Compaq tempers retail fiasco

Compaq tempers retail fiasco

Compaq managed to salvage its relationship with Coles Myer last week with the formation of a partnership that will see the two combine their previously disparate retail strategies.

The companies released a joint statement last Friday in an attempt to smooth over a week of tension between the two.

Coles Myer began protracted negotiations with Compaq last week, apparently unhappy with its retail and Internet direct selling strategy amidst speculation that the entire alliance was being abandoned.

Peter Geer, IT buyer for Coles Myer, told ARN during the negotiations that Compaq would cease plans to expand its stable of Compaq Connect stores beyond the original stores in Melbourne and Brisbane.

"Having been involved in discussions with them, I realised their plans were to some degree developed in isolation and there was a whole lot of different perspectives they hadn't considered well before they made that announcement. Compaq's decision not to open any more stores at this stage has more to do with getting clarity of understanding of what the retailer can offer. I don't so much think of it as a backlash," said Geer.

The companies report they have now embarked on a new partnership to "meet the total IT solution needs of consumer and small business customers. Recent discussions between the two companies highlighted the fact that they had individually developed similar customer-oriented strategies," the statement read.

However, the statement failed to reveal details of the partnership, the possibility of exploring the "stores within stores" concept, or the possibility of cross-selling or Internet strategies, or respond to Geer's claims of a change in plans to expand the Compaq Connect concept throughout Australia.

Compaq's managing director could not clarify details of the partnership or make a statement about the future of the Compaq Connect stores before ARN went to press. Geer refused to add any further comment after the joint statement was issued.

Meanwhile, other retailers are still uncertain as to what effect Compaq's revamped supply chain structure, or "Customer Choice" model, will have on them. Most are resigned to the fact that it signals yet another competitor in an already cutthroat environment, or what IDC analyst Bernie Esner describes as "retail overkill".

"If one applies a current channel map of the PC market at the retail end, I predict we are heading for a total retail overkill and there will be blood on the streets," Esner said.

Don Sparks, product manager, computers and SOHO, for retail outlet Clive Peters, sees no respite from direct vendor competition on the horizon. "More and more vendors are wanting to represent their products directly. This makes them the competition and we don't necessarily like it but there will be no change in our business - we'll just have to do it better than they do," he said.

Yet Esner is not predicting the direct vendor environment to totally disarm the retail channel and retailers are developing alternative tactics. With Christmas fast approaching, the implementation of such concepts as Compaq's Connect stores and HP's Internet strategy have forced retailers to revert their focus to whitebox goods, a strategy Esner believes might work for them in the short term at least.

With unbranded PCs controlling 40 per cent of the home market and 48.5 per cent of the small business market, retail outlets such as Strathfield Car Radio and Dick Smith have released Christmas offerings to take advantage of the consumer demand.

"Right now, the brands which are beginning to matter are those of the retail outlets - the Harvey Normans and Coles Myers of this world. Consumers want to feel good about the place where they purchase the big ticket items. They want to know where to find them if there are problems. The mass merchants know this and a new series of low-priced personal systems being advertised are clearly designed to capitalise on this sentiment," Esner said.

Geer agrees that the retail outlet has a brand in its own right and will be able to offer the choice single brand stores and sites can't. "People are very, very comfortable with us and our brand adds value to the product in itself because our customers know we are their advocates. When I buy a product I like to think there is a multimillion-dollar company on my side if something goes wrong and that I'm not just Joe Citizen up against a bloody American conglomorate."

Bing Lee's merchandise manager for audiovisual and computers, Phil Moujaes, advocates retailers "getting their own slice of the Internet action. As a retailer you have to have an open mind and be ready to change and take advantage of any opportunites," Moujaes said.

He suggested one such compromise would be the store within a store concept, although Bing Lee is yet to enter negotiations with Compaq or other direct selling vendors.

"We have to talk to Compaq so they can explain what it is they are doing so we can decide what we need to do," he said.

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