Welcome to Issue 10 of ChannelMedia – The Retail Edition.

Our subscriber, contributor and sponsorship base all continue to grow. We take this to mean that we are filling a void in the market for actionable information to help you drive your business. On behalf of Vision Events and Newman Media we thank you all for your support as we continue to look for ways to help your business. We welcome more input. This is YOUR platform and we view ourselves as an open content standard. If you are attending RetailVision please stop and catch us up. (You can schedule a time to meet with editorial or sponsorship salespeople at RetailVision by sending an email to keithn@telocity.com).
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ChannelMedia Top 10
By Keith Newman

1. When pushed against a picket fence, Gateway's Holstein-lovin', ponytail-wearin' CEO comes out singing. In its latest TV ads, we find Ted Waitt driving down a desert highway in an 18-wheeler, with cow at his side, singin' Devo's 1981 hit "Whip It." What else would one do to fire up demand and increase margin. I think the point is to show how easy it is to rip, burn and listen to digital music on its new systems. Steve Jobs just decided to raise prices on the new iMacs. Rock on.

2. Best Buy's Q4 profits surged 84% and Q1 sales are slightly ahead of expectations but earnings per share will be lower than analysts' estimates. Sales for Q4 rose 28% to almost $7 billion from $5.4 billion a year ago. The increase reflected the addition of 62 Best Buy stores in the previous 12 months, which brought the total to 481 stores. The company also operates about 1,320 Musicland stores and 95 Future Shop stores in Canada.

3. Similarly, Circuit City said electronics chain posted a 51% increase in its fiscal fourth-quarter profit, helped by solid sales growth in big-screen and digital televisions. Meanwhile, the company's CarMax Group chain of car dealerships saw its fourth-quarter profit more than double as sales surged 22%. Looking ahead, Circuit City Group said it expects same-store sales growth in the mid-single digits for fiscal 2003, driven by expanded categories and high-growth electronics such as big-screen TVs, digital imaging, video gaming and wireless communications. However, the retailer expects a per- share loss in Q1 in the mid- to high-single digits. The company, however, expects the first-quarter loss to be more than offset by small profits in the second and third quarters. And similar to fiscal 2002, the Circuit City business said most of the earnings for 2003 are expected to occur in the fourth quarter.

4. But not is all that healthy around Retail Land. Redbook Research's latest indicator of U.S. retail sales shows sales down 1.1% in the four weeks of retail March versus the same period in February. The report also shows seasonally adjusted sales in the four-week period up 4.9% versus March 2001 .On an unadjusted basis, sales in the week ended March 30 were up 3.7% from the same week in 2001. The report said that the week's sales performance was seen as disappointing; especially in light of an expected Easter surge in sales. Winter storms and unseasonably cool weather in much of the country were cited as reasons for the weakness. Some retailers said they might fall short of their March sales targets.

5. Congrats Carly. Problem is, NOW the work begins. I have a lot of thoughts on HP-Compaq and what should be done next. Who doesn't? But one thing I know is that while morale is important it's not always best to smother the issue with attention. With a company the size of "Hpaq" most gestures will appear more like lip service. Instead, my old philosophy: Manufacture small wins, celebrate the victories, look away from defeats and keep swinging. Having market leadership in desktops, notebooks, digital cameras, printers and, oh yeah, supplies is not a bad start. Both HP and Compaq have many strong assets in the Enterprise and PC Space. Oh yeah, faster decision-making would be nice too. Let me know if I can help.

6. Use it or Lose it. More than 40% of home Internet users in the U.S. have downloaded MP3 files onto their home computers, and they are storing an average of 305 music files on these "virtual jukeboxes," according to Parks Associates' latest study E-Home 2001. Younger consumers in particular are storing a vast amount of music on their home PCs. In a survey of 711 consumers in U.S. households with Internet access, Parks Associates found that 81% of respondents aged 18-24 have downloaded MP3 files onto home computers, storing on average approximately 350 clips, songs, and files. Although a lower percentage of consumers' aged 25-34 has downloaded MP3 files onto home computers, they are currently storing - on average - twice as many files (more than 700). -- For additional information, please visit http://www.parksassociates.com.

7. The Consumer Electronics Association (CEA) is endorsing Georgia's first "Shop Georgia!" tax-free shopping holiday at the end of March where consumers were allowed to purchase computers, school supplies, clothing and footwear without paying sales tax, which ranges from four to seven percent in Georgia. "Giving consumers a chance to buy a home computer without the added burden of a sales tax will help more families enter the digital age," says Gary Shapiro, president and CEO of CEA. "For an average computer system, the total sales tax savings could be close to $100, and retailers often have additional promotions and discounts. This really is a great opportunity for Georgia families to buy their first PC." Earlier this month, Governor Roy Barnes signed into law the temporary sales tax exemption that was passed by the legislature. Georgia joins three other states - Pennsylvania, South Carolina and North Carolina - which have enacted sales tax holidays that include personal computers. CEA's research has shown that more than one-quarter (27 percent) of families with household incomes of less than $25,000 would be more likely to buy a home computer if they did not have to pay sales tax. In addition, almost half (49 percent) of all households who do not own a computer, but plan to buy one in the next year, say that a sales tax holiday would improve the likelihood of such a purchase. According to an October 2000 study by the U.S. Department of Commerce, the State of Georgia ranks 39th among the 50 states for household computer ownership, and 34th for Internet access. The study reported that about 52 percent of Georgia households did not have a personal computer. "A sales tax holiday for computers is a low-cost, high-return investment for the state," said Doug Johnson, CEA's director of technology policy. "Not only is such tax relief for computer purchases an innovative way to help narrow the 'digital divide,' but sales tax holidays in general are a proven way to boost consumer spending and stimulate the local economy." Georgia's Department of Revenue has created a website (www2.state.ga.us/departments/dor/salestaxholiday/index.html) where consumers can go for information. The website features a list of taxable and nontaxable items, answers to commonly asked questions, and contact information for further assistance. For more see www.ce.org/taxholiday.

