A job for you when it's all over: "A Computer on the Doorstep and a Toehold Inside. Borrowing a Strategy From Soap and Makeup
By SHOLNN FREEMAN
upperware-Style parties and door-to-door sales pitches are no
longer enough for Handtech.com, the ambitious little Austin, Tex.,
company that has created a buzz in the computer industry by selling
systems in your living room.
With a mix of easy credit and
customer hand-holding --
hence its name -- the
three-year-old company
envisions making a bundle
not only by selling computers
to the 50 million American
households that don't have
them, but also by getting its
customers onto the Internet,
where they can buy more
Hand products directly. And
even as it seeks to move
more operations online, it will
use its Amway-style sales
force to show existing
customers how to use what they have bought or might buy later, not just
to make initial computer sales.
"The goal is to build a substantial channel to sell computers," said
Andrew Harris, the company's chief executive and co-founder. "This
company can become as big as any company selling computers today.
This can become a multibillion-dollar corporation. It's very similar to Dell
in the mid-80's."
That is big talk from this tiny company, which changed its name last
month to Handtech.com from Hand Technologies Inc. Hand sold just
$4.2 million of personal computers last year, less than a quarter of what
Dell sells in a single day, and analysts don't see Hand making inroads
anytime soon.
The business of selling computers has become a big-name, big-money
brawl with seemingly little opportunity for small players. Even some of the
giants are being battered by plunging prices and rebates.
"The Internet mania is peaking," said Eric Schmitt, an analyst at the
Internet research firm Forrester Research. "The well of first-time buyers
is drying up."
And, he added, some 13.5 million of the 50 million households without
computers cannot afford them.
But Hand has a deep-pockets ally that is considerably more optimistic
than Schmitt: the Fingerhut Companies, the second-largest catalogue
retailer in the country, behind J.C. Penney. Fingerhut holds a 28.1
percent stake in Hand and is giving it access to the 31 million names in its
own data base, focusing on low- to middle-income families, and the 59
million names in that of its parent, Federated Department Stores.
Through Fingerhut's credit policy and payment plans, Hand can finance
high-interest computer purchases to low-income people and people with
bad credit histories.
William J. Lansing, Fingerhut's chief executive,
predicted that Hand could be a billion-dollar
company within two to three years. But, he
cautioned, "I don't think we will be taking the
wind out of Dell's sails anytime soon."
Harris said Hand has shown 30 percent revenue
growth each quarter. But the company has yet
to make a profit and does not expect one until
the end of next year.
Harris and Martin Slagter, Hand's president, are British-born marketing
veterans who started the company in 1996, after testing the
door-to-door selling concept for computers in Britain. Previously, Harris
spent five years building the international operations of the Dell Computer
Corporation from a $70 million into a $1.4 billion business. He left Dell in
1992 after losing a bid for a more senior position, and Slagter, who was
leading Dell's business in Europe, followed him to Austin, which is also
Dell's headquarters.
Based on Harris's track record and business plan, the company attracted
$6.75 million from private investors. Harris and Slagter, who also
invested $1.5 million of their own money, own about 29 percent of the
company.
On a company Web page intended to attract sales representatives,
Harris is shown next to the message: "We took Dell to the top, and we'll
do the same with you." But getting Hand to the top won't be so easy in
an industry filled with price wars, discounts and even free PC's.
Micron Electronics Inc. and FreePC.com Inc. are offering free machines
to customers who sign up for online service, while rebates are being
offered to Internet customers by big names like America Online's
Compuserve division, Prodigy Communications and Microsoft's MSN.
In this fiercely competitive atmosphere, CompUSA Inc., the biggest
computer retailer and the only one devoted mainly to sales of personal
computers, is closing as many as 14 of its 211 superstores, eliminating
hundreds of jobs and adding more consumer electronics items to its
lineup. And the Good Guys, which operates 80 consumer electronics
stores in California and four other states, said this month that it was
leaving the PC business altogether.
Even the direct-selling giant, Dell, has been buffeted. "It's an ugly
business now," Schmitt said. "Dell said they'd never go below $1,000,
and they have," now selling computers for much less.
"It's a game for people with deep pockets and an established name," he
added.
But Harris is undaunted. He is going after buyers the others have ignored.
"We actually have someone in your home showing you how to get on the
Internet and how to buy from us," he said. "We're actually energizing
people to get on the Internet."
"From that we can make money," he added, alluding to the company's
online storefront, which sells accessories, software, upgrades and
Web-based tutorials.
Simple sales of basic computers to friends and neighbors, sometimes at
Tupperware-style get-togethers, have become less important as the
company takes in more revenue from Internet sales. And the
person-to-person contacts themselves have become more focused --
aimed, for example, at a small-business owner or at local business
groups.
The company's operations are heavily Web-based. Orders are
processed through its site, and the sales staff uses it to calculate
commissions and to communicate with teams and with the company.
Hand also values flexibility. Systems are built to order, keeping
inventories low and letting prices change with the market. Sales
representatives focus on the company's own line of PC's, called Vivapro,
but Hand also has partnership agreements to sell computers from
Emachines, Compaq and I.B.M. Hand has tried to roll with the market
by offering a $400 discount on its own machines for customers who sign
up for three years of online service at $21.95 a month.
Of course, customers pay for the company's hand-holding. Consider
someone with $300 to spend on a new basic computer. He could get a
$699 Vivapro model -- with speed and capacity similar to what is
standard for most computers at the lower end of the market -- and, after
signing up for Hand's online service, a $400 rebate.
The customer would get $500 of vouchers to use in online shopping at
other sites, but neither a printer nor a monitor.
By comparison, for $300 (after a $400 Compuserve rebate for
customers who sign up for three years' service and a $50 Lexmark
rebate), a leading computer store advertising last week offered a
Compaq Presario 5304 with greater speed and capacity -- and a
monitor and a printer thrown in.
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Handtech"
A gosh, they're in Texas too. |
