I was recently asked to talk on the subject of buying a computer. That led me to take a bit of a walkabout, in Canada and California - to examine the current situations in several categories of resellers.
So, I went to small, service-oriented retailers, larger superstore-type chains, clone assemblers and even scoured the Internet to see what the latest trends in mail-order sales might be. Although in the past I have engaged in similar research by posing as a customer interested in a full computer system, I did not do so this time. I identified myself as a journalist and told the people I spoke to exactly what kind of information I was seeking, and what it would be used for, in the hope that the salesperson and I could bypass the usual games that are played during the sales process. Indeed, the individuals I spoke with were very helpful. Here are descriptions of the resellers I visited and some excerpts from the conversations.
The Long-Time Retailer
This vendor has been in existence since the dawn of the personal computer age. Originally targeting the customer that, in the late 1980s, might have otherwise purchased a Radio Shack TRS-80 or Apple II series computer, the company made its first wave of sales with the PET (Personal Electronic Transactor) Systems by now-defunct Commodore Business Machines. The retailer moved through the many phases of the market, primarily focusing on the business- and education-oriented customer. This strategy saw its business boom with the huge market successes of the Commodore 64 and 128, and enjoy a few glory years with the Amiga, as the emerging categories of desktop video and animation graphics proved to be the Amiga's forté.
When the Amiga began to lose ground to the increasingly potent PCs and Macs of the early 1990s, the company moved strongly into the IBM-compatible arena and now focuses primarily on service and networking.
According to a spokesperson for one such company, networking now accounts for approximately 50 per cent of the company's business, and the service orientation means that there are four people behind the wall for every two out on the floor. Education accounts, which the company admits are notoriously "long sells," continue to represent a significant revenue source as well.
Not surprisingly, the "walk-in" retail aspect of the business is not a major moneymaker. In fact, one owner tells me he is considering giving up the storefront aspect altogether and focusing on the corporate accounts that represent the bulk of his revenue. Thus, the business model of this type of reseller is not too dissimilar to that of the value added reseller.
The lesson here is that, for small retailers (and VARs) to remain competitive, service must drive sales.
The Clone Retailer
The next category I visited was the clone retailer - the big-time box pusher. I traveled to what might be considered the centre of the computer retailing universe: a very well-known computer retailer in San Jose, Calif. and examined its operation, and compared it with a number of the offerings of a few well-known Canadian box-builders.
The Californian operation was, without a doubt, the biggest clone operation I have seen. I was mildly surprised to see that the illegal activity of unbundling software (taking software that is sold by the OEM for inclusion with a specific piece of hardware and selling it separately) was being practiced in full force. Not to name names, but I see this dubious activity going on at many Canadian cloners, as well. (I was also slightly surprised to see what a huge array of "adult-oriented" CD-ROMs this retailer had.)
Graphics tablets, removable-media storage systems such as Zip, Jaz and PD drives, and scanners were all particularly abundant at the retailers I visited. And games hardware and software products were everywhere, as they should be at this time of year.
The Superstore
This category of retailer focuses on name brands, doesn't do much service beyond the installation of extra RAM, and is sure to offer you an extended warranty. According to the people I spoke to, more than 50 per cent of systems (once averaging about $3,000, and now typically going for less than half that) go out the door with a printer - usually of the ink-jet variety. The average user, one salesperson told me, falls into one of two categories.
First come the parents with the know-it-all kid who picks the system while the mom or dad signs the cheque - within an hour or so, they're out of there. (According to the people I spoke to, the average system goes out with one major piece of software - usually a productivity software package such as an "office" suite.)
The second category is the price-sensitive shopper who has a computer paper or shopping list in hand, and is destined to come back more than once before the deal is closed. I wrote about the psychology of this type of shopper in a previous column; I won't repeat it here.
In a trip to California in the Fall of 1999, I couldn't help but wonder: "where are all the notebooks?" In particular, "clone" notebooks were hard to find - a phenomenon that has apparently not reached Canada in force yet. (One Californian retailer complained he stopped selling these notebooks when the manufacturer started selling direct at discounted prices). I saw the big-name portables, like IBM, Compaq, Toshiba, and Hewlett-Packard, but I saw far fewer of the seemingly ubiquitous Taiwanese "clone" notebooks than I typically see at Canadian retailers.
But Apple computers and billboards were seemingly everywhere - a surprising contrast to the last time I was in Silicon Valley, when Apples of any shape and size were few and far between.
Mail-Order
The last category I explored was the mail-order vendor. Clearly, the Internet is emerging as an important marketing tool for this class of organization, although touting "Editors' Choice" awards by major magazines continues to be the primary marketing focus.
More on Internet marketing next time.
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