8. Something to cheer about (kinda) at Kmart: BlueLight.com was named a top-10 e-tailer in customer service in a survey released this week by Chicago consultants The E-Tailing Group. The E-Tailing Group surveyed 100 top sites during the first quarter of 2002 and measured their performance on the basis of time to shop, number of clicks to check out, number of business days to receive merchandise, time to answer e-mail inquiry, and number of days to receive credit. BlueLight.com ranked number-one in fewest number of business days to receive item ordered at just three days. The company ranked second in time spent to answer email inquiry at less than an hour and a half. Results such as these, which can be viewed at www.etailing.com, placed BlueLight.com in the top-10 overall along with other e-commerce companies such as Amazon.com, Lands' End and Nordstrom's. For more visit www.bluelight.com.

9. Gimme a "V" - V Communications announced the purchase of the Web Easy and Media Easy product lines from IXLA USA Inc. and IXLA Ltd., further expanding its reach into the consumer marketplace. IXLA's consumer oriented product line, best known for its Web Easy line of rapid web design tools will become wholly-owned, marketed and distributed by V Communications effective April 1, 2002. The products will be released with new updated versions under the V Communications label and will be available along with VCOM's popular System Commander®, CD Anywhere®, and Partition Commander®, software utility lines. The purchase of the assets from IXLA enhances V Communication's position in the mass consumer area, especially with the recent shipment of its newest product, DVD Photoplay?, which allows digital photos to be displayed on any TV with a DVD player. "The award winning technical excellence of IXLA's software, as well as their brand name awareness, gives V Communications an instant identity in this market for consumers," noted V's president Frank van Gilluwe. Additional information is available on the V Communications website at http://www.v-com.com or by email at sales@v-com.com.

10. Bull Rush: Barnes & Noble told analysts that 2002 consolidated earnings were expected to increase 46% to $1.87. Consolidated net earnings on a pro-forma basis for the year (prior to a $4.5 million charge for settlement of a lawsuit) were $91.3 million or $1.28 per fully diluted share. Retail net earnings (which include retail bookstores and GameStop) grew 13.3% to $123.6 million or $1.70 per fully diluted share. Bookstore sales were $1.2 billion for the fourth quarter, an increase of 2.2% and $3.7 billion for the year, an increase of 3.6%. Net earnings for the fourth quarter were $88.2 million or $1.15 per fully diluted share and $115.0 million for the year or $1.59 per fully diluted share. Barnes & Noble bookstore sales were $1.1 billion for the quarter, an increase of 4.7% and $3.4 billion for the year, an increase of 6.0%. Comparable store sales increased 4.5% for the quarter and 2.7% for the year. The company opened 40 new Barnes & Noble stores for the year and closed 18 locations, ending the year with 591 stores. B. Dalton Bookseller sales were $112.1 million for the quarter, a decrease of (17.6%) and $310.3 million for the year, a decrease of (16.6%). Comparable store sales decreased (3.4%) for the quarter and (3.7%) for the year. The company opened one B. Dalton Bookseller store and closed 35 underperforming locations, ending the year with 305 stores. GameStop sales were $514.2 million for the quarter, an increase of 57.2% and $1.1 billion for the year, an increase of 48.2%. Comparable store sales increased 58.7% for the fourth quarter and 32.0% for the year. Net earnings for the fourth quarter were $18.8 million or $0.23 per fully diluted share and $8.6 million for the year or $0.11 per fully diluted share. As previously reported, GameStop completed an initial public offering on February 19, 2002, raising $250.0 million in cash for Barnes & Noble, Inc. and $98.0 million in net proceeds for GameStop. On a fully diluted basis, Barnes & Noble has retained approximately a 60% interest in GameStop. The company projects consolidated earnings per share growth for 2002 of 46.0% to $1.87 per share, consisting of $1.78 for retail bookstores, $0.33 for its share of GameStop earnings and a pro-forma loss of ($0.24) for its share of Barnes & Noble.com and other equity investments, based upon 80.9 million fully diluted shares. "We are pleased with the earnings growth of our retail business and look forward to an even better year in 2002," said Steve Riggio, chief executive officer of Barnes & Noble, Inc. "We began 2002 with a significantly stronger balance sheet due to the GameStop IPO and effective working capital management. We expect Barnes & Noble.com losses to decline significantly and GameStop sales and earnings to continue their extraordinary growth."
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PC Connection makes strong step for Fortune 5000 space with acquisition. See all the details behind the deal.
by ChannelMedia Staff

Struggling to regain its identity and a focus that will reignite sales growth, PC Connection, a leading direct marketer of information technology (IT) products and solutions, recently signed a definitive merger agreement under which it will acquire MoreDirect, Inc., a premier e-procurement supplier of IT products for medium-to-large corporate and government organizations nationwide. MoreDirect's Internet-based system enables corporate and government customers to efficiently source, evaluate, purchase and track a wide variety of IT products. For 2001, MoreDirect reported net sales and pre-tax income of $219 million and $9.2 million, respectively. The acquisition will be accounted for using the purchase method of accounting and will be immediately accretive to earnings. The boards of directors of both companies have unanimously approved the transaction and expect it to close within the next 30 days. Under the terms of the agreement, PC Connection will pay the shareholders of MoreDirect approximately $21 million in cash at the closing. Prior to the closing, MoreDirect will distribute from available cash balances approximately $9 million in previously taxed but undistributed earnings. In addition, PC Connection will pay additional cash based upon MoreDirect achieving targeted levels of annual earnings before income taxes through December 31, 2004. PC Connection will also escrow $10 million in cash at closing to fund a portion of these contingent payments. Certain portions of the contingent payments may be converted into PC Connection common stock at specified conversion prices between $20.80 and $40.00 per share. Ken Koppel, Chief Executive Officer of PC Connection, Inc., said, "We are very pleased to have MoreDirect join the PC Connection, Inc. family of companies. Russell Madris, President of MoreDirect, has built a very successful organization that services medium-to-large corporate and government customers through leveraging a high-quality sales organization with an Internet-based e-procurement solution." MoreDirect will operate as a wholly owned subsidiary of PC Connection from its current facilities located in Boca Raton, Florida. The company will continue to operate under the MoreDirect trade name.

