Drew, No, never heard of him before he posted to me.
The normal distribution model with a maker and a distributor and retailers has been shaken up by the Direct sales method, pioneered by Dell wherein the product goes direct from maker to buyer. All the intermediaries are eliminated(called 'disintermediation') At some point the costs of freight get to become a larger and larger % of the system costs and people turn to local suppliers.(Wallmart $299 system, no monitor) Freight can be $30-50 or 10-15% of system costs, and about the same as sales tax. When this happens people buy local. They have no freight, local warranty but they must pay sales tax. More and more system will fall prey to this in the fall. In addition, the so-called 'free' systems will impact things. I suspect gateway will enter this market. The big problem is when you sell a $2000 thing and make 10%=$200 you can survive. Sell a $400 things and make 10%=$40...can you survive? You must sell 5 times as many to make the same $ and you have 5 times the boxes to fiddle with, 5 times the RMAs and your costs are not covered by that $40. There will be a squabble of enormour proportions over the next year. e-machine, Dell, Gateway etc and new entrants. Will the overall market expand 5 times as large so the same profita are made? No a chance. That means a game of musical chairs will begin and when the music stops Gateway may not have a saet, maybe Dell will not have a seat. Compaq? IBM? Will be a bloodbath as they all get cheaper. What happens when they hit $199?
Bill |
