December 8, 1999
Compaq Hopes Customer Focus
Will Mean Low Costs, More Sales
By KEVIN J. DELANEY
Staff Reporter of THE WALL STREET JOURNAL
Compaq Computer Corp. will overhaul the way it sells computers to
businesses in Europe, increasing the role of Internet sales and introducing a
single pricing policy for the region.
By standardizing prices and diminishing the role of middlemen, Compaq
hopes to compete better with direct sellers such as Dell Computer Corp.
While Compaq retains the largest share of the European personal-computer
market, a slowdown in its recent performance suggested the need for a
change of strategy. Its PC sales in the region fell 10% by value in the third
quarter of 1999, while Dell's leapt 16%, according to market-research firm
Dataquest.
Analysts say Compaq is being hurt by its lack of control over pricing for its
products. The cost of the same computer can vary dramatically across
Europe because affiliated resellers set the final price customers pay. That
has hurt Compaq's ability to advertise and offer competitive deals.
By the end of next year, the PC maker plans to post a single European price
for customers on its Web site and centralize more of the distribution through
Internet-linked systems. The costs to resellers will also be based on the
single prices listed on the Web site, although resellers will earn discounts by
providing extra services like delivery or installation. In addition, Compaq
hopes to cut costs by minimizing the number of times a product is handled
before it reaches the customer.
The moves were a response to increased use of the Internet, which would
take business to the cheapest part of the region if pricing weren't
standardized, said Neil Marshall, director of Compaq's channel strategy and
development in Europe, the Middle East, and Africa.
The company also aims to take advantage of the Internet to make Compaq's
supply chain more efficient, particularly by finding out more about what the
end-customer wants. Computers currently travel from Compaq's factories to
warehouses where any extra features the customer requests are added.
Now, Compaq wants to tailor each computer to the specific customer's
needs at the point of manufacture.
"We want to get to a position where the box is touched only once, unless
there's any value added along the way that the customer is prepared to pay
for," Mr. Marshall said.
Compaq declined to detail any estimated cost savings from the change.
The company also wants to expand its sales partners in the region from the
current 20,000 authorized resellers. Compaq will pay a fee for sales and
marketing activities conducted on its behalf. Starting in the second quarter of
next year, companies that don't sell hardware directly, like software makers,
will also be eligible for these payments.
Mr. Marshall said the company is evaluating whether to launch a similar
overhaul of its consumer PC sales.
--Karen Chan of Dow Jones Newswires contributed to this article.
Write to Kevin J. Delaney at kevin.delaney@wsj.com |