Commenting on the acquisition, long-time member of the corporate reseller market Russell L. Madris, said, "As part of PC Connection, MoreDirect will have access to additional capital, marketing programs and other resources. Our customers will benefit from PC Connection's wide range of service offerings, including overnight custom configuration, as well as their additional inventory and logistics capabilities. We believe our Internet-based e-procurement system is highly scalable, and we look forward to pursuing new growth opportunities as a subsidiary of PC Connection." Martin Wolf Securities LLC advised MoreDirect in connection with this transaction.

Additionally, PC Connection announced that it expects its net sales in the first quarter of 2002 to be in the range of $235 million to $240 million. The Company also expects to report a loss, before special charges, in the range of $.04 per share to $.06 per share, and after special charges, a loss in the range of $0.06 per share to $0.08 per share. PC Connection expects to report its definitive financial results for the quarter during the week of April 15, 2002.

PC Connection's commercial business has remained virtually flat with the fourth quarter of 2001. Federal government business is expected to be up 10% over the first quarter of 2001, but down sequentially from the fourth quarter of 2001 by $32 million. The sequential decline in federal government sales was greater than previous years' historical patterns due to the unusually high federal government sales achieved in the fourth quarter of 2001. The Company remains optimistic that the federal business will have another strong year of growth in 2002.

Ken Koppel commented, "Although we are disappointed with our projected results for the quarter, we are encouraged that the commercial business has stabilized. We are cautiously optimistic that with a stable commercial business, seasonally better quarters for our GovConnection business, and the completion of our acquisition of MoreDirect, the Company will see improved financial results in the remaining three quarters of 2002."

Contingent Consideration Structure

Based upon achievement of MoreDirect's Earnings Before Income Tax (EBIT) for calendar years 2002, 2003 and 2004.

Contingent Consideration Backed by Cash Escrow

• A cash escrow of $10 million. The escrow will be paid out in one installment if MoreDirect maintains EBIT for the calendar year 2002 and 2003 of at least $22 million in the aggregate.
  
  
• If MoreDirect has the aggregate EBIT for calendar year 2002 and 2003 of at least $19.8 million, and the 2003 EBIT is greater than the 2002 EBIT, the escrow payout will be prorated.
  
  
• If MoreDirect earns at least $11 million in EBIT for calendar year 2002, $5.0 million of the cash escrow will be paid out and the balance would be paid based upon aggregate 2002 and 2003 EBIT as noted above.

Additional Contingent Consideration
($ in thousands)

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Radio Shack, Network Associates, Activision, Go America, Alera
by ChannelMedia Staff

Is this a good thing? Bobby Knight autographed copies of his new autobiography, KNIGHT: My Story, at the Barrett Pavilion Media Play in Kennesaw Friday, March 29. Knight, former head coach of the University of Indiana basketball team, discussed his life, accomplishments and the failings that led to his dismissal in KNIGHT: My Story. As head coach of the Hoosiers, Knight ranked fifth on the NCAA all-time list with 763 career wins, and held three NCAA titles and 11 Big Ten titles.

The Right Start announced it has changed its name to FAO after approval today by its shareholders at a special meeting. The special meeting also resulted in the approval of the conversion feature of the preferred stock the company issued to acquire assets of Zany Brainy, Inc. and FAO Schwarz and approval of reincorporation of the company from California to Delaware. In leveraging the brand equity of the 140-year-old FAO Schwarz stores, FAO, Inc. will also change its stock symbol from "RTST" to "FAOO" at a special market opening ceremony with the Nasdaq on April 18, 2002. FAO, Inc. headquarters will be located in King of Prussia, Pennsylvania. "The change in our name reflects the marquee brand value that FAO Schwarz provides," said Jerry R. Welch, Chief Executive Officer of FAO, Inc. "The initials `FAO' are known all over the world and represent great products, quality service and fun for kids. This name provides exactly the right corporate umbrella for our company." Its too painful to go on. Kmart Corp. on Friday reported a $174 million net loss for February, the first full month since the discount retailer filed for Chapter 11 bankruptcy protection.

Shack-Attack - In celebration of the inaugural Samsung/RadioShack 500 NASCAR Winston Cup race on April 7, 2002, Radio Shack and Samsung have put together a fantastic phone offer! Now through March 31, 2002, purchase and activate a Samsung N200 phone at your local RadioShack and get a $50 Instant Rebate, plus get an additional $50 mail-in rebate from Sprint PCS®.

VSDA points out an interesting data point: VHS tapes continue to be the leading format for home movie renters but buyers overwhelming choose DVD. Go figure. Consumers spend three times as much money renting VHS than DVD discs. VSDA's 2002 year-to-date figures show the consumers have spent $542 million renting DVDs (172 million rentals) and $1.32 billion on VHS (500 million rentals). However, the VSDA did report that consumers spent more buying movies on DVD than VHS in 2001, with $5.4 billion spent purchasing DVDs and $4.9 billion on VHS cassettes, quoting from figures supplied by Adams Media Research. "The excitement for DVD product continues to grow at a rapid pace, and there is a natural transference of VHS turns toward DVD. However, the VHS format still remains strong in both rental turns and revenues," said VSDA director of research Brad Hackley.

Network Associates has made an offer to acquire the outstanding publicly held shares McAfee.com, a virus protection service. Network Associates already owns approximately 75% of McAfee.com. It is particularly well known for its virus protection system. The site has more than 1.3 million paid active subscribers. Network Associates provides network management and security services under the McAfee, Sniffer Technologies, and Magic Solutions brands. McAfee.com was set up with separate public stock to take advantage of the market's one-time fascination with all things Internet. With that period being over, it makes more sense to simplify the corporate structure.

