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There goes the neighbourhood

There goes the neighbourhood

Half way between Adelaide and Melbourne, Mount Gambier fits all the Australian cliches of isolation and desolation. The town is neat, quiet and friendly, and belies the barren landscape from which it arose. Oddly enough the town is also the seat of a lively channel community that ranges from large, multi-faceted businesses to small one-person outfits.

The local South East Institute of TAFE caters to a fairly healthy flow of IT students, providing courses for beginners through to Cisco networking certification.

According to David Bell, lecturer in information technology at the Institute, the student body represents a mixture of relative newcomers to IT and autodidacts looking for formal qualifications.

"We have a whole range of people come through," Bell said. "There are quite a few mature age people, as well as young kids coming out of Year 12, and people looking for the qualifications to continue to study at uni."

"Many of the students are already in business but are looking to improve their skills, or get formal Cisco qualifications."

Bell also singles out the growing interest from farmer's wives, who traditionally play the role of accountant in the family business.

Regional communities are similar to urban centres because, for all intents and purposes, these days farms need to be run like any other small business. With the introduction of the GST many people living in farming communities have been forced to acquire their first PC and are still coming to terms with the technology. Bell points out that while those in urban areas have the luxury of popping into the local reseller/PC repairer when a problem arises, the isolation of many rural PC users has forced them to become more proactive in solving their own problems.

"Quite a few farmer's wives come through the IT courses here at the South East Institute in order to learn how to use specific types of software, as well as basic maintenance and problem solving," according to Bell. "They are often from remote areas, and they need to know how to deal with problems when they occur and fix things themselves."

Similarly Charmaine Dangerfield, owner/proprietor of reseller Comp-U-Lern in the nearby town of Millicent, says that much of her business is associated not only with installing systems, but providing basic training for farmer's wives in accounting software such as MYOB.

"A lot of them don't have the time to come in and do the courses, they just want to know how to do their own books," Dangerfield said. "They don't want to show just anyone their accounts either so you have to build up a fair bit of trust."

However, house visits are "just part of the service" for Dangerfield, who spends as much time in the car visiting customers as she does behind the counter. In Mt Gambier the service element is not an added extra, it is an essential part of the sale.

Coping with the neighbours

A construction site has some of the Mt Gambian resellers slightly concerned. The town will soon play host to IT reselling heavyweight Harvey Norman. With the new store currently under construction, some of the locals are reviewing their current sales approach and looking for ways they might avoid losing market share to their new neighbours.

Harvey Norman financial director John Skippen refused to reveal the process by which different towns or suburbs were selected as locations for Harvey Norman outlets when approached by ARN.

Skippen did however reveal that store positioning was based on demographics, and largely hinged on the positioning of other Harvey Norman outlets.

"We have to make sure they don't overlap with any other Harvey Norman franchises," Skippen said.

With a significant local reseller population doing fairly brisk trade in both commercial and home-user markets, and a well-attended IT course at the South East Institute of TAFE, Mt Gambier would appear a prime location for resellers of all sizes and persuasions.

Nonetheless, many of the Mt Gambian resellers are fairly confident their business models will stand up to the larger player.

Andrew Stopp, director secretary of Mt Gambier-based reseller and integrator Green Triangle, believes many end users in the area will remain loyal to their current IT suppliers.

"We have a lot of personal contact with our customers. They know we will do the right thing by them," Stopp said. "Whereas Harvey Norman will still have to prove itself."

While Stopp believes the Harvey Norman store will have a significant effect on whitegoods and furniture retailers in the town, he believes Green Triangle will remain largely untouched by its presence.

"For starters, we concentrate on the business market and not the home market," Stopp said. "Some local firms will feel the effect because they have concentrated on the home market. We have 16 technicians on the road, so we can cover a huge service area. If anything the arrival of Harvey Norman will give us the opportunity to pick up some more services work."

The Value of Hindsight

If other regional centres are any indication, Stopp's confidence may be entirely justified.

Midway through 2000, in the NSW town of Moss Vale, Harvey Norman opened an IT franchise, a move which has had a mixed impact on the local resellers.

Some resellers in the region have seen a drop off in sales. Irvine New, owner/proprietor of Penultimate Computers Moss Vale, on the other hand, has actually seen his business grow.

"My business has increased because large retailers cannot offer the level of service we provide," New said. "Before Harvey Norman began selling computers in the area my business was lagging a little bit, but now I am getting the flow-on effect because people come to me for services and repairs."

Although small IT resellers do not have access to the marketing collateral of the franchisees, New believes a small-scale business model is more flexible, making it easier to fully service customer requirements.

"Small retailers have the ability to source whatever their customers require, and tailor systems to suit their needs," New said. "End users often need someone to come into their homes to solve a problem, if they buy something brand new and it doesn't work when they get it home, many don't know where to start."

For small retailers there is an added attraction associated with service provision. Unlike sales, earnings based on services represent pure profit, and not vendor-dictated margin.

"I made the money by going out and sorting out the problem," New said. "If people had bought systems off me in the first place I would have had to include that service element in the original sale."

Bruce White owner/proprieter of Moss Vale reseller Computer Needs told ARN his business lost some market share to Harvey Norman when it opened its doors. However, it also served to make him more aware of the importance of the service element.

"As a small retailer it is the personal service element that keeps you alive," White said. "I don't just give my customers a box, I deliver and install a system. I stand by the quality of the components and I am only ever a phone call away."

Nonetheless, White believes the greatest hurdles smaller retailers have to overcome is the credit offerings larger retailers provide. While some vendors are beginning to offer credit products which can be provided through the channel, for the most part small retailers are not able to take on the risk of providing credit to their end users.

"Rental programs have enabled me to compete, especially in the notebook market," White said. "Resellers have to be on the look out for different financial products which make them competitive."

Knowing how to listen

These days the PC retail market is often compared to the whitegoods market, as consumers become more aware of the functionality of the systems they are purchasing. However, according to many players in the reseller market, there are still a lot of differences between the sales models.

This is because consumers can assess the pros and cons of different whitegood offerings on sight, whereas the role of the reseller in explaining system features is fundamental to the sale of a PC. Resellers such as New and Dangerfield are aware of the importance of listening to their customers requirements, then providing systems according to their needs.

"The first thing I ask a customer is what do they want to use the computer for," New said. "Then I build them a system according to their needs. You can't sell a computer by pointing at some display models and telling the customer to take their pick, because they often don't know what they are picking."

New believes it is this level of flexibility which will differentiate large retailers from small outfits. The ability to tailor a system to the customer's requirements without overwhelming them with technical jargon should be paramount to a small reseller.

"My customers don't care what is in a system, they just want it to start up and do some fairly specific tasks," Dangerfield said. "Sometimes they don't even want to unplug it when there is something wrong."

New believes this flexibility will ensure the survival of smaller retailers even in the wake of larger suppliers. Rather than take on larger retailers on their own terms, New suggests smaller players focus on the areas large retailers are unable to cover.

"Resellers need to do some research, go into large retail stores and find out what they don't do, or what they don't do well, and compensate," New said. "Don't take them on on their own terms, but take the opportunity to fill in the gaps around their service. I've made money by sorting out the problems large retailers can't solve."


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