G'day victor,
Thanks for all of your posts.
TECHNOLOGY
4.1.99
Compaq's Web Sales — Not the
End-All and Be-All
After angering resellers with its online
strategy, the PC giant expands store sales
again
Compaq Computer Corp.'s Web site is open 24 hours
a day, and it puts the minutiae of product specs and
prices almost instantly in consumers' hands. How could
mere stores hope to compete? When Compaq started
its Web sales effort six months ago, it certainly looked
like they couldn't. The company's small resellers saw
business drop off precipitously -- and they were
fighting mad. In fact, many of them stopped pushing
Compaq's products altogether.
Now, after six months of hawking its small-business
line primarily via the Web and telephone, the computer
giant has discovered that the Net may be a good place
to sell computers -- some $1 million in small-business
products alone per day -- but it's not the only place.
In part to combat a slowdown in overall small-business
equipment sales, Compaq announced on Mar. 29 that
it's expanding store sales. It will offer its Prosignia line
of small-business PCs and servers through retail giants
CompUSA, Office Depot, OfficeMax, and Staples.
Small retailers will also sell Prosignias through what
Compaq calls an "inventoryless distribution model":
Retailers phone in customized orders, which are then
assembled and shipped directly to retail buyers.
BURNED. Compaq is hardly billing this as a retreat.
The company "is the first to successfully marry reseller
distribution with direct," boasts Eckhard Pfeiffer,
president and CEO.
That's cold comfort to some small Compaq resellers,
who say they feel burned by the company's move to
direct sales. Since Compaq announced its strategy in
November, many have redirected their efforts into
promoting Hewlett-Packard, IBM, and low-cost,
generic "white boxes," which resellers build in-house.
Some resellers, at least, aren't shy about expressing
their feelings, either. "I hate Compaq," says Nader
Yousefzadeh, president of Micro League, a Santa
Monica (Calif.) retailer and cyberspace merchant who
now sells Compaqs only because his customers ask for
them.
"In 1996, it was pretty fair. They referred clients to us,"
recalls Yousefzadeh. "Now, they're taking them for
themselves, moving away from distribution and going
direct."
Yousefzadeh admits, however, that Compaq had little
choice but to offer its wares via the Net, especially
given the success Dell Computer has had selling direct.
Still, he says, in its rush to compete in cyberspace,
Compaq neglected the retailers on whom many
small-business customers rely.
"BEING EVERYWHERE." Compaq spokesman
Arch Currid admits that some resellers are upset by the
online selling. But he maintains that Compaq's
relationship with resellers is still one of the best in the
industry. What's more, he says, the company's move to
direct sales came only after the company sought
extensive input from its sales channel and offered 4%
commissions on direct purchases referred by dealers.
"We want to be everywhere our customers are,"
Currid adds.
Apparently, that now includes old-fashioned retail
stores -- where roughly 16% of small-business
computer buyers make purchases, according to
Compaq research. It remains to be seen whether
Compaq can sell direct and still keep the little guys
happy -- and, most important to Compaq, how much it
matters at the bottom line.
Some people say it matters a lot. "Compaq's sweet
spot is still the resellers. And they can't alienate the
channel. Compaq has no option, really," says Alan
Weinberger, chairman and CEO of ASCII Group, a
buying cooperative of 1,000 computer resellers.
Resellers will have to wait until April -- when
Compaq's first-quarter financials reveal whether their
boycott really hit home. There may be some inkling in a
recent announcement from the company: Despite
robust Internet sales, Compaq warned of sluggish
overall small-business sales during early 1999. Maybe
those resellers aren't so expendable after all.
By Dennis Berman in New York
dennis_berman@businessweek.com |