Alera Technologies is announcing a new and unique FireWire A-Connect Connection Kit tailored specifically for Macintosh users. The Macintosh FireWire Connection Kit is a new option in the Alera Technologies A-Connect Series of multiple I/O capable products. "Serious Macintosh users insist on Powerful DVD and CD recording solutions. The Alera Technologies offering with A-Connect for Macintosh is an obvious success story," states Perry Solomon, President and CEO of Alera Technologies. "Our technology partnership with Charismac incorporating their highly acknowledged Describe software with our Mac compatible A-Connect architecture gives our Macintosh customers exactly what they have been asking for." "Alera Technologies is recognized for advanced, yet practical, optical recording technology innovations" stated Wyler Furgeson, President of Charismac Engineering, Inc.

GoAmerica, a leading wireless data solutions provider, today announced results for the fourth quarter and year ended December 31, 2001.Total subscribers as of December 31, 2001 were 140,927 compared to 108,446 at the end of the third quarter. Subscriber growth during the fourth quarter was driven by strong sales of GoAmerica's value-added wireless services. "We are pleased to report a strong quarter of subscriber growth," said Aaron Dobrinsky, GoAmerica's Chairman and Chief Executive Officer. "Our extensive roster of distribution alliances continues to deliver customer opportunities. We are particularly pleased with the continued success and adoption of our value-added services as well as the improvement to our operational cash burn, which sequentially declined by $4.3 million during the fourth quarter."

TDK Mediactive, a publisher of entertainment software and Activision Value Publishing Inc., announced today they would co-publish a minimum of four new computer games this year. Last year, the two companies signed on to co-publish several upcoming PC games based on TDK's exclusive licenses. "We had a very successful 2001 with our co-published titles - 'Shrek Game Land Activity Center' and 'The Land Before Time Three Pack,'" said Vincent Bitetti, chief executive Officer of TDK Mediactive. "As our relationship with Activision continues to grow, we are pleased to have such a committed partner for our upcoming PC titles and PC catalog business."
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Handspring Q&A
An Interview with Channel Chief Greg Woock

Q. Handspring has just launched a new product, called TREO, that seems on one hand a logical product extension and on another hand, a radical change of product direction: Standalone personal organizer vs. digital communicator. Is this a correct read?
A. Not really all that radical, just an evolution. It does everything your old PDA does and then adds cell, web access and mail. I believe all handheld's will get "connected" at some point.

Q. From a channel standpoint, how is this "change" being perceived: This is a service and a product, right? that creates a potential annuity back to the channel? Does the channel "get" the idea of selling this like a service vs. a product?
A. Most of our customers are selling wireless products that require "activation" today although typically through a different merchandising team. In that change we need to get around the organization a bit but the PDA teams know us and I believe Handspring has built a reputation as an innovator so doing something ahead of the rest of the pack is anticipated if not expected. There are some channels that do not "activate" wireless products today, mainly in the distribution and general VAR channels. Within these channels a great opportunity exists to reach into new businesses. The "wireless data channel" is something that does not really exist today and its here that I see the biggest collision of traditional wireless resellers and traditional computer sales and distribution. That collision is going to be more of a big bang... the beginning of an evolutionary path.

Q. You are also expanding your channel - retail, wireless, VAR, etc. Can you share with us your strategy here? How big, broad (and bad) are you guys trying to be?
A. These types of products appeal to a really wide range of resellers and are the first "wireless data" product I really feel like more traditional wireless resellers can bring into their fold pretty easily. It also plays well into those folks portfolio who are selling CRM, SFA, synchronization, mail, etc. along with a server. The net effect is that there will be expansion of our distribution to support these new types of customers who are outside our current distribution partners.

Q. Here's an off the wall question: If I were opening up a Handspring store, how would you suggest I sell and market the product? Who would I target (hot customer base?) and make money (would I sell other products, services?)
A. I would first look at those 10 million or so active PDA users in the US and tell them that the product they have been waiting for has arrived. Then I would look at anyone who is using a cell phone and see if having email, messaging, web access and a PDA all on a screen and keyboard that's usable would be a benefit. Don't drag the notebook along. No more hassle with VPNs, trying to find a data jack in the airport lounge. Get your mail on the go when its convenient for you... plus web access, PDA and voice, all in a device that's small (and lighter) than your average wallet. As far as revenue opportunities, the wireless operators are pretty interested in getting new subscribers and pay accordingly. If you have the ability to sell, service and install custom solutions, there is even more money in this and today...little competition since these functions have note really been combined well in the past. The value-added players are going to have the biggest opportunity. These devices have been a consumer purchase model in the past... even though most customers use their products for biz. Cell phones, PDA's mostly bought at the local retailer and then reimbursed. With email and synchronization, the IT guys take over and that's when you need servers, maintenance, integration etc. This channel does not exist today- neither the carriers or resellers are really up to speed here and this space is going to be a great one.
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Selling the Service: How to maximize the sell-through of an intangible product
by Paul Wenig

Successfully promoting and selling a service product (ISP, Satellite, Small Business Tools, etc) at retail occurs only when there's a harmonious marriage between an art and a science– traditional merchandising and direct response marketing. And while there are dozens of tactical issues one must consider, fortunately, there are only a handful of fundamental things to keep in mind.

Assuming your service product is priced and positioned correctly, you need to ask yourself the oldest question in the retail handbook. Is your retail partner a true business partner? Has the trust been forged and are they strategically motivated? Are there financial incentives for all of their customer channels? Have you both agreed on the best ways to maximize those channels?

With that said, when it comes to the in-store experience, do you have all of your bases covered? Product packaging, signage and sales associates are the biggest purchasing influencers. This means it's as equally important, if not more, to have an "in-home" registration/activation process as it is for an "in-store" process. Busy sales associates, missing sales associates, and broken systems all increase the odds of missing the customer unless you have an alternative solution for the customer who wants (or needs) to sign-up at home.

And when it comes to that in-home solution, that take-away piece, the one thing that will close the sale, whether it's a brochure or a CD-ROM or both, think "direct response". After all, you have but mere seconds to convince the customer to take and respond. Your key benefit statement and offer---are they clear, concise, and compelling? Is the creative bold and eye-catching? Have you tested, tested, and re-tested it? Sizes, colors, fonts, and copy are all key factors.

