The BTO model is not that easy to copy, as many vendors are finding
Fez
_______________________________________
COMPUTER RETAIL WEEK
October 19, 1998, Issue: 223
Section: News
----------------------------------------------------------------------
Gateway's Retail Model Inspires Competitors, Who Achieve Various Levels of Success -- Some Hit, Others Miss BTO Target
Todd Wasserman & Aaron Ricadela
Waltham, Mass. - The runaway success of Gateway's Country Stores is inspiring competitors to use the build-to-order retail model, but not everyone is reporting the same level of success.
Last fall, the industry touted BTO as a silver bullet for computer retailers looking to contain margins and ward off direct sellers such as Gateway and Dell Computer.
"A year ago, everyone was saying 'BTO, BTO...,'" said Jack Legg, a former TriGem executive who next quarter plans to launch a BTO program with his new company, Future Power Technologies. "Instead, they've focused on grinding margins down to get more people in the stores."
Many vendors are expanding their retail BTO programs more slowly than they'd expected, but Gateway's success with its Country Stores indicates the model may hold some promise.
Gateway now claims 94 Country Stores, 18 more than the company operated at this time last month. A Gateway spokesman declined to comment on expansion plans.
Yet the implosion of Inca Computer last week, the lukewarm reception of Everex's retail kiosks and the continuing struggles of Sun TV show BTO acceptance is far from universal.
Following in Gateway's footsteps, BTO retailer TechMedia plans to double its store count to 50 by year's end. New locations are due in TechMedia's core markets in California, Florida and New Jersey, and the company is mulling expansion into the Southwest and additional Eastern states, said Diane Borre, director of marketing.
TechMedia considers its in-store technicians and 24-hour, seven-day toll-free support line a winning formula for getting incremental business.
"We're trying to indicate that we're small enough to give people personal attention, and that they can reach us anytime," Borre said.
TechMedia sells Compaq commercial systems and is adding Hewlett-Packard to its mix. About 65 percent of sales are to consumers; TechMedia also maintains a corporate sales force, Borre said.
Compaq, which launched a BTO program this year, is pressing on with expansion plans, but vice president of sales and marketing Mike Larson said growth is slower than the company anticipated.
Although he had hoped Compaq would have 2,000 BTO kiosks at retail by now, Larson said, the count now stands at 1,200 kiosks in chains such as Best Buy, Circuit City, Office Depot, OfficeMax and regional retailers H.H. Gregg and ABC Warehouse.
"The challenge is being able to engage to the level necessary and get everybody up as fast as we'd like to," Larson said. He added that some smaller chains have grumbled that the rollout was too slow.
IBM's BTO program is also moving more slowly than expected. The company planned to launch a pilot BTO program this summer, but pushed it back to the fall.
In mid-September, IBM launched a BTO program exclusively with Circuit City. The vendor plans to broaden this program over the next few weeks, an IBM spokeswoman said.
As first-tier vendors gear up for BTO, clone makers such as Proteva, Pionex and Everex are trying to exploit their absence.
Bill Lynch, president of Proteva, said smaller chains have an advantage over larger retailers in selling BTO systems.
"If you're in a larger chain where a guy is wandering over from the refrigerator section, you're going to have a tough time selling him a BTO system," he said.
Warren Mann, group director of the NATM Buying Corp., which purchases for regional computer and consumer-electronics retailers, said BTO systems account for about 20 percent of PC sales at NATM stores, and "no one's more than 30 percent." Most consumers, he said, are buying faster machines of 350MHz and higher.
BTO programs also help retailers keep systems sold. "It's like a suit," Mann said, drawing a parallel to another product subject to customization.
Not all the BTO news is sunny, however. A source at ailing Sun TV said a few dozen consumers who bought PCs via BTO on Sept. 15, the day Sun filed for Chapter 11 bankruptcy protection, are currently in limbo. Those customers are paying for a PC they may never receive. But the source said the situation of those customers is likely to be addressed soon.
"It's bad [public relations] for BTO and Sun TV," he said.
Before the filing, Sun TV's BTO program accounted for 20 percent to 25 percent of its PC sales, he said.
Everex's experience with BTO has been underwhelming. Director of sales Soyen Hwang said retail BTO is "not as popular as we'd hoped." The vendor's BTO kiosks at retail have been modified to encourage a choice of 10 SKUs, rather than true BTO, he said. |
