Compaq's Web Sales Not the End-All and Be-All
After angering resellers with its online strategy, the PC giant expands store sales again
Compaq Computer Corp.'s Web site is open 24 hours a day, and it puts the
minutiae of product specs and prices almost instantly in consumers'
hands. How could mere stores hope to compete? When Compaq started its Web
sales effort six months ago, it certainly looked like they couldn't. The
company's small resellers saw business drop off precipitously -- and they
were fighting mad. In fact, many of them stopped pushing Compaq's products
Now, after six months of hawking its small-business line primarily
via the Web and telephone, the computer giant has discovered that the Net
may be a good place to sell computers -- some $1 million in small-business
products alone per day -- but it's not the only place.
In part to combat a slowdown in overall small-business equipment sales,
Compaq announced on Mar. 29 that it's expanding store sales. It will offer
its Prosignia line of small-business PCs and servers through retail giants
CompUSA, Office Depot, OfficeMax, and Staples. Small retailers will also
sell Prosignias through what Compaq calls an "inventoryless distribution
model": Retailers phone in customized orders, which are then assembled
and shipped directly to retail buyers.
BURNED. Compaq is hardly billing this as a retreat. The company "is the first
to successfully marry reseller distribution with direct," boasts Eckhard
Pfeiffer, president and CEO.
That's cold comfort to some small Compaq resellers, who say they feel
burned by the company's move to direct sales. Since Compaq announced its
strategy in November, many have redirected their efforts into promoting
Hewlett-Packard, IBM, and low-cost, generic "white boxes," which resellers build
Some resellers, at least, aren't shy about expressing their feelings, either.
"I hate Compaq," says Nader Yousefzadeh, president of Micro League, a Santa
Monica (Calif.) retailer and cyberspace merchant who now sells Compaqs only
because his customers ask for them.
"In 1996, it was pretty fair. They referred clients to us," recalls Yousefzadeh.
"Now, they're taking them for themselves, moving away from distribution
and going direct."
Yousefzadeh admits, however, that Compaq had little choice but to offer
its wares via the Net, especially given the success Dell Computer has
had selling direct. Still, he says, in its rush to compete in cyberspace,
Compaq neglected the retailers on whom many small-business customers rely.
"BEING EVERYWHERE." Compaq spokesman Arch Currid admits that some resellers are upset by
the online selling. But he maintains that Compaq's relationship with resellers
is still one of the best in the industry. What's more, he says, the company's
move to direct sales came only after the company sought extensive input
from its sales channel and offered 4% commissions on direct purchases
referred by dealers. "We want to be everywhere our customers are," Currid
Apparently, that now includes old-fashioned retail stores -- where roughly
16% of small-business computer buyers make purchases, according to
Compaq research. It remains to be seen whether Compaq can sell direct and
still keep the little guys happy -- and, most important to Compaq, how much
it matters at the bottom line.
Some people say it matters a lot. "Compaq's sweet spot is still the resellers.
And they can't alienate the channel. Compaq has no option, really," says
Alan Weinberger, chairman and CEO of ASCII Group, a buying cooperative
of 1,000 computer resellers.
Resellers will have to wait until April -- when Compaq's first-quarter financials
reveal whether their boycott really hit home. There may be some inkling
in a recent announcement from the company: Despite robust Internet
sales, Compaq warned of sluggish overall small-business sales during early
1999. Maybe those resellers aren't so expendable after all.
By Dennis Berman in New York