With millions and millions of consumers shopping at retail, this artful science, which I call Direct Response Merchandising, can prove to be a very powerful strategy.

Paul Wenig is a retail purebred. After being raised by a pack of retailers, he left home to join Computer Retail Week as Associate Publisher and then migrated to America Online where he led their retail initiatives. He can be reached at (415) 384-0425 or at pwenig2@aol.com
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Crossing Channels: Will Anybody Be Left Standing?
by Steve Cross

Lately, I hear people saying that Webvan couldn't work, and that it was a dumb idea. That people won't pay to have groceries delivered to their home. Let's see...people don't want ease, convenience, speed, and quality? Why else do people buy anything? People say Webvan was a loser just so the speaker can sound politically correct and in tune with the times. In my opinion, Webvan was an absolutely brilliant concept that blew it on two things; over-expansion, and warehouse infrastructure costs. Any retailer with any knowledge at all would have told them to watch for those two things. But instead of hiring retailers, merchandisers, and long-time grocery industry folks, they hired a bunch of bright-eyed, freshly minted MBAs. I am confident that any (current or former) senior retailer at RetailVision could sit down, and sketch out a successful launch for Webvan. So is Safeway. Because folks, Safeway just started a web-based, home-delivery grocery service. BINGO!

Safeway will supply orders from their own stores from an infrastructure already built and paid for. Safeway is rolling the program out to heavily web-savvy communities like Silicon Valley first then going regional, then national, after the kinks are worked out and a scalable program is in place. How does all this impact us? Think about Fry's purchase of Outpost. Outpost was one of the best etailers from the very start. They had good merchandising, decent vendor programs, and really great customer service. What Outpost lacked was low-cost infrastructure. Well, you've been to Fry's, isn't that what they majored in at school...low-cost infrastructure? I ask again, how does this impact all of us? Well, think about all the former standalone etailers, and look at how they are linking up with the big brick-and-mortars guys.

Will there be any room for the standalones? Can they overcome the infrastructure costs or even the costs of virtual warehousing? I don't think so. Do you? Let me know.

Steve Cross works with mid-sized high tech companies to evolve their businesses. Since 1997 his clients have included Pinnacle Systems, Visioneer, Dazzle, Network ICE, Margi, Aladdin, Outpost.com. He was formerly sales vice president at Connectix.
Contact: steve@crosschannel.com 408-528-7211
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A PREVIEW OF RETAILVISION SPRING 2002

"Straight Talk from the Retail Trenches:
Get the Inside Scoop from the Store Level"
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As a Channel Sales Professional, have you ever asked yourself the following questions:

What is the single most impactful thing my in-store representative can do to increase sales of my products in stores?

How do Sales Associates best learn and retain information on my product?

What is the most effective marketing vehicle by retail chain?

Well, you may finally have your answers come this RetailVision Spring 2002! Campaigners will be conducting a first ever panel session of retail experts who can provide you with pertinent information about what's working and what's not at the retail level. The panel will consist of sales associates; store managers and Campaigners field representatives. There will also be an open question & answer forum for you to ask any questions you may have related to the field of retail marketing.

There will also be some fun in store (no pun intended) for all! Campaigners will be giving away a special gift to all attendees courtesy of our partner, Fujifilm. Additionally, all attendees of the panel session will be entered to win "A Day of Pampering" at a spa in your hometown!

If you don't get a chance to attend this unique panel session, please stop by the Campaigners' booth at "The Meeting Place" for an inside look at retail marketing. Better yet, Campaigners would love to have a scheduled appointment with you - so please contact us at (888) 524-9192 ext. 20 to schedule an appointment at RetailVision with the Campaigners team.

Campaigners is a cutting-edge Performance Sales and Marketing Agency with a track record in creating DOMINANCE for our clients in terms of:

• Brand Awareness
• Category Leadership
• Marketshare

Campaigners integrates, executes and manages sales and marketing campaigns that deliver QUANTIFIABLE RESULTS and dramatic improvements in category leadership.
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Digital Convergence: Buy Ubiquity-the slogans are ready, are you?
by Martin Smith, 6-degrees

The recent presentation at the Jupiter Media Forum on the development of ubiquity between devices poses some interesting and challenging questions to the industry in terms of how it copes with increasingly interoperable devices and the customization and authoring of media by consumers on these devices. The recent study by CEA confirms this trend in swappable and intelligent media looking to post 100% growth rates annually with huge increases in capacity of memory cards and transfer rates as USB2 and Firewire become adopted. So where's the challenge, if we buy ubiquity? Well perhaps the slogan and the products are ready before the communications strategies and the channel. In a world where there is a growing interdependence between media and devices there becomes an increasing need to focus and align internally, externally and with the consumer. For many organizations resellers and manufacturers business as usual simply won't cut. Perhaps its time to get reacquainted with a few folks inside and outside the organization who may be able to help you fully leverage the opportunity.

Internal Alignment

How well does your organization respond to consumers? The super-serving companies of this generation have broken down many of the cross-functional issues between marketing, sales and the often-dreaded gatekeepers of the marketing database. They understand the need to develop dialogues with the consumer not deliver monologues. Migrating 60 question product registration cards to the web isn't it. They understand what relevant communication is and the how to identify the level of adoption and readiness consumer segments have. These super-serving companies have staffed experienced database marketers to a key position and know how to leverage all their assets. They understand how to test and how to watch for cannibalization of sales across channels. They are not seduced by shifting share for a few points when they could be leaving significantly more dollars on the table. Nor do they see marketing technology on its own as a panacea, but understand that their systems and processes need to be designed and aligned to meet their goals and not the reverse.

External Alliances

Taken a walk around your channel partner organizations recently? They are changing, to meet the market in the best way they can, creating more integrated operations with emphasis on the needs of the customer groups and roughly aligned by value to out-bound and in-bound. Do you have a strategy for how this comes together how to target and measure your coop dollars in a more refined way? Is your reseller creating strategies that show they understand how customers are integrating your technologies into their own personal network? Are you working with the rebate houses to identify how to improve the speed by which you get the data back, to sell to more products? The alignment goes on with each supplier to create and improve how your organization touches the customer directly or indirectly. There needs to be consistency and cooperation at each phase. The net result of doing these things better will make you more focused on whom you need to align with particularly if you start to identify what other services and products the customer is using.

