Direct sales
A report just published by IDC (www.idc.com) in the US suggests that direct PC sales will exceed indirect sales by the start of 2001.
According to Joseph Rigoli, an IDC analyst, direct channels are doing especially well with portable PC's as a result of increasingly common policy of companies instructing staff to use laptops. Although the IDC report covers only the American market, Rigoli's comments apply to the UK, as well as Europe. He argues that the traditional value-added resellers that make up the commercial channel are being affected by a fundamental shift in the distribution model.
`End users are increasingly shifting procurement activity to those that are best at logistical efficiency - direct distributors - while often using in-house technical expertise basic for integration services,' he explained.
This fact will not be lost on UK channel watchers, especially now that one of the longest-running distributors, Principal (see story below) has now folded.
Principal Distribution fails - 30 staff redundant
Broughton-based Principal Distribution has become the latest casualty of the PC profit margins squeeze. The firm went bust with estimated debts of a million pounds in mid-August, with around 30 staff being made redundant.
KPMG has been retained to handle the sale of the distributor, and has kept five staff on to assist it, since the firm has around 400,000 pounds worth of stock to sell off.
Curiously, the failure came just two months after a management buyout (MBO) of the company. Reports suggest that the firm lost a number of its franchises as a result of the MBO. That, and a lack of support in the industry appears to have been to blame for the failure.
KPMG says that it is confident that it can find a buyer for the firm's name and assets. That, at least, is a good thing for the dealer channel, especially when you remember that Principal - originally called P&P Computers in the early 1980s - was one of the first distributors in the new computer market of that era.
PMC hits the buffer with 40 layoffs
Another casualty of the summer profit margins squeeze has been Keighley-based PMC Electronics. The firm, which started life as Pace, the UK's first modem company, quietly went into receivership in early August, with the loss of 40 jobs.
The company originally started as a modem vendor in the early 1980's and, following a flotation of Pace in the 1990's, the modem business was spun off as part of a management buyout (MBO) in the mid-1990's, and became known as PMC Electronics.
Since the beginning of the year, PMC has diversified away from its modem roots into areas such as PC videophones and graphics cards. At the same time, the firm's modems have become more sophisticated, but product pricing in the modem market has continued to plummet.
Like Principal Distribution, KPMG is handling the receivership, but reports suggest that the firm is unlikely to resurface, because of the size of the company's cashflow problems.
Siemens' new for old dealer campaign
Siemens has started an innovative `new for old' PC marketing campaign that offers what are claimed to be the most competitive trade-in prices on old PCs from major vendors - including Compaq, Dell, Digital, Fujitsu, Hewlett-Packard, IBM and Toshiba - against the
purchase of new Siemens PCs.
The dealer offer, which runs until the end of September, is unusual in applying to all Siemens' PCs, including the budget models, and trade- in discounts of 345 pounds are available.
Ian Davidson, Siemens' marketing manager, said that the vendor is currently offering the Scenic 320 (Celeron 366) system at 499 pounds.
`A customer with a typical Pentium MMX200 system can trade-in their existing PC for 120 pounds and upgrade to a new Siemens desktop system for just 379 pounds,' he said.
`As a single purchase this represents an excellent offer, but for those organisations - particularly in local government and the education sector - looking to replace their remaining non-Y2K compliant systems, the numbers are even more compelling,' he said.
`With trade-in values ranging from five pounds for a 14 inch monitor to 345 pounds for a Pentium II 233 MHz mobile system, we're confident that customers will take advantage of the offer,' he added.
Dealers are pleased with the trade-in campaign, not least because it does not interfere with other marketing discounts the vendor is allowing its customers.
Tiny ditches free PC offer
Barely two months after it started the scheme, Tiny Computers has ditched its free PC program, claiming a lack of interest.
As reported previously by Dealer Info, the Tiny free PC deal was the first of its type in the UK (although soon followed by other vendor's deals) and required users to switch their telephone lines to the company's indirect telephony service and commit to 25 pounds worth of phone calls a month for a year.
Tiny says that only five per cent of people signing up for the deal opted for the free 300 MHz Celeron-based PC, with most people going for a discounted Pentium III machine.
The discount Pentium III offers will continue, but the firm says that take-up of the free PC deal was too small to keep it on. In the first month of the offer being advertised, the PC vendor claims it had 25,000 calls into its call centre about the offers.
Cable & Wireless offers dealers commission on calls
Cable & Wireless Communications (CWC) is also keen on end users opting to use its network for their phone and Internet calls. It's now encouraging dealers to sell its services, and is offering them a commission on the calls that customers make.
The deal offers business partners up to 15 per cent of customer call revenue on calls. Full dealer support is being offered by a new third-party service centre that is billed as supporting business partners from pre-sales contact and order management right through to post- sales service and support.
Peter Green, director of CWC's business markets third party channels division, said that the 15 per cent commission deal is pretty well unbeatable in the UK telecoms marketplace.
`We've listened to the dealer community, looked closely at our competition and responded accordingly,' he said, adding that resellers get access to good resources, a strong brand and the widest product portfolio currently available on the market.
`This, coupled with an extremely attractive commission scheme, will generate a lot of interest from prospective partners. We are looking for no more than 20 partners but these will be of the highest possible calibre,' he explained.
Siemens Computer Systems, 0044-1252-555396 (GB),
http://www.siemens.co.uk;
C&W, 0044-171-6745440 (GB)