Acer has left its distribution channel out in the cold, announcing a major restructure of its channel strategy which will see the vendor dealing directly with resellers, using its soon to be launched e-commerce Web site.
Until now, Acer has used 10 distributors to reach hundreds of small dealers around the country. But in an effort to build its market share in the small and medium enterprise (SME) arena, Acer will bypass its distributors in favour of a direct relationship with resellers.
In a letter to distributors, Acer explained how a slowdown in the economy had been compounded by the rapid maturing of the PC industry.
"These factors have resulted in Acer's distribution channels not meeting revenue and, more importantly, margin and profitability targets," the letter stated.
Shocked by the seemingly sudden decision, angry distributors have branded the decision ill-informed and naïve (see story on page 6).
"Effectively they have told us they can do without us," Siltek CEO Bruce Harvey said of the letter, which advised him of Acer's channel model change. "We have to buy products at the same price as resellers and it doesn't take a rocket scientist to work out that this is an untenable situation for a distributor."
However, Acer maintains the move will help bring it closer to the market dynamics.
"After we viewed the business momentum of the last 18 months and our internal resources, we decided to directly service the smaller reseller so we can enjoy the goods of our e-channel initiative," said Acer's Oceanic Region managing director Charles Chung. "We have a very efficient supply-chain model. Most vendors use the two-tier structure because they can't handle the small shipments."
Under the vendor's new channel program, resellers will be organised into two groups, depending on their qualifications and business commitment with Acer. Currently, around 80 resellers are branded AAA resellers with Acer. These businesses will automatically become Gold resellers, according to Chung. Acer intends to recruit a further 200 resellers by the end of October to work as Silver resellers, in a move to help grow Acer's SME business. The different levels will receive different benefits and discounts.
The backbone of the new structure is Acer's new e-business site, known as the Acer Partner eCommerce (APeC) solution. In mid June, the vendor will go live with the site with three of its major resellers. Mass delivery of the site's capabilities will occur by the end of June.
The ApeC Web site allows resellers to get online to configure their products, find prices or part numbers, or learn if there are any conflicting components. Once the order is placed it is sent through to Acer's backend. Resellers can look up the order status and estimated delivery day. A feature known as Orderwatch will automatically e-mail the reseller as the item reaches each of the seven fulfilment stages. Resellers can also check their credit status.
The system is not Acer's first foray into the world of online procurement. In 1997 the vendor attempted to roll out its Internet Online Processing System - a system which ultimately failed because of technological limitations.
"We learned a lot from that system and we are taking a very careful and cautious approach," Chung told ARN.
The Web site roll out is the first phase of a larger program that will eventually see Acer deliver direct to key account customers such as Telstra. However, Chung said resellers would continue to be a major part of Acer's strategy.
"You can't just go direct," he said. "I believe our resellers are providing add-on value, such as account management and consultancy, that we can't provide. Currently less than 15 per cent of our revenue comes from direct selling."
Acer has given distributors 60 days notice of its decision - enough time, Chung hopes, to smoothly change over supply arrangements.
"If, over the next 12 months, distributors want to join us as a Gold reseller, we will provide volume quantities of certain products at roughly the equivalent of a dealer price," he said.
"We are still waiting for a final decision from distributors, but we do hope some will stay on with us."