The retail boom is not over. Although Christmas sales of PCs were lower than expected, retail remains a popular route to the SoHo market. But that is no reason to think for one minute that retail is the place to be. For dealers even to consider moving in this direction, they should be one of two things: big and rich or very clearly focused on their local customer base.
Retail is a difficult game and if competing with chains like Dixons, Escom, Byte and PC World isn't bad enough, there are also the large retail chains such as WH Smith and John Lewis to contend with. So why do some dealers keep looking to retail? The answer seems to be a combination of fast turnover, unskilled staff and a desperate need to pick up sales from just about any avenue.
THE BIG EASY?
This may be a crude assessment, but it seems to apply to small dealers.
Larger dealers, which can afford the training and investment needed to set up a retail outlet, have so far looked more towards the superstore format. This is not an immediate route to success; dedicating a part of the business as a retail outlet is no mean feat and it takes more than a bucket full of money and a big window. There are dealers who would like to add a little retail to their existing business in an attempt to top up turnover, but it's not quite as easy as that.
One issue to consider is support. Retail buyers tend to demand more after-sales support than corporate customers because they know less about the product they are buying .
Graham Hopper, AST general manager, is sceptical about dealers looking to get into retail. He says that for dealers to do some retail, even just a little bit on the side, is being 'very unrealistic' because they need to make a massive investment. 'Only the large dealers who have the capability of doing it seriously can succeed,' says Hopper. 'Against such massive competition, to even contemplate getting into retail may be foolish unless you can guarantee a captive market.'
That, of course, is extremely difficult to do. Hopper adds that there is good coverage by the major stores across the UK, so there may only be room for a dealer with retail ambitions on a very small, local scale.
So why should dealers look at moving into retail? Alastair Carvlin, channel marketing manager at Apricot, says the idea of selling into the growing SoHo sector is appealing to dealers because it offers another opportunity which, in the long run, may also help their existing business with corporate customers. He bases this theory on the idea that a successful, well-supported retail sale may trigger business sales because the home user probably works in an office and may have a say in deciding which computer to buy next and where to buy it.
GOT IT COVERED
It's a 'covering all angles' policy which can prove costly for a dealer if it is poorly targeted. 'Some dealers may shy away because of the support issues,' says Carvlin. 'But the big retailers have helped to open people's eyes to IT and opened up an opportunity for the channel to tap into that market.'
Carvlin says it's only a small percentage of dealers at the moment which have taken a plunge into retail sales while retaining their business to business contracts, but it will grow. Hopper is not so sure. 'Moving to retail is not a big trend. There are smaller, regional dealers which have managed to bridge the gap. The distinction tends to be blurred between shop-front retailers and business dealers anyway. If there is a trend at the moment, it's that general retailers feel they have to carry a PC product.'
At one end of the scale are the 'glass front' dealers with a local following, looking for a foot in both camps. At the other are firms such as SCH with its superstore chain Byte, which has the resources to grow big in retail while continuing to maintain other market interests with dedicated divisions.
There are also dealers, such as Watford Electronics, which have moved to offer retail sales through a dedicated outlet. Although a glass front seems to be an important part of a retail service, it is by no means the only knife to give the retail business a cutting edge. Some companies have offered retail services despite having no shop front and being out of the way of passing traffic. Hugh Symons' Centrex store in Poole, Dorset, is a good example of this, although the firm now has other outlets on more traditional retail premises.
The retail trade's real cutting edge is, of course, sharpened by price.
Commodity items are on the increase and much of the technical mystery surrounding products such as modems and storage seems to have been dispelled.
Most retail customers want to buy machines already configured with pre-installed software and with a competitive price tag.
So is it the vendors that drive the retail market and not the retailers?
Manufacturers have been learning fast how to build products for a retail audience and this has been recognised by dealers as well as retailers.
Apricot's retail entry machine, the MS540, was launched last year in time for Christmas. At the launch, Apricot group marketing director Chris Buckham said: 'If you're going to get anywhere in the consumer market, you need Dixons.'
LOVE IT OR HATE IT ...
