Reseller group looks to minimise divisional conflict

Reseller group looks to minimise divisional conflict

Leading Edge Group CEO, Keith Lane, has brushed aside perceived conflict between its recently launched electronics division and its established computer dealers, insisting both can be sustained.

"There will always be a future for specialist computer stores," he said. "LEC is selling services and knowledge - it's more than just the box."

By contrast, the LEE model was centred on straight retail sales, Lane said.

Going electronic

Last year, LEG was approached by a cooperative of former Dick Smith resellers to establish a new Leading Edge Electronics (LEE) division. All had been dropped by the large retailer as a result of plans to open direct Dick Smith stores in their locations.

As well as gaining 35 new electronics stores, Lane said LEG had also managed to pick up some of its core management staff. These included its former national wholesale manager, Michael Carr.

"The opportunity to sign these dealers gave us an immediate leap into convergence," he said.

However, the decision to incorporate a new electronics business has left computer resellers questioning the fate of their division. For many, the introduction of an LEE store in their town represents further competition.

Lane admitted the group had not handled the integration of electronics as well as it should have.

"We were careless about our communications and these mistakes have caused angst," he said.

As a way of preventing future clashes, LEG has devised a new agreement for LEE members.

This would ensure no LEE store is opened in a town where there is an existing LEC store without first informing those owners, Lane said.

Further restrictions have also been placed on where LEE stores will be located.

But by having an electronics arm in the group, existing computer dealers had an opportunity to control which stock was available to them, Lane said.

So far, seven LEC store owners had expressed interest in opening LEE stores.

LEE general manager, Michael Carr, said it would ensure members did not encroach on the LEC model by limiting them to one PC system and one notebook model.

Its computers section - which also includes systems as well as accessories and cabling - currently accounted for 19 per cent of sales, he said.

Carr said his immediate task would be to grow its member base, particularly in metro areas.

It now has 48 stores but is hoping for 200 members by the end of next year.

Stock limits

LEC Cairns owner and committee member, Colin Mackinnon, said he supported the decision to take on the electronics group provided limits were set on access to stock.

"This is an opportunity for the whole group to be in the right place in the market when convergence blossoms," he said. "In one sense, it's hedging our bets but in another it is saying we're independent and battling the big guys."

One of the key positives for including electronics in the group was the ability for LEC to access higher margin product, Mackinnon said.

"We are predominantly focused on the middle to high-end consumers and SOHO users," he said. "LEE suppliers give us a chance for lower end consumer sales."

Electronic products and PCs also had a different sales cycle, Mackinnon said. In stocking both, LEC owners had the ability to balance out sales trends.

"The PC is now a tool: people buy systems when they need them," he said.

"LEE does most of its business in the Christmas period. Being able to sell both type of product gives us a good balance over the year."

Nevertheless, Mackinnon said there could be problems further down the line when convergence between electronics and computer products becomes reality.

"It's five years time that is a concern - how will these businesses eventually work when there's more convergence?" he said.

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