Direct sales to top channel by 2001

Direct sales to top channel by 2001

The popularity of the Internet and new corporate distribution strategies are fueling direct PC sales that are expected to outpace indirect commercial sales by 2001, according to an International Data Corporation report.

Companies reaping the benefits of this trend are direct sellers like Dell Computer and Gateway 2000, while others relying primarily on resellers and other distributors will encounter problems, said Joseph Rigoli, the IDC analyst who wrote the study.

"Dell and Gateway have changed the equation, bypassed middlemen and are distributing PCs directly to end users," Rigoli said in a telephone interview last week. "And there is a growing group of end users willing to get on the Internet and order a PC."

Traditional indirect sales operations, called commercial channels, sell through value-added resellers (VARs), systems integrators, corporate account resellers, and computer specialty dealers, Rigoli said.

Direct PC sales grew 25 per cent from 1997 to 1998, compared to growth of just 5 per cent for indirect commercial sales in the same period, the IDC report said.

In 2001, computers sold through direct channels are expected to capture 33 per cent of the market, surpassing the indirect commercial channel's 32 per cent anticipated marketshare, Rigoli said.

Through 2003, indirect commercial sales will experience a compound annual growth rate of only 7 per cent, according to the report. In contrast, in the same period direct sales from "outbound" channels where the vendor originates sales through telephone calls or other solicitations, will experience a compound annual growth rate of 15.5 per cent a year. And direct sales from "response" channels where buyers react to advertising and buy through the Internet and by other means will grow 16.6 per cent a year, the study said.

However, companies relying on indirect sales will not be mortally wounded by the trend, Rigoli cautioned. "A lot of people think this spells the death knell for indirect sellers; That's not true," he said. "A lot of executives with a lot of experience are figuring out right now how to leverage the Web into their business."

Nonetheless, it is not easy for companies relying on indirect sales channels to move away from the established networks they have, Rigoli said.

Earlier this month, Dell officials, on the strength of record second-quarter earnings, boasted that their direct sales system had catapulted the company ahead of Compaq for the lead in PCs shipped in North America. But IDC analysts said Compaq, whose primary distribution channel is indirect sales, still retained a slight lead.

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