This is a view shared by Carvlin who is adamant dealers can feed off of the success of any product sales through big retailers. Apricot is not shy of following trends. Two years ago it sold off-the-page because it felt that was what its customers wanted at the time. Now it is going to retail for the same reasons. 'From the manufacturer's point of view, you can't ignore retail,' says Carvlin. 'For dealers, their traditional business and any retail business can cohabit quite happily.
'It is an added string to the bow. It all comes down to attitude and is not necessarily about the size and shape of premises. If dealers feel comfortable dealing with one-off customers and meeting support needs, then there is scope. If they can see a way of selling added services, such as Internet training, then the support issue is worth it.'
Since the launch of its retail product, Carvlin admits some of Apricot's business dealers have expressed an interest in taking retail stock for one-off sales. Although the figure isn't large, it's a sign that there is some awareness of the growth of the retail sector.
According to market research firm Romtec, consumer PC sales accounted for 34 per cent of all PC sales in 1995. Over a three-month period, specialist retailers accounted for 33 per cent of sales while non-specialist retailers accounted for 26 per cent. Just four per cent of sales came through the direct channel while secondhand (19 per cent) and sales from friends or colleagues (11 per cent) demonstrated the breadth of possible channels for retail buyers.
Deciding whether to sell certain products through a retail-style channel can sometimes create a dilemma. The pricing may suggest that it's a retail product but at the same time that product may still be shrouded in technical intricacies which frighten the average consumer away.
YOU CAN'T IGNORE IT
This is a potential problem noted by TDK European distribution manager, Joe Amodio. As a manufacturer of PC card modems, TDK has a technical product with a rapidly reducing price which is increasingly likely to be sold off revolving retail stands. The main reason is price, but an increasingly knowledgeable buying market also make it more feasible.
'Prices of PC card modems have fallen dramatically over the last few years,' says Amodio. 'But modems and PC cards sold from retail displays are still a technical sell. It's not like a hair dryer or a CD player.
These cards are computer peripherals and not every man-jack knows what to do with them.'
There are two possible solutions to the problem. Amodio says it's the manufacturer's responsibility to make the products 'as bullet-proof and user-friendly as possible', by bundling software which will remove the hassle of installment and configuration. After all, the industry is not yet plug-and-play and everyone, especially retail customers, needs their hands held at some point.
The second solution is that dealers, which are more accustomed to dealing with technical products, can ease their way into a retail market that is desperate for communications products. Dixons, for all its charm and High Street dominance, will not hand-hold a customer outside the shop.
STRENGTH IN SUPPORT
'Thought has to be given to how these products will be supported,' says Amodio. 'Customers aren't going to take kindly to some inexperienced shop assistant pointing them in the direction of the manual. People buying computer products are used to being able to get technical support and will take a lot of weaning away because the product is now being sold in a different way.'
The question that arises with certain products - is it retail or is it too technical? - may throw up opportunities for dealers looking at retail as an addition to the business. But with the price fluctuations and minuscule margins that so frequently prevail, dealers could be forgiven for thinking it may not be worth the effort.
Hopper believes that half measures will not be possible in retail for much longer. Unless a dealer can invest heavily in the retail channel, the chances of survival are limited. In the last recession, it was the glass-front dealer that suffered, and today even thinking about offering retail products may be enough to start the knees shaking.
As Carvlin suggests, it is also down to attitude. Adding a retail string to your bow need not just be about pushing a few extra boxes out of the door. It may be about forging new ties and making inroads through an unexpected SoHo market contact. There is also another benefit: retail is a hard game.
Forging a successful strategy is not easy and much can be learned from it. Carvlin believes dealers can benefit by being part of a vendor's or distributor's retail marketing plan and maybe carrying the techniques to the business sales side.
Although this on its own is not enough to convince dealers of the advantages of retail, it may plant a seed. Retail is a heady brew that can make the heart rule the head, but should not be discounted on those grounds. Successful dealers may move with the times, but it's important to keep one foot firmly in familiar territory while ensuring all the eggs aren't in one unpredictable basket.
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