Customer Involvement

Then there is the customer, that much forgotten fairly anonymous specifier, chooser and user of your product, service or media. They have been moving on-line and that is where many companies now interact with them. Again the super-serving companies have the strategic advantage here. They are working on the implementation of strong value exchanges that communicate effectively core brand values and create a presence close to the buyers. There is life beyond the product-focused newsletter, most customers don't want to know what it is, they want to know what it does for them. Let the developers be enamored with the technology, let the customer love what it does for them. If we are to buy ubiquity we better understand what it costs and how it impacts the way we go to market and how we are to manage change. As Machiavelli said "There is nothing more difficult to handle, more doubtful of success and more dangerous to carry through than initiating change...The innovator makes enemies of all those who prospered under the old order, and only lukewarm support is forthcoming from those who would prosper under the new...partly because men are generally incredulous, never really trusting new things unless they have been tested by experience."

6-degrees is an independent sales and marketing company. They specialize in supporting vendor companies through direct sales to manufacturers, and in providing innovative and effective marketing solutions for manufacturers and resellers. martinsmith@6-degrees.com.
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Viking 256MB CompactFlash


MSRP - $119.99

CompactFlash is the latest "must have" product to hit the channel and if you sell digital cameras provides an excellent opportunity for incremental revenue. Viking has been a manufacturer of CompactFlash and Smart Media since the very first digital camera was announced, and in independent reviews has been confirmed as one of the fastest cards available (See www.dpreview.com for information). These products are guaranteed compatible with all major digital cameras, MP3 players, PDAs and are available in densities from 8MB to 512MB.


Viking Components Looking to Expand Retail and E-tail Reach...

With a 13 year history in the channel Viking is looking for a limited number of partners to expand its reach into the retail and e-tail space. The Viking product offering includes a complete line of desktop and notebook memory, CompactFlash and SmartMedia for digital imaging and upgrades for all make of Workstations and Servers. Partner benefits included limited competition, guaranteed margins and an aggressive MDF program in support of sales.

For information regarding becoming a Viking Partner please call Drew Ohmart at (800) 338-2361 ext. 2204 or e-mail him at dohmart@vikingcomponents.com or visit our website at www.vikingcomponents.com.
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Scanners and Flash Memory
by Dwain Smith, Research Analyst

The scanner market is at a stand still; there are not many "over the top" innovations on the horizon to stimulate growth in the market. In fact, other peripherals in the scanning/imaging arena, including printers and monitors, can't handle or fully utilize "current" technology specifications such as 48-bit color depth. This is problematic because one of the main reasons for companies to push technology further is simply to create new marketing opportunities. But before all hope is lost, there is one technology that could help stimulate a flurry of interest and opportunity -- USB 2.0.

USB (Universal Serial Bus) is the wired link between the endless number of peripherals available on the market and your PC, including scanners, digital cameras, CD-RWs, DVD-RWs, etc. Replacing the serial interface nearly a decade ago, USB 1.1 surpassed the serial port in terms of speed, providing streams of data at 12 megabits per second (almost 100 times faster than its predecessor). With the advent of devices such as scanners and digital cameras, the slow serial interface could not handle the volume of data being transmitted to the PC. Therefore, both retailers and manufacturers quickly embraced the standard to encourage its mainstream market acceptance and help drive growth and sales.

Like USB 1.1, USB 2.0 also passes data along to your PC after an image has been captured digitally from a device such as a scanner, but USB 2.0 is more efficient. The new technology is nearly 40 times faster (480Mbs) than the speed of a USB 1.1 connection and also outpaces FireWire (400Mbs), the connection currently featured on macs and many digital camcorders. The new protocol has the same ease of use feature (plug-in-play) and is "backwards compatible", where users can utilize the same connectors, cables, and software already in use, without the need to upgrade other equipment (besides the PC). Most importantly for the consumer, all current USB 1.1 peripherals purchased by the consumer will work on a USB 2.0 system, making the transition easy and fairly painless.

Another advantage to USB 2.0 is higher bandwidth, a major boost in facilitating digital imaging applications. This will make a significant difference in the time it takes to transfer files. By utilizing this new standard, Canon's recently announced CanoScan D1250U2F reportedly scans a 600-dpi, 8.5" x 11" document four times faster than USB 1.1 enabled scanners. In addition, a CD-RW drive can copy an average music CD (500MB CD) in less than 4 minutes, about a fifth of the time it takes to copy the same CD using the current USB 1.1 standard.

As history has shown, both retailers and product manufacturers are hesitant to quickly embrace new technologies. This is largely due in part to the limited install base and high price premiums associated with new products. As they see it, there is simply not enough demand to risk embracing the technology. Microsoft hindered USB 2.0's cause by not including drivers with its Windows XP operating system, although the company did make them available shortly after. USB 1.1 had a similar beginning, but eventually, every PC and Mac included USB ports, leading to an installed base of millions. Peripheral manufacturers quickly introduced new versions of their products featuring USB. Now, almost all peripherals have USB capability.

Acer, Microtek, Epson and, most recently, Canon were the first companies to introduce scanners with the new USB 2.0 standard. Epson's first foray with this technology was its Perfection 2450. The scanner was first introduced in July 2001, and when it finally arrived in the retail channel in November 2001, only two retailers, CompUSA and Circuit City, were brave enough to carry it. Micro Center and Fry's Electronics have recently followed suit, making room on their shelves for the Perfection 2450. This "wait-and-see" mentality could wind up being detrimental to both manufacturers and retailers alike who don't meet the demand up front.

