THIS WEEK: TWICE asked its distributor panel to discuss the impact of Dell entering the low-priced PC market, what moves should be made by the new Hewlett-Packard and Compaq's CEOs, and The Good Guys dropping PC products. Joining in the conversation this week are Dave Uhlman, Merisel retail channel VP, Gary Brothers, D&H VP, and Matt Millen, Tech Data director of retail sales.
TWICE: Will Dell Computers' introduction of consumer-oriented, sub-$1,000 PCs make it a major player in the PC consumer market and push it past Compaq as the number one PC vendor in the U.S.?
Uhlman: The systems market is extremely competitive, as demonstrated by the recent increase in pricing pressures. Each of these players has a different model and a different strategy in the consumer market, so it is difficult to predict who will hold the top PC vendor position.
Brothers: Since Dell has been selling on the Internet for several years, they are already a sizeable player in the consumer market. Venturing into the shark tank of sub-$1,000 PCs is somewhat risky. I'm not sure that is their customer or that it supports their margin requirement. I think they have more to lose than to win pursuing this business segment.
Millen: Remaining competitive in the retail space is the name of the game in this current market climate. PC pricing innovations, while not unique, are unquestionably a major part of manufacturers' strategies. It will be interesting to see how the competitive landscape evolves over the next several months. Look for the emphasis on emerging technology packaged into promotions to drive market share.
TWICE: Two of the top five PC manufacturers acquired new CEOs last month. What advice would you give Compaq's new CEO Michael Capellas and Hewlett-Packard's Carly Fiorina on how to improve their company's consumer business?
Uhlman: Develop a strategy that addresses all channel segments, drives growth, and rewards profitability. This industry needs to learn that profit isn't a dirty word.
Brothers: Right now we're witnessing rapid changes in e-commerce, profit and growth. These changes impact how we all engage customers. In today's rapidly paced, information-driven society we have to recognize those changes and react to them and the opportunities they create. Implementing these changes will determine who is the winner in the end. Compaq and HP need to recognize these changes and then react positively. Providing value and product offerings is the challenge and goal for us.
Millen: Companies such as Compaq are proactively managing the rapidly changing industry with such initiatives as the Distributor Alliance Program (DAP). By forging new channel relationships, PC manufacturers have great opportunities to drive out inefficiencies in the supply chain and enhance their competitive edge. My advice - continue to invest in channel relationships.
TWICE: The Good Guys earlier this month decided to drop out of the computer products category. Do you expect other retailers to go the same route? If yes, why? if no, why not?
Uhlman: How best to market your company is an independent decision. The Good Guys believes the right decision for them is an exit strategy. I would not expect the majority of consumer electronics retailers to completely abandon the computer business.
Brothers: As channel players, including retailers, continue to adjust their business models in response to the changing marketplace, I think we'll see more specialization in each segment of the channel. Those who identify a special niche will potentially eliminate aspects of their businesses that someone else may be able to better develop as a core competency.
Millen: There is no one cookie-cutter answer. It is likely that more retailers may make bottom-line decisions to change their product mix. Retailers continuing to include the computer category as an anchor need the support of manufacturers and publishers to compete in today's retail space.
With support for customer-centric promotional offerings and services, retailers can profitably market computer products. Focusing on specific customers such as the small business and home office buyer is another way for retailers to maintain market share.