Context: Distribution set for solid second quarter

The second quarter is shaping up to be a strong one for the European channel, with distributors potentially set for double-digit year-on-year growth.

Forecasts from Context indicate that European distributors could see revenues grow by 10% in the second quarter, compared with the same period in 2020, and there are hints the figure could have been higher if it were not for component shortages.

It is always going to be difficult to compare against 2020 because of the unusual market conditions caused by the coronavirus pandemic, but Context is putting some numbers out there to give a sense of what the rest of the year could look like. The analyst house has forecast 8% revenue growth in the second quarter, followed by a further 5% in the third quarter and 5.5% in the fourth quarter.

The dynamics that dominated the market last year, with strong demand for laptops and work from home technology, are likely to soften. But the prospects for desktops should improve as people return to offices and look to upgrade. Infrastructure projects that have been delayed should restart and telecoms will remain a growth area.

Context has also shared more “optimistic” forecasts, with a potential 10% growth in the second quarter, followed by 8.5% in the third and 8% in the fourth. But for that to happen, some of the current supply chain issues would have to be eased.

In a more pessimistic scenario, where demand for notebooks flags, telecoms suffers drops and cloud projects stall, there would be lower growth of 7% in the second quarter, 3% in the third and 4% in the fourth.

“As a result of the pandemic, we’re seeing more remote workers invest in home office equipment and employers kitting out the workplace to support a new hybrid model. These are just some of the reasons why we’re forecasting impressive channel growth for the rest of 2021, despite strong year-on-year comparatives,” said Context global managing director Adam Simon.

He added there were other factors on the horizon that meant momentum in the channel would continue into 2022.

“Two other factors that will increasingly influence the market as we head into 2022 are the environmental concerns of consumer and B2B IT buyers, and the EU’s huge €1.8tn recovery fund, much of which will be spent on digital,” he added.

The market analysis from Context echoes other voices in the channel that have also spoken about a sense of optimism about the rest of 2021.

Late last month, Agilitas IT Solutions shared the results of its Channel Confidence Index 2021, revealing that despite everything that has happened in the world as a result of Covid-19, the level of positivity among the senior leadership at channel firms is holding firm.

Areas in which partners felt positive were around resilience and customer experience. There were also signs that sustainability is an area that is really influencing decisions, with almost a third of channel businesses (29%) hoping to implement an effective strategy in the next six to 12 months.

“This past year has been one of challenges, opportunities and lessons learned for the IT channel community, and seeing such strong levels of confidence is hugely promising for the times ahead,” said Richard Eglon, marketing director of Agilitas.