The scanner market has reached a point of maturity, and innovation is hard to come by. Specifications such as color bit depth and resolution, which cannot be utilized by other peripherals or appreciated by consumers, are no longer being emphasized. However, scanning speed is an area that can be greatly improved and can create a new opportunity for the industry. The benefits of higher data transfer rates will serve to increase the productivity of end-users. But like all technologies, it takes time for manufacturers, retailers and consumers to realize the benefits and embrace new technologies. This slow adoption process enables both manufacturers and retailers to slowly transition to the new standard until there is evidence of sufficient demand. With the number of players behind the technology, as well as the number of products on the horizon, consumers will soon find a wide variety of scanners and other peripherals featuring USB 2.0, creating new demands needed to generate more sales.
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Online Forecast: PCs Still Power U.S. E-commerce Forces
by Michael Cruz, GartnerG2

Viewpoint

• E-commerce has integrated in mainstream retailing in the U.S. It will reach $239 billion by 2006.
• The PC is the dominant platform for e-commerce, accounting for 90% of e-commerce in 2006.

Dynamics

• PC Internet access is widespread-124 million U.S. adults have access at home and 71 million have access at work.
• As Internet users gain experience, they are more likely to make purchases online and spend more on those purchases.
• Convenience is an important driver of e-commerce and the PC remains the most convenient platform for most transactions.

Predictions

• By 2006, more than 75% of PC Internet users will make purchases online, spending $239 billion.
• Internet buyers will average more than $1,900 and 15 online transactions per year in 2006.
• The 2001 to 2006 compound annual growth rate in e-commerce revenues will be 33%.

Recommendations

• Concentrate on the things consumers value most.
• Online transactions are only a piece of the puzzle.
• Capitalize on the advantages PCs have over other devices.

Dig Deeper

• Related Research from GartnerG2
• Outside Sources
• Data Tables
• Methodology

Viewpoint

Three platforms will compete for e-commerce dollars, but in the United States, the PC has a big head start over mobiles and interactive TV. The PC will account for the lion's share of e-commerce spending through at least 2006.

Until recently, all e-commerce in the U.S. was conducted by PC. Consumers who use a PC for e-commerce are more and more comfortable with e-commerce while mobile devices and interactive TV struggle to find a niche where their capabilities match consumers' needs. Consumers will complete an increasing number of online transactions and spend more per transaction. Widespread availability of Internet access in the workplace will ensure the PC's dominance as an e-commerce platform for convenience-hungry consumers.

Increasingly, retailers will personalize their offerings to individual consumers and, where appropriate, offer consumers the ability to customize products. But personalization and customization are best suited to PCs, which are more flexible than TV and mobile interfaces.

Dynamics

The days of geometric growth in the Internet and electronic commerce are over. Most Americans with an interest in the Internet are online already and more than 20% are unlikely to get online within the next several years. Nevertheless, the online population is still growing slowly.

More important to the growth of e-commerce is the experience level of those online. GartnerG2 research shows that experienced Web users spend more per transaction more frequently than those new to the Internet or just new to e-commerce. The strong growth in the online population in the preceding two years will translate into strong growth in e-commerce over the next two years.

PC e-commerce
Any purchase, or commitment to purchase, of goods and/or services via a PC connected to the Internet or a vendor's private network. Financial transactions are excluded from this definition of e-commerce.

The PC has all the advantages
Convenience is an important driver of e-commerce, and the PC remains the most convenient platform for most transactions.

Ready access
Many consumers have Internet access at work, and according to Market Facts' Q3 Tech Facts survey, more than 9% of U.S. adults make online purchases while at work. Last year, ACNielsen NetRatings reported 46% of online holiday shopping was done at work. In comparison, consumers are less familiar with TV and mobile online interfaces and they are not as widely available.

Greater flexibility
As a shopping platform, PCs are more flexible than TVs and mobile devices. Compared to TV remotes and phone keypads, a keyboard and mouse are much more effective input and control devices for e-commerce activities. Consumers can enter information (fill out an order form) quickly and easily. The PC platform also allows rapid entry of characters, point-and-click functionality and easy retrieval of preferred sites and vendors through "favorites" lists and bookmarks. PC monitors have better resolution and are larger than the screens on mobile devices. In addition, consumers who use PCs can access more commerce sites and have greater control over content retrieval. In contrast, the interactive TV consumer can only interact with the information that is presented.

Suitability for hybrid commerce
With its greater flexibility, the PC is the ideal base for synergistic channel use. Consumers can set up shopping lists on the PC then order via mobile. Consumers can also read product reviews and compare features before making offline purchases. Starting at the PCs, consumers can improve their shopping and buying experiences using all other available channels.

Information throughput
Compared to mobile devices, the PC has much greater bandwidth (especially for consumers with a broadband connection) allowing user interfaces to incorporate sound and images to improve the consumer shopping experiences.

Advantage to the competition
One area where the PC will not dominate: ticket purchases. GartnerG2 forecasts that by 2005, more movie and event tickets will be sold via mobile devices than PCs. We expect mobile devices to be the preferred platform for spontaneous, event-related purchases. Instead, PC e-commerce dollars will be spent on travel products, computer hardware, entertainment products and cars. Currently these four categories represent 72% of e-commerce revenues. By 2006, that percentage will change only slightly, although auto sales will represent a much larger portion of the revenues by 2006.

• Travel transactions (e.g., airline tickets, car rentals, hotels) have jumped off to a big start and will remain a large portion of total e-commerce revenue (23% in 2006). In the case of travel, just the ordering channel will change as e-commerce evolves. Whether tickets and reservations are arranged via a live travel agent, a call center or through an online channel does not affect the delivery of the service purchase.
  
  
• Plane seats, hotel rooms and rental cars are "deliverable" in the physical sense although they are frequently ordered online. Consequently, there is a fundamentally different dynamic than goods ordered online and delivered directly to the home office. These e-commerce transactions should be forecast and analyzed separate from actual "deliverable" products and services.
  
  
• By 2004, car sales will be the largest e-commerce category at $44 billion. Strictly speaking, cars cannot be sold over the Internet; only a commitment to purchase can be made. Nevertheless, by 2006, while car sales will will only represent 0.2% of online transactions they will account for 32% of the e-commerce dollars.
  
  
• Entertainment products (books, CDs, DVDs and videos) will grow steadily-consumers appreciate the ability to browse and buy 24 hours a day and expansive e-tailer inventories.

