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Technology Stocks : OnSale Inc. -- Ignore unavailable to you. Want to Upgrade?

To: B. A. Marlow who wrote (3738)	2/22/1999 11:06:00 AM
From: Don Wellington Jr.	Respond to of 4903

Thanks for the compliments. You also seem to have been around the industry. My only guess relative to Tech Data's last quarter, is that the volume of purchasing being done from Computer distributors has to be suffering for several reasons. 1) They charge heavy fees and margins to the manufacturer. In the old days, a distributor was the only way to sell some of the computer retailers. Either theretailer's credit wouldn't fly with the manufacturer on a direct basis; Computer City, Egghead, Babbages& Software Etc., CompUSA (in the old days), Fry's Electronics. Or there were "sweetheart" deals made between the distributor and the retailers. For instance if Ingram or Tech data was the Software supplier, which is generally a "rack-jobbed" category, a la the music industry, then a retailer could count on people checking their stores regularly, and that helped manage the hardware merchandising. It also provided the retailer with a "return guarantee" from the distributor for unsold goods. Many of those benefits were applied to the distributor for hardware. 2)With the Asian currrency crisis, many manufacturer's could no longer afford the high cost of distribution, to move their "liquidation" inventories, or felt no need for a distributor to handle the credit of best Buy or CompUSA, today. Even fry's has dramtically improved their payables record, in an effort to gain more price advantage with direct relationshsips. 3) VAR's and Integrators, a large segment of distributor business, have been struggling since the name brands and the major retailers provide corporate sales programs, tech support, etc. to the business segment end-users, which was the VAR's bread and butter. 4) Finally, I do think the OnLine availability, has drastically affected the small and medium buyers, who traditionally purchased from the distributors, because they could not get small quantities of product from the manufacturers. Now they can get it regularly over the Internet. Example: In analysing a vendor's sales of Data Switches Keyboards, Mice, etc., we found that 20-30% of sales were in multiple units. We also found, by researching over a three month period, that many of the same names were re-buying. Thus we created multiple packs of items at reduced costs and shipping charges. This tactic is working well and will be expanded. Anyway, I think the last quarter may have just been the beginning of noticeable distributor sales downturns. As for Consumer Electronics. That industry was my career for 20 years before entering computer products and Internet Consulting. You are right that there are few Branded Consumer Electronics distributors. Those that exist have clauses in their distributor agreements, relative to Internet sales (the major brands don't want them to sell OnLine, at the detriment to the major Retailers.However, since the major retailers are selling the product OnLine, now, it will only be a matter of time before it spreads and the Brands must allow it officially. it would be interesting to sit in the negotiations of an OnSale partnered with a Tech Data, and listen to the Sony, Panasonic negotiations for the rights of distribution with the Internet being the final destination. It defintely would be revolutionary, at this stage. Actually, I am working in another direction to also bring branded goods of Consumer Electronics to OnSale on a fulfillment basis, and hope to have it completed in the next week or two. I will keep you advised.