Compaq chief directs Net sales strategy

Compaq has reiterated its commitment to Internet sales and enforced its pledge to resolve supply chain inefficiencies.

Compaq has reiterated its commitment to Internet sales and enforced its pledge to resolve supply chain inefficiencies.

It also said that direct business in Europe will account for a quarter of sales by the end of the year.

Speaking in London last week, Michael Capellas, chief executive of Compaq, outlined a strategy to restore the "spirit of innovation", and return the vendor's commercial PC division to profitability.

"Compaq lost touch with its customers. We have now become advocates of our customer base," he said, adding that there was "still a way to go" in simplifying Compaq's distribution channel.

But he emphasised his determination to reduce inventory, which he dubbed "the enemy".

This would be achieved by selling direct over the Internet wherever possible, leaving partners to provide service. The continued development of less complex and fewer versions of PCs, such as the iPaq and other Internet devices, would make manufacturing easier and distribution simpler, he said.

Compaq will push direct sales of its consumer products and is looking to establish build-to-order kiosks in large retail stores as well.

Capellas maintained that global accounts would continue to be taken directly as customers demanded it, although he said direct business would increase faster in the US than in Europe.

He said Compaq would not replicate its purchase of US distributor Inacom in Europe. Distribution of its direct sales operation would be contracted out as part of the Channels for the Internet Age (CIA) programme (PC Dealer, 15 September 1999).

The challenge facing many resellers in moving from a business model based on hardware margins was emphasised by Werner Kopf, EMEA general manager at Compaq, who claimed that half of Europe's channel was "technically bankrupt", with 40 per cent "in trouble" and just 10 per cent enjoying success.

Kopf insisted the CIA scheme provided "excellent margins" for logistics experts and service-based organisations. He said: "Everyone has to change or leave the arena."

However, analysts remained sceptical about Compaq's ability to reverse its fortunes. Tom Willmott, chief executive of analyst Aberdeen Group, said: "Compaq is still competing head to head with all the big guys in every market it plays in. There are still cracks between the figures."