Figure 1: PC online buying

Source: GartnerG2, January 2001

Predictions

• By 2006, more than 75% of PC Internet users will make purchases online, spending $239 billion. Nearly $130 billion will be spent on travel and automotive purchases.
  
  
• Internet buyers will average more than $1,900 and 15 online transactions per year in 2006. The average online transaction will be for $121 in 2006.
  
  
• The 2001 to 2006 compound annual growth rate in e-commerce revenues will be 33%.

Recommendations

• Concentrate on the things consumers value most: Simple, convenient interfaces and a wide range of choices. Consumers use technology more to save time and effort than to save money.
  
  
• Online transactions are only a piece of the puzzle. Encourage hybrid commerce where consumers shop online and buy offline. Shopping lists, product information and product reviews allow consumers to research online then buy offline.
  
  
• Capitalize on the advantages PCs have over TVs and mobile devices. Complex transactions where consumers want information or personalization are ideal for the PC and difficult via TV or mobile.
  
  
• Plan on the PC as the dominant consumer platform, and focus strategic e-commerce initiatives on projects that improve the PC shopping experience.

For more details visit www.gartnerg2.com
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Service Net Warranty Programs Offer You More Margins...Today!

From its beginning, Service Net set out to do things differently...

Today, we continually push the boundaries of INNOVATION to create more value for our clients and their customers. This FOCUS is what has attracted some of the biggest companies in their respective industries. Recently we added Philips and Office Depot to our roster, and look for many more to come. The talented team we've brought together and the proprietary systems we've created to help run our clients' programs DRIVE our success. All this adds up to better SERVICE for them.

INNOVATIVE. FOCUSED. DRIVEN. SERVICE.

Let Service Net do things differently for you. We'll put the fire back into your warranty or service contract program. Let us show you how we can add more profits to your bottom line today. Email Tom Watson, National Sales Manager at Fire up my Warranty Program! for more information.
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Meetings, Meetings Everywhere...But Not a Productive One in Sight
by Scott Reedy

Meetings are the necessary evil of work. The bigger the company the more meetings you are going to be in. It is possible that you can spend entire days in meetings. When I worked at Ingram Micro it actually got so bad that we had to have several meetings to review all the meetings we had. In fact, we had a Meeting Analyst come in and review most of our standard meetings and gave us recommendations. One of the recommendations, which we have all heard at one time or another, was to stand during the meeting. So you try. It lasts about 2 weeks, and then it is back to kicking your feet up and passing the M&M's. So if the meetings are inevitable how do you make them more productive? I will proffer my lessons. Anyone who knows me knows that I am not the best at meetings, as I have a tendency to be a little loquacious, but I do like to get through them quickly. Here are my recommendations for more productive meetings:

Don't Have Too Many People in the Meetings
Nothing wastes more time than having too many people in meetings. Plus it is very expensive. Sometimes people seem offended when they are not invited to a meeting. The way I handle this is simply to point out via email or when the meeting starts that unless you will be involved in executing or overseeing the action items from the meeting that attending may not be the best use of your time. Think about this when you decide whom to invite or have stay in a meeting.

Define the Objectives and Time Frame for the Meeting
I always start by announcing why we are here, trying to be as specific as possible, and exactly how long we have allocated. It is important to get agreement on the objectives. Without this the meeting may wander. If it starts to wander it is the objective of the Chair to remind everyone of the objectives and the time left to achieve them.

Have a Chairperson
If I am running the meeting I will announce that I am chairing the meeting. If it is not my meeting I will ask who is overseeing the time and topics. The Chair may not be running the meeting but is responsible for identifying the time frame and the results of the meeting. The Chairs' job is to accomplish these goals.

Make the Meeting for a Half-Hour, Not an Hour...or Call is Short
Too many meetings seem to be scheduled for an hour. This seems like a waste of time to me. A good friend of mine told me one of my favorite quotes: "The task expands to the time allowed". So true, especially for meetings. If you know you have an hour you will use it. Trust me. Next time schedule your meeting for a half-hour. See if you cannot accomplish your tasks in this half-hour. I will often schedule back-to-back half-hour meetings and let the first meeting group know I have to leave in 30 minutes so we better not waste time. Lastly, if you have accomplished the Objectives simply call the meeting and move on. So many times I have seen meetings ramble on just because everyone felt that had the meeting scheduled for a specific amount of time. Usually it is just re-hashing the same issues with no effect.

Cancel the Meeting...
If there is no agreement on the Objectives, or if the right decision makers and those responsible (or their representatives) cannot be present, cancel the meeting. Don't waste time. Cancel it and reschedule as soon as possible. If you try to go ahead and have the meeting you will probably just talk about the same thing twice bringing the missing parties from the first meeting up to speed. Just doesn't work.

Notes and Action Items
Don't waste time doing extensive notes for meetings. I find that a two or three sentence, or better yet, bullet points are better than a diatribe. Regardless of the meeting notes I always note Action Items and who specifically is responsible (and by when if possible). I always send this out in an email and then save the sent email to my In Box or other folder where I use it to send out to those responsible for Action Items a reminder of the tasks – a very effective trick I have used for years.

How to Keep People on Time...
There are a few tricks you can use to keep a meeting tight and on time. My favorite for keeping meetings on time is a game of last-one-in-brings-the-treats. I will start a regular meeting by bringing food or snacks. Then I announce that at the next meeting that the last one there needs to bring the snacks next time. It works, its actually kind of fun...and there are snacks! Believe me when I tell you that you will find yourself being the last one there sometimes.

Look around the table next time you are having a meeting. Do some simple math in your head of what this meeting is costing the company. I will bet you it is more than you think. So effective meetings are not only better for productivity, they will save the company money. Let's schedule a meeting and we can talk about it. But I have to warn you...I only have 30 minutes...

Scott Reedy is an Independent Channel Consultant. With over 15 years in the computer channel, he has had tenure at several companies including Apple Computer, Ingram Micro, Multiple Zones, and Onsale / Egghead.com.
Contact: scottreedy@hotmail.com
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