TomTom bomb puzzles

By Christelle du Toit, ITWeb senior journalist

Johannesburg, 13 May 2008

The global positioning system (GPS) market has reacted with shock to news that Core Group has severed its relationship with international GPS manufacturer TomTom.

Yesterday, Core announced it had taken the decision as the Dutch company had "continuously failed to honour its contractual obligations".

Core group director for navigation business RJ van Spaandonk said Core "had no choice to terminate the relationship due to, inter alia, TomTom`s inability to supply a competitive product range, and support it with appropriate marketing activities in southern Africa".

Core represents premium brands, such as Apple and Nintendo, in SA.

This morning, Core declined to provide any additional comment on the matter, referring only to the statement the company issued yesterday.

Richard Fearon, group CEO of Avnic Holdings, exclusive distributor of Garmin GPS devices in SA, says both he and the retailer were caught by surprise by the announcement.

"As recently as a week ago, TomTom was promising major retailers the world - at CEO level," says Fearon. He says upon hearing the news yesterday, at least one CEO was "in shock".

Fearon points out that, while Garmin and TomTom are generally separated by only about 5% in terms of market share worldwide, Garmin has captured about 75% of the South African market.

"I don`t understand why TomTom can succeed in other markets and not here," he says. "It is very disconcerting that a global brand such as TomTom failed on as many counts as they have been charged with."

Fearon says the personal navigation device (PND) market in SA is on track and exceeding expectations, although he did not want to be drawn on Garmin`s growth targets.

He says while the market is reaching maturity "fairly quickly", the number of market opportunities at the moment is double what it was three years ago, due to price erosion and the general 'commoditisation` of PND devices.

This morning, TomTom`s customer call line was offline during its official business hours. The TomTom Web site still referred local customers to the Core Group.