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Consumer-Direct PC Sales Surge

Cheap PCs fueled by Internet service provider rebates drove the TWICE PC Computer Products Registry up by $7 billion to $34 billion in 1999, with online retailers and direct retailers now accounting for an even larger slice of the overall sales pie.

The dynamic of the 2000 TWICE registry has changed dramatically from preceding years by the inclusion of e-tailers such as Buy.com and the vendor-direct online sales from such companies as Compaq and Hewlett-Packard.

The addition of e-commerce and vendors selling directly to consumers immediately brought Gateway and Dell into the top-10 segment of the list and boosted the consumer-direct portion of total PC sales to just more than 17 percent, up from 9.5 percent in 1998. Sales over the Internet increased 76.4 percent, with consumers spending $3.4 billion in 1999. (The online sales of brick & mortar retailers had always been included in the registry.)

Computer stores as a whole performed poorly for the year, with sales increasing only 8 percent to $8.6 billion, barely above the 7.5 percent increase mass merchants enjoyed. However, the PC stores did manage to stay ahead of the national and regional CE stores that enjoyed a 19.6 percent sales increase, with total sales tallying $7.9 billion.

Consumer-direct shopping via mail-order catalogs and television also posted strong gains last year. Although the total amount of computer products purchased through the TV direct channel comprised less than 1 percent of all computer product sales, revenues reached the $286.5 million mark - up 22.4 percent from the previous year.

The much larger mail-order segment, $2.3 billion in 1999, or 6.6 percent of the market, rose a healthy 15.5 percent for the year.

Primarily due to the large lead it inherited from 1998, CompUSA retained its No. 1 position on the TWICE registry, despite posting a paltry 1.3 percent increase in sales for a total of $5.9 billion. CompUSA was purchased by the Mexican firm Grupo Sanborn in a $1 billion stock deal in January. In March the chain replaced longtime CEO James Halpern and followed that move the next month with a major restructuring that saw staff levels reduced.

Second-place Best Buy's and third-place Gateway's gains of 19.9 percent and 15.2 percent, on respective sales of $4.4 billion and $3.9 billion, helped close the gap with CompUSA. Gateway's strong showing is, in part, due to the addition of 83 new Gateway Country Stores opened this year, for a total of 227.

Circuit City and Staples placed fourth and fifth, with computer sales of $3.1 billion and $1.9 billion, respectively.

Office Depot fell to sixth place with $1.8 billion in sales, but outpaced Dell's $1.3 billion in consumer sales, which gave it the seventh spot. However, the impact Dell is having in the consumer sector can be seen in the 44.6 percent increase in sales it enjoyed in 1999.

PC Connection, Sears and Sam's Club rounded out the top 10 retailers. PC Connection rode a 44.3 percent increase in sales last year, which brought the direct retailer's sales to just more than $1 billion. Sears' computer sales earnings were flat for the year, despite becoming an Apple iMac dealer in May 1999. Sam's Club's $660 million in sales were just 8.4 percent higher than in 1998.