Retail: Consumables and Accessories: Morsel Combat

OK, so flogging a box of floppies isn?t as exciting as selling a computer, but consumables and accessories can represent easy profit, says Andrew Charlesworth

To see the way most computer retailers treat consumables and accessories, you?d think they weren?t worth stocking. But they can be an attractive and profitable part of a dealership?s business, bringing in high margins and repeat custom.

Walk into most dealers with a shop front and you can see the disdain with which consumables and accessories are regarded. Hiding in the darkest, untidiest corner of the shop is a dusty stack of assorted laser printer cartridges in dog-eared boxes that have been opened several times. Above them hang a few limp cables in discoloured, perished polybags.

Ask the owner why they are so badly presented and the reply is usually along the lines that consumables and accessories don?t bring in much money, so what is the point of bothering? Goods presented with all the appeal of horse manure and broken glass are hardly likely to bring in much money, are they?

The week before Easter, I experimented with my local computer dealer. I went to buy two boxes of floppy disks and a four-socket surge-protector, both of which I genuinely needed. There were several PCs running rolling multimedia demos, and the window and display areas were chock full of colour printers and graphics accelerators. But the floppy disks were fished out of a filing cabinet drawer in the back office.

?We keep them in there because there isn?t much call for them,? said the shop manager. Now there?s a surprise. Customers aren?t clairvoyant and are reluctant to ask for something they can?t see.

The surge-protector was out of stock. ?We?ll get a delivery Friday,? said the manager.

?This Friday?? I asked.

?Yes.?

?You?ll get a delivery on Good Friday??

?No.?

?Tuesday??

?Yes, definitely.?

delivery doom

I phoned Wednesday, they had not been delivered. Two weeks later, I wandered past the shop, having bought the surge-protector elsewhere, but I called in just to wind up the manager. And guess what? Still no delivery.

?Have you tried B&Q?? asked the manager.

?No,? I replied, ?because I believe I should walk down to my local dealer and give him the money rather than drive 10 miles to an out-of-town multinational and fund its ongoing rape of the planet, exploitation of its underpaid staff and systematic annihilation of small businesses like yours. But I?m open to persuasion either way.?

He wrote my name down on a piece of paper and promised to phone me when the delivery came. Of course, he never has.

Naturally, he would much rather sell me a PC, but I?ve already got one. I went to his shop prepared to pay for what is, admittedly, a low-ticket item, but without having the argument over price that he probably gets with every PC he sells. No wonder PC World is so successful.

Such dealers need to visit a WH Smith outlet and look at the way stationery is presented. It looks edible. All those little coloured blister packs and notebooks are better presented than the goods on the confectionery counter. I?m sure Smith?s would much rather sell a #300 Psion organiser or a #50 Parker fountain pen than a #1.05 blister pack of paperclips, but, because of the way it is presented, stationery is a dynamic line, making a significant contribution to Smith?s turnover.

Anyone who doubts this need only look to the $3 billion Virgin Group. Richard Branson?s empire takes in cinemas, hotels, an airline, holidays, trains, vodka, cola, publishing, nightclubs, a radio station, record distribution, financial services, a modelling agency and computer media ? in the shape of Virgin Euromagnetics.

Euromagnetics is not just a convenient nonentity where Branson can hide profits from the taxman. ?Virgin doesn?t enter a market to be a small player,? says Virgin Euromagnetics MD Ian Burroughs. ?It?s used to difficult markets where there is a brand leader.? Ask British Airways and Coca-Cola what they think of Branson.

Floppy disks are inherently dull and low-tech. But while CD-Rom has become the medium of choice for shipping software, most people still reach for a 3.5in floppy when it comes to backup. When you boot up Windows 95 for the first time, it tells you to make a system disk copy. For that you need floppies ? by the box-full.

?If you offer the consumer more, with better quality at a lower price and you keep innovating, you can?t go far wrong,? runs the Branson mantra for his brands.

?It?s all very well for Richard to say that, but it?s not so easy to deliver in computer accessories,? says Burroughs. ?These are me-too products, but we can create some excitement around the products.?

Burroughs says Euromagnetics has the edge in computer media because it can offer the same quality as the traditional companies but with far better brand recognition ? up to 93 per cent in high street surveys, he claims.

The existence of the other Virgin brands enables Euromagnetics to indulge in some attractive cross-promotions that lift what is otherwise a mundane product range. For example, Virgin?s 17 per cent stake in Eurostar enabled Euromagnetics to run a cut-price train ticket promotion in Somerfield supermarkets for three months last year, which led to a 30 per cent increase in audio and video media sales for the chain during the test period. Promotions involving Virgin Vodka have also been run.

Virgin Euromagnetics distributes through ISA International, XMA, Northamber, Despec (including Despec Computer Food, which is rolling Virgin?s products out across Europe this summer), Centersoft and Kingfield. The company offers incentives of trips on Virgin Atlantic and weekend breaks at Virgin hotels for the top performers. Consequently, Virgin consumables can be found in Comet, Tandy, Virgin Megastores, Office World, Stationery Box, Morrisey?s and a smattering of indies.

Although Virgin Euro- magnetics makes it?s own magnetic media, it has to buy-in other items to make a complete range of consumables and accessories. ?You have to present a whole range because that?s what distributors want,? says Burroughs. ?They don?t want to shop around.?

Most consumables and accessories suppliers don?t manufacturer their own products. Boeder is unusual in that it does. ?You can tell that this sector is increasing in importance by the number and quality of buyers which the big multiples are dedicating to it,? says Chris Adcock, MD of Boeder UK.

?There are few sectors in any industry that are showing 20 per cent compound annual growth as this one is. People would be daft not to take advantage of it.?

The daftest, according to Adcock, are the independents, who have yet to catch on to the attraction of consumables. ?There?s no doubt that the multiples have awakened to the potential,? he says. ?One Makro has recently moved its business products ? which include our range ? from a rather dingy site under the escalator to the front of the store. You have to walk past it to get to anything else, it?s great.?

Boeder?s UK business has grown rapidly in the past six months and its products are now in 1,000 outlets, including Comet, Byte, Office World, Office One, Allders, Virgin Megastores, Scot Power, Northern Electric and WH Smith. Tesco also carries Boeder products which went through Leisuresoft, but with the demise of that distributor, Adcock is hoping to supply Tesco direct.

In September last year, Boeder launched a modular rack of products with its own merchandising service aimed at independents. The idea was to replace the dog-eared boxes and discoloured polybags with a smart, purpose-built rack of Boeder goodies in whatever product mix the store required. A self-administered merchan- dising system meant that lines should never be out of stock and non-movers would be replaced quickly with faster-moving SKUs (stock keeping units).

But these plans have not worked out the way Adcock expected, and it has been multiples which have taken the racks rather than indies. ?We don?t have the resources to go direct to independents and we couldn?t find a distributor prepared to handle it the way we wanted it handled,? he says.

?Consequently, it takes as much effort to sign up one independent as it does to sign up one multiple, but the multiple gives us 10, 20 or 30 times the reward.?

But the indies have not been forgotten, Adcock says, and he is still pursuing a route to get Boeder products into independent dealers.

One reason why indies are reluctant to take on consumables and accessories is that they are me-too products, which any shop can have a go at selling, whereas indies usually have specialist knowledge and can provide a level of personal service to customers which multiples can?t. A me-too product is of little value to any indie because the multiple will always drive down the price.

Adcock is sympathetic with this, but says it doesn?t have to be that way. ?You see products displayed without anything to differentiate them ? another mouse, another ream of paper. We want to get away from that ? from being a box-shifter ? and add some value.?

Being a manufacturer rather than a rebadger of consumables means Boeder still has some margin to play with. Thus Boeder?s mouse is bundled with a copy of Sid Meiers? Civilisation strategy game; its joystick with EA?s US Navy Fighters. ?Packs like these opened the doors at Byte and other stores,? says Adcock. ?We sent out 2,000 packs as experimental special offers and they went extremely well.?

Bundling will now be a large feature of Boeder?s product range. The latest bundles are value packs for PCs and printers. In the PC pack are #35 of accessories, including a pack of floppies, disk storage box, mousemat, screen filter and four-socket gang plug (my local dealer please note). It is priced at #24.99.

?The printer pack has all the stuff you need ? cables, paper etc ? you can pick it up by the handles and know that you?ve got everything,? says Adcock.

The key is reassurance and value: the customer, who has just forked out a large amount of wonga (or signed up for the financial handcuffs over 36 months), is in no emotional state to think about the twiddly bits he needs to get operational. But presented with a PC value pack, he can be reassured that someone else has done the thinking for him and is offering it for a knock-down price.

The problem is educating retail staff to sell them. ?Once they?ve sold a #1,500 PC they think the job is over and they lose interest in selling a #25 pack of accessories,? says Adcock. Consequently, much of Boeder?s marketing budget goes into retail incentives and merchandising.

The appeal of accessories and consumables doesn?t have to depend solely on slick presentation or huge brand names. Computer Care South, in Reading, is no BMW showroom when it comes to presentation: the double-fronted shop is packed with its own-brand PCs and every kind of peripheral imaginable. But general manager Robin Sasson understands the value of accessories.

On a two-metre section of the wall is Sasson?s cable display. It may look like a collection of dead grey snakes in polybags, but it?s a hit with trade and end-users because of its diversity. ?I am very proud of this section, I built it up myself,? boasts Sasson. ?It?s got every type of cable for a computer you can think of, and if you can?t find what you want here, I can get it or make it.?

The effort Sasson has gone to may seem disproportionate to the size of the sale. But he has applied the indies? best weapon ? individual service ? to something simple and made it work.

There is a PC World on the industrial estate on the other side of Reading from Computer Care South. It casts its shadow over other local businesses, but not Sasson?s. After all, what is the point of going to PC World, just in case it might have the item you want in stock at a slightly lower price, when you know Computer Care South will definitely have it?

Users come back because all the staff know what they are talking about. No one gets employed in the shop who can?t build a PC from scratch. Computer contractors frequent it because when stuck with the task of connecting x with y, they know Sasson has a female x to male y hanging on his rack.

You may think marketing gurus are a waste of skin, but their accumulated painstaking research tells us that 80 per cent of business comes from 20 per cent of customers.

You can only sell a PC to a customer once every three years if you are very fortunate, but you can sell consumables to the same customer every month. Consumables encourage repeat custom and should be stocked and presented well if only for that purpose. Who knows what else a punter may buy when they have popped in for a box of floppies?

The temptation for dealers is to dismiss the area of consumables and accessories entirely as being of too little value to matter, leaving it up to the multiples whose staff are only trained to sell me-too products and who can fight their price wars with the impunity that comes from having a nationwide chain of outlets and #100 million turnover.

But with some effort and thought, consumables can be turned into a profitable and fast-moving contributor to your turnover, with the considerable added benefit of encouraging repeat custom.