Uncle West where did that last post come from if I might ask?
Here's something interesting. The mention of fingerhut is near the end.
Copyright 1999 CMP Media Inc.
Computer Retail Week
January 4, 1999
LENGTH: 1295 words
HEADLINE: Retailers Pedaled Faster To Keep Pace In '98
BYLINE: Aaron Ricadela
BODY:
Further consolidation in the computer retailing industry helped the largest chains tighten their grip on power in 1998. Falling prices, increased superstore competition and untenable expansion plans knocked a slate of contenders out of the market. Yet even as the majority of leading retailers stayed ahead of the pack, the increased visibility of Internet retailers and the ascension of build-to-order chains such as Gateway Country Stores shifted rankings among CRW's Top 100 Retailers.
CompUSA's acquisition of Computer City contributed to the most seismic change in CRW's Top 100 list, though there were other upheavals as well. During the first half of the year, Egghead.com closed its retail stores in favor of selling online, and Creative Computers switched its focus to direct marketing and Internet sales. Later in the year, regional players Sun TV and Campo Electronics closed their doors. While defunct stores' customer bases were absorbed by national chains, large retailers experienced divergent fortunes even as they padded their sales leads. PC and peripheral prices, less deflationary than in 1997, still gave retailers fits as they pedaled faster to maintain profit margins in an expanding market.
No. 1 CompUSA failed to keep pace with historic levels of sales growth, due to its broad retail exposure to price declines, sluggish corporate sales and the liquidation of Computer City. OfficeMax, the No. 3 company in the Top 100, continued to pare its PC selection and promotions.
Meanwhile, consumer-electronics chains Best Buy and Circuit City had banner years in computer-products sales as they focused on drawing traffic, entering new markets and demanding profitability from the home-office category in 1998.
Retailers on CRW's Top 100 list achieved a respectable 13.8 percent increase in computer merchandise sales overall, as the market (excluding mail- order companies) grew to $29 billion in 1998, from $25.5 billion in the previous year. Retail storefront-only sales grew by a less-robust 11.1 percent, to $23.9 billion, from $21.5 billion.
When direct marketers such as CDW Computer Centers and Micro Warehouse are included, the computer retail market grew 14.8 percent, to $36.6 billion, from $31.9 billion in 1997.
These returns are even larger when Gateway Country Stores is included in the mix. Gateway has opened retail showrooms at a furious pace, expanding from 37 locations at the end of 1997 to an estimated 120 stores by the end of last year.
Gateway, No. 16 on the Top 100 list, and seven smaller companies for which 1997 data was not available, were excluded from our year-over-year analysis so we could draw accurate comparisons between 1998 and 1997. Including Gateway Country Stores, several Internet-only retailers and rising chains including Tandy's three-store TechAmerica (all of which were excluded from comparisons), the Top 100 retailers generated $37.6 billion in computer- related sales last year.
Demand for systems through retail and mail-order in 1998 was fueled by lower prices, greater product functionality and increased competition among manufacturers, retailers and CPU suppliers, according to Stephen Baker, senior hardware analyst at market research company PC Data, Reston, Va.
Although price erosion was more gradual in 1998 than during the previous year, ever-falling prices hurt retailers with the broadest exposure to vendors' product lines more severely, Baker said. The average retail price of a PC declined $300 to $1,125, during the first 10 months of 1998, compared with the average price for the same period in 1997. PC unit shipments shot up 37 percent during the first 10 months of 1998, while dollar volume moved ahead just 8.5 percent.
Hardware sales for CRW's Top 100 (excluding direct mailers), reflecting the sales of systems, peripherals and components, increased 12.4 percent in 1998, compared with 1997, from $17.1 billion to $19.2 billion. Hardware represented 66.2 percent of total revenue for the Top 100.
Retail software sales increased 15.6 percent over 1997, from nearly $4 billion to $4.6 billion, and accounted for 15.7 percent of the Top 100's total revenues for the year. Sales of accessories and supplies, including books, ink cartridges, cables and recordable media, grew 15 percent in 1998, from $4.6 billion to $5.3 billion, and represented 18.2 percent of total sales.
Overall, 75 retailers showed sales increases for the year and 14 were down; 11 accounts either showed no change or did not have 1997 data available.
Excluding direct sales, the picture was less rosy: Sixty companies increased their sales from the retail floor in 1998; 16 companies' retail sales were lower; and 24 retailers either showed no change or were not included due to a lack of 1997 data.
CompUSA added to its lead by increasing overall sales 13.4 percent to $5.8 billion, less impressive than the 19.3 percent growth it experienced between 1996 and 1997. Retail sales, which account for about 60 percent of CompUSA's revenue, expanded by a modest 8.6 percent in 1998.
While Best Buy and Circuit City made hay selling sub-$800 systems to many customers drawn by non-computer-related merchandise, CompUSA's emphasis on higher-priced computers exposed it to softness at the high end. To offset falling average selling prices, the nation's largest technology retailer promoted its CompUSA PC line, which carries a higher average selling price than many name-brand PCs.
The computer superstore segment of the Top 100 list notched a 12 percent sales increase for the year, moving $8.8 billion in merchandise, compared with $7.9 billion in 1997. PC superstores for which 1997 and 1998 data were available accounted for 24.1 percent of the Top 100's revenues in 1998 (including direct mail).
Consumer electronics superstores, led by Best Buy and Circuit City, increased their computer-products sales by 13.8 percent to $6.8 billion, from $5.9 billion in 1997, and claimed an 18.5 percent slice of overall revenue.
Despite lower volume at OfficeMax, the office superstore category posted a 17.2 percent sales increase in 1998, selling $6.1 billion of computer products (16.5 percent of the Top 100's revenue), vs. $5.2 billion in 1997 sales. Staples and Office Depot each made acquisitions in 1998 that strengthened direct-marketing operations.
Direct-mail houses recorded an impressive 18.9 percent sales gain, to $7.6 billion, from $6.4 billion in 1997. Direct-mail companies generated 20.7 percent of the Top 100's sales in 1998.
While Micro Warehouse, PC Connection, Creative Computers and Multiple Zones continued a transition from Apple-heavy product mixes, Insight and CDW leveraged their operational expertise and business-to-business focus to post strong gains. And Global DirectMail, with a full year of Midwest Micro operations under its belt, vaulted into the top 10 largest accounts on the Top 100 list.
Two familiar names in direct marketing, QVC and Fingerhut, make their first appearances on the Top 100 for 1998. QVC is devoting more air time to computers, and Fingerhut has added several technology-oriented catalogs to its mix.
Warehouse clubs increased their PC-related sales by 21.2 percent, to $1.6 billion from $1.3 billion, as Sam's Club and others devoted more attention to PCs. Mass merchants finished the year with a 23.9 percent increase for the year, to $1.1 billion. Wal-Mart posted big gains in software, and began selling PC accessories and supplies at a greater percentage of its stores, while Target shifted its software mix toward newer titles and away from budget apps.
Internet retailers notched big gains for the year as well, as more surfers and shoppers flocked to the Web.
Copyright 1999 CMP Media Inc.
LANGUAGE: ENGLISH
LOAD-DATE: January 2, 1999
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