NEWS RealLife@Retail By Keith Newman, Editor of ChannelMedia

Wow, we barely had a chance to recover from RetailVision and boom, the news flying around is ‘off the hook.’ I’m not talking Cubs in the playoffs but real big biz stuff. New Products, M&A, the people mover and all of that on top of a Q4 selling season that is forecasted to be well above last year in terms of sales (and hopefully profits). I guess it’s time to put away the golf clubs and put on the gloves because this is going to be a battle for market share for Vendors and Retailers alike.

1. Once Bitten, Twice Aggressive - Well, first they tried Circuit City but were turned away so they went after the next most attractive CE Retailer. That’s right, as you no doubt have heard, CompUSA has signed a definitive merger agreement with Good Guys. Under the terms of the agreement, each outstanding share of Good Guys common stock will be converted into $2.05 in cash. Good Guys will become a wholly-owned subsidiary of CompUSA and will continue to operate under the Good Guys name. The merger agreement is subject to certain conditions, including obtaining regulatory approvals and the approval of the holders of at least the majority of the outstanding shares of common stock of Good Guys. The transaction is expected to close prior to the end of Good Guys's fiscal year. Jefferies & Company, Inc. acted as financial advisor to the Board of Directors of Good Guys. In connection with the transaction, CompUSA has invested $5,000,000 in Good Guys in the form of a two-year unsecured subordinated convertible promissory note, convertible into Good Guys common stock at the rate of $2.05 per share. "This transaction will allow our stockholders to receive a substantial premium over recent trading prices of our stock," said Kenneth Weller, Chairman and Chief Executive Officer of Good Guys. Mr. Weller also stated that, "the impact of the economic environment on our industry, particularly in Northern California, and the Company's need for additional capital to meet its longer-term objectives, were key drivers of the decision to go forward with the transaction." Mr. Weller added, "Our combination with CompUSA should greatly strengthen the resources of the Company and enhance the Company's prospects for future success. "With fiscal 2003 sales of $750 million, Good Guys is one of the largest specialty Retailers of higher-end entertainment electronics in the nation. With its differentiated product selection and knowledgeable team of product specialists, Good Guys is dedicated to providing entertainment solutions to the West Coast's early adopters and tech-savvy consumers. Founded in 1973, Good Guys operates 71 stores in California, Nevada, Washington and Oregon. For more information, visit www.goodguys.com.

2. Advanced Micro Devices introduced four new Athlon 64 processors targeted at desktops and notebooks, which it hopes will be the next PC innovation and further cinematic graphics at VARVision/System Builder Summit through a live satellite uplink. The Athlon 64 crunches 64 bits of data at a time, and runs both 32-bit and 64-bit applications. Both AMD and Intel offer 64-bit processors for server computers, however this is the first 64-bit processor for the Windows desktop platform. In support of AMD, Microsoft unveiled a native 64-bit version of its Windows XP desktop operating system for Athlon 64, which Microsoft said would work with an Intel 64-bit desktop chip, should the company develop one. AMD indicated that over 60 manufacturers and system builders intend to create computers based on the processors including HP, Fujitsu, and Alienware. HP intends to offer such a system in the fourth quarter, while Home Media Networks Ltd. said it was developing an Athlon 64 PC that will allow users to play DVDs, CD, MP3 music files or watch television on different devices throughout the home using a remote control. To promote the use of an Athlon 64 processor, AMD is working with Dweezil Zappa, who is using an Athlon 64-based computer to mix a piece of music into surround sound and to archive his father’s music, Frank Zappa. AMD has struggled in its competition with Intel in the 64-bit server market, and the introduction of a 64-bit processor for PCs adds renewed strength for AMD. Although Intel’s Pentium 4 processor ships with higher speeds than the new AMD offerings, Intel stated the PC market is not ready to switch, but will continue to manufacture 64-bit processors for high-end workstations and servers.

3. Intel introduced the Intel Pentium 4 processor supporting Hyper-Threading (HT) Technology for notebooks that improve performance with the ability to perform simultaneous applications at the same time. The processor with HT Technology offers frequencies up to 3.20 GHz, and enables customers to use multithreaded and processor-intensive multimedia applications such as video encoding, digital media, and gaming. The mobile Intel Pentium 4 processor supporting HT Technology is compatible with the Intel 852GME and Intel 852PM chipsets and features a 533 MHz system bus and supports advanced mobile power management. Even with the introduction of the new Intel Pentium 4 processor supporting HT technology, Intel is still cautious about the PC market rebounding especially after last year’s slight third quarter inventory glut that only negatively affected fourth quarter sales.

4. Holiday Looking Up - Christmas spending will be up according to the NRF, consumer confidence in the economy falls according to the Gallup Poll, but at the same time, most economic forecasters are talking about the economy having its best performance since 1999 during the last half of this year. The recent Gallup Poll release asks why is consumer confidence declining as the economy builds positive momentum? Why aren't economic forecasters worried about consumer spending falling as consumer confidence declines? Will consumers continue to spend even if their confidence in the economy continues to tumble? In September, 30% of consumers rate current economic conditions as "poor" while only 21% say they are "good" or "excellent." Currently, though, more consumers are saying economic conditions are getting worse (50%) than say they are getting better (40%). This means consumers are less optimistic about future economic conditions than they were this summer. Gallup's September survey shows that nearly half the public (46%) expects unemployment to increase over the next six months, while only a third (33%) expect it to decline, even as economists expect the economy to grow at its best rate in years. Traditional economic analysis suggests that when consumers get concerned about losing their jobs, they reduce their spending. The most recent UBS/Gallup Index of Investor Optimism poll provides new evidence supporting the idea that significant increases in individual investor net-worth levels -- wealth gains -- have a positive impact on consumer spending intentions. For the moment, it appears as though these wealth gains are offsetting whatever negative effects unemployment fears are having on the rest of the consuming public's spending. Evidently, concludes the report, many economists assume that productivity gains and the wealth benefits they provide can keep this process and the economy going even if the job market continues to suffer.

5. Similarly, for Q4, BizRate.com forecasts $18.35 billion in online sales which is a 22% increase in spending over last year's $15.04 billion. The firm went on to say that the third quarter of 2003 produced online retail sales of $12.43 billion, a 24% increase over the same period in 2002 when $10.02 billion was spent. For the first nine months of this year, online sales totaled $37.16 billion, up by 24% from last year's $29.90 billion for the same period. Actual orders grew by 47% to 101.34 million unique transactions in the third quarter. However, the average purchase amount has decreased by 15% to $123 in Q3 2003 compared to $145 in the same period last year. The top categories in terms of sales volume were computer hardware ($3.09 billion) and electronics ($1.97 billion).

6. Waterford Technologies, Inc., a privately held e-mail policy and security compliance software provider based in Waterford, Ireland, today announced the appointment of Brian Bigley as president of its North American operations. Bigley is responsible for all of Waterford Technologies’ North American operations, including sales and marketing strategy, business development, and channel efforts. He reports directly to Waterford Technologies CEO Brendan Nolan. “We’re very excited to add Brian’s 20 years of broad sales and marketing experience to our senior management team," said Nolan. “His experience in building new organizations will help in our efforts to increase our market presence and revenue throughout the United States and Canada.” Prior to joining Waterford Technologies, Bigley held the position of Senior Vice President at Computer Associates, where he was the creator of my-eTrust.com, CA’s first eBusiness web store that has added over 400,000 subscribers to its personal security service. Bigley recently launched CA into the retail channel with the eTrust product brand as well as closed marketing and revenue partnerships with Yahoo, American Express, and Cablevision. Prior to that, Bigley held various sales leadership positions at Compaq Computer, Siemens, Banyan Systems, WorldTalk Corporation and Baltimore Technologies. “Waterford Technologies’ market leading software offers enterprise and medium-sized businesses the opportunity to better manage the risks and liabilities associated with Microsoft Exchange and IBM Lotus Domino e-mail content,” said Bigley. “After reviewing the Sarbanes-Oxley Act, Gramm-Leach-Bliley Act, The Patriot Act, and SEC electronic document management requirements, I believe Waterford Technologies has a silver bullet for protecting senior management while increasing the productivity of companies and reducing the risks associated with e-mail.”

7 . Seagate and Lindows.com jointly announced the availability of LindowsHD that is a copy of LindowsOS pre-loaded on specific Seagate 60GB capacity Barracuda 7200.7 hard drives. The hard drives are available domestically from Bell Microproducts, Inc. or Synnex Information Technologies, Inc. for no additional premium over hard drives without an operating system. Manufacturers of whitebox computers can save up to $100 per computer. The program is available through December 2003. The pre-loaded Barracuda hard drives will reduce production time and labor costs for system builders as they can be implemented into any Intel-compatible PC and auto-detect hardware and self-configure so that no additional set-up is required.

Bruce Koenigsburg is the man with his head down and working during the RetailVision events and at night you might see him working just as hard but more than likely with a bass guitar in his hand (see photo)a few fellow musicians (friends) behind him. But from a professional side, Bruce has over 33 years of merchandising, marketing, purchasing, and operations, packaging design and copy, advertising and sales experience with leading internet and mail order/catalog internet resellers along with leading specialty storefront Retailers and distributors in the Computer and Consumer Electronic Channels.

Formerly, Vice President of Merchandising for Multiple Zones and a Senior Merchandising Manager for Fretter, Bruce has seen quite a bit since he graduated from Oakland University in Rochester, MI. Today, Koenigsberg & Associates, which includes Director of Operations, Susan Murphy, Tom Chase in Event Sales & Operations, and new National Sales Manager Lou LaRocco, has been transformed into a leading technology consulting firm which also provides hosting and consulting services for Vendors and Manufacturers for industry events such as RetailVision.

"Our core competency is assisting Computer Software companies to launch new products and/or increase their sell through and dealer base of existing products. This includes providing marketing, packaging, merchandising, and sales strategies through various reseller channels. Our specialty is interviewing various software publishers to determine if they can successfully launch software products into various retail channels through a commission or license based agreement. We are currently on track to launch six (6) new software titles from Aug. to Oct., four of which are new to retail but have been available prior through downloads only. K&A has also been selected for the fifth year in a row by MUSICMATCH and is assisting in the launch of the newest versions of MUSICMATCH V8 Jukebox Deluxe, The World’s most Popular MP3 Jukebox along with a channel wide rollout of MUSICