Toshiba, or Sony doesn't.

"If they have to replace (another brand), that's going to cost more money to get that shelf space because for the most part, it's not in the interest of retailers to increase their shelf space," Baker said.

Lenovo says it plans to stand out from the crowd by overhauling its marketing strategy and presenting a single message around the concept of "ideas."

Dell also said recently it will streamline its overall brand message, and that's probably not a coincidence. Both are trying a new tack at the same time: learning how to grab the attention of retail customers by convincing them that their product will enhance not just their processing power, but their lifestyle.

But knowing how to appeal directly to consumers is a relatively new trend for PC makers, so Lenovo isn't that far behind.

"A lot of these companies have gotten away with not being very good" at marketing and branding, said Richard Shim, PC market analyst for IDC. "Only recently some of these companies have started to get better--most notably HP. And Apple's always been good at it."

Now even Dell has gotten into the game with slick advertisements, which sets the bar higher for Lenovo.

"Lenovo is taking the steps, but it's the sort of thing that will take time," Shim said.

Lenovo also says it hopes to distinguish itself in the area of customer support. For example, Marigen said, "if you're in North America and you call us, someone from North America will answer. And they will answer within two minutes."

Added services like that ultimately may be what sets apart players in the jam-packed PC retail space. Some kind of integrated product scheme is the next step for all companies that want to be successful in the consumer technology business, Baker said. Whether it's set-up and installation services bundled with a notebook, or TVs sold as a package with game consoles, customers want an experience, not just a product off the shelf.

"Just moving boxes isn't enough. You have to sell people a solution," Baker added. "Consumers demand it, and profitability requires it."