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Context charting a rising channel optimism

Analyst house Context has been following the impact of the coronavirus through the course of the pandemic and has found that the sentiment across the European channel has improving since late May

As the coronavirus lockdown measures start to ease and more parts of the economy open up, there are growing signs of optimism across the channel.

Throughout the Covid-19 crisis, analyst house Context has been charting the response from distributors and resellers to the virus and its latest weekly update indicates that, although it remains a mixed picture business for many across Europe, optimism is holding firm.

When asked how the climate was last week, compared to the prior seven days, 59% indicated that things remained the same and 28% saw things improving. Only 13% saw the climate worsening.

An analysis of pipeline strength indicated that one-off deals when compared to the start of the year were down for many, but when compared to conditions on 1 April they were the same or improving for many resellers.

Those lucky enough to have shifted to a model that relies on recurring revenues reported that things had held steady over April and May. Compared with how life was on 1 January, however, 38% saw the pipeline as weaker.

Week 22, the last week of May, saw good progress in Western Europe, with the four week rolling average showing climbs in growth getting back towards 2019 levels. The chart for the UK also had an upwards tick as the market continued to improve.

Throughout the coronavirus pandemic, the view has been that the UK is about three weeks behind Italy, which has now managed to get back to pre-pandemic revenues. Most European countries are heading back to the expected revenue baseline, with the exception of Russia which is starting to face mounting challenges with Covid-19.

The Context figures also showed that on the distribution front there was a return to growth in May across Europe, with sales improving year-on-year (YoY) by 1.3%. In the UK, the pattern is slightly different with May proving to be slightly more difficult compared with a positive April.

Dominika Koncewicz, senior market analyst for displays at Context, said that in the market she covered demand had remained strong, but supply issues had caused problems – particularly in April.

“There were supply issues in China with a lot of the factories closing, and the biggest problem was for customers looking to purchase things because there was not much supply. We are seeing now that the demand is quite strong for display products and all the suppliers say it is improving. The demand is still there,” she said.

There were some specific examples of categories being negatively hit by Covid-19, such as signage and large displays, and the hope is that the tap could start turning again in the second half on those products.

Koncewicz said that there was a sense across the European channel that things were starting to improve. “Overall the sentiment is getting better,” she added. “As more schools are reopened and some business are reopened, some projects are coming back.”

However, lots of uncertainty remains, with it not clear if money that would have been spent in the second half has been pushed forward to support the shift to home working. Koncewicz said that some vendors were concerned that customer budgets would come under strain in H2.

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