Compaq sails close to the edge

Compaq's muddled channel strategy continues to rile resellers with former retail partner, Leading Edge Computers (LEC) taking umbrage to the PC vendor's attempts to lure LEC members to its new franchise model.

According to Keith Lane, CEO of the Leading Edge Group - the parent company which administers LEC and six other buying groups - Compaq has "no idea what it is doing" with its current retail and aggregation strategies. He called it "absolute arrogance".

Lane said the vendor is undermining the group on one hand by trying to lure LEC members into the Compaq franchise model but at the same time its newly-appointed "aggregator" is trying to convince the co-operative buying group to purchase discount branded stock.

"[Compaq] can't seem to make up its mind as to which sort of channel it should be supporting," Lane said. "There is not a retail model out there driven by a vendor that works. They all fail because you can't be a manufacturer, wholesaler, distributor and retailer all a once. It never works.

Compaq's director, consumer division, Robert Balmer denied Compaq was specifically targeting Leading Edge members. He claimed the only LEC members on its 150-plus list of dealers that have expressed interest in the franchise concept are ones that have approached Compaq.

"We can't help it if those members see greater value in being part of Compaq Connect than they do in being part of the Leading Edge Group," Balmer said. "it is understandable that Leading Edge Group members are approaching Compaq Connect and we welcome them to do so."

Lane feels Compaq is "desperate". He said Compaq has "failed abysmally" with its planned launch of 100 Connect stores and is now "having a go at the Harvey Norman-style franchise model to see if it can make that work".

"The franchise model will fail too," Lane said. "Compaq is no Gerry Harvey. It is no Leading Edge. It has not got an established track record in retail and you need that to be successful at it."

Lane also had strong opinions on the nonsensical nature of Compaq's moves to use Sweetwater as an aggregator. This too is a "fundamentally flawed" business model, he claimed.

"What is [using Sweetwater as an aggregator] going to do to the Compaq dealer?" Lane questioned. "If the computer store next door is going to end up with stock of cheap gear that has been dumped on the market because Sweetwater is buying cheaply and then dropping the stock on the market at discount rates.

"What is that going to do for the Compaq brand? Discounting is bullshit. [Global] PC vendors are all panicking at sales slumps and dropping their prices to keep the numbers up. Going down that route is a recipe for disaster."

"There are only a few business models out there that work [in computer channels] and the most prominent one of those is where suppliers partner strongly with their retail partners and together drive the business."

Compaq's Balmer said the whole idea of using an aggregator such as Sweetwater is for the vendor to not have anything to do with who they approach. "That is the value-add Sweetwater is providing for Compaq," he said. "They have certain channels of distribution and part of the deal is that they take advantage of those channels. It is entirely up to Sweetwater who they sell to."