To All: An interesting article found at Techweb relating to direct sales:
>>
January 05, 1998, Issue: 196
Section: Computer Retail Week Top 100
Direct selling via the telephone, mail order and
the Internet has been key to rapid sales
growth for large and small retailers. -- Direct
Sales Use More Direct Connections
Retailers found more ways to sell computer products and
services directly to businesses and consumers in 1997,
using everything from in-store kiosks to Internet commerce.
By now, it is becoming clear that direct sales represent an
opportunity for retailers, and not a threat, as a growing
number of retailers are learning.
The beauty of direct selling is the ability to sell products
that don't have to be stocked, whether they be hardware or
software. Retailers selling on the Internet are able to
offer products from their distributors' inventories instead
of their own, without the customer ever knowing where the
product originated.
In a related twist, some small retailers have become
players in the online sales arena simply by having product
on hand that other online resellers do not. State Street
Discount in Portsmouth, N.H., used to make use of mail
order, but it switched to an Internet-based approach of
direct selling because it allowed a broader reach and
leveled the playing field, according to Ron Risman, buyer
and manager of the computer department.
The kingpins of the direct-sales side of the retail business
approach corporate sales from several angles, including
catalogs, Internet commerce, outbound sales and outbound
telemarketing and electronic data interchange. Most of
these approaches require significant investments in
personnel and technology, but companies that have spent
the money have benefited handsomely.
In 1997, the newest efforts in direct sales included the use
of client-site kiosks, a technology pioneered by such
companies as Catalink Direct, but now being adopted by
Tech Data as part of a pilot program to allow retailers and
resellers to provide their business customers with a
terminal for placing orders directly.
For many retail companies, though, the Internet has
provided the ability to have a virtual on-site presence,
with Web sites allowing for either direct ordering or for
telephone orders.
While the concept of assembling a computer for a business
customer is nothing new, build-to-order PCs were
rediscovered in 1997. From in-store kiosks to
Internet-based configurators, users ranging from consumers
to businesses were assembling their own systems and
pocketing the savings.
On the Internet, the buzzword of 1997 was "online
auction," and several companies inaugurated auction sites.
But the largest direct sellers of computer merchandise did
not bother with auctions. For them, the process of direct
sales required mass mailings, barrages of telephone calls
and wearing out lots of shoe leather.
CompUSA, the leader in direct sales, derived a significant
portion of its growth from direct marketing of products and
services, aided by relationships with third parties such as
value-added resellers and build-to-order PC makers. In
fact, CompUSA was so successful in leveraging its use of
local PC assemblers, large and small, that it ultimately
chose to create its own brand, CompUSA PC.
The CompUSA brand took the place of the Compudyne
brand, which has not completely disappeared. But the
CompUSA PC is CompUSA's way of providing structure
to what had become an ad hoc computer assembly
program. Under the new program, three companies have
been authorized to manufacture the computers, which can
be ordered online, by telephone or in CompUSA stores.
By the end of the year, CompUSA had been so successful
with the program that it took a lower profile after a flashy
launch to allow its suppliers an opportunity to catch up
with demand. A similar result was experienced by about a
dozen retailers that tested in-store terminals for ordering
systems built to a customer's specifications. Customer
demand was so intense that these retailers pulled the
terminals out of their stores to prevent any customer
disappointment resulting from delayed shipments of PCs
for Christmas.
Market analysts have already forecast $1 billion in sales
of CompUSA PC-branded systems alone, said Seymour
Merrin, president of Merrin Information Services, Palo
Alto, Calif. "The big change in direct selling by retailers
has been CompUSA's mastery of direct sales and its
integration with their store sales," he said.
Merrin said CompUSA's success is driven by its
infrastructure, which was enhanced with the company's
acquisition of PCs Compleat early in 1997. In addition, the
company is building a massive technical support facility to
field customer calls, the volume of which is expected to
grow as CompUSA PCs proliferate.
"CompUSA PC will be a very big part of their business in
1998," Merrin said. "They will give Dell a run for their
money."
Staples has been the most successful of the office
superstores in integrating and expanding the contract
stationer portion of its business. Corporate sales show
strong double-digit gains at Staples and Office Depot, and
momentum continues to grow. Staples more than doubled
its direct sales of computer merchandise in 1997 to $205
million, which moved the company ahead of Micro Center
and Office Depot into fifth place overall.
By the close of 1997, Staples had entered the
build-to-order business with terminals established in a
handful of stores, but it has big plans to roll the program
out at 150 stores in January. OfficeMax was actually the
first of the office superstores to bring a build-to-order
solution to market in 1997. But it took a lower-key
approach, and the prices of its BTO systems were not
deemed competitive. The company is expected to be more
serious about build-to-order in 1998, observers said.
Computer City SuperCenters brought in Nexar to fulfill its
corporate build-to-order sales, but a wider build-to-order
program for consumers that could encompass name-brand
systems is anticipated for 1998. By the end of 1997,
Egghead Computer was in talks with Nexar as well to set
up a similar program.
CompUSA's 26.3 percent increase in direct sales pushed
the company close to the $2 billion level in 1997, with
CDW Computer Centers a distant second with $1.17
billion in direct sales, a 38.5 percent increase.
Creative Computers got a boost from its Elek-Tek
acquisition, which helped the company weather any
erosion of its Apple-compatible business. Creative saw a
33.5 percent increase in direct sales to $444 million in
1997, to close in on Computer City in third place.
ComputerWare was not so lucky, with an estimated loss of
8.5 percent, or $4 million, in direct sales attributed
primarily to eroding Macintosh-related sales. The
company had the tenth-largest total of direct sales.
In all, 47 retailers on the Top 100 list had at least some
direct sales in 1997, up from 33 in 1996. It is likely that
even more retailers will plug into direct sales in 1998.
Copyright (c) 1998 CMP Media Inc.
>>
Later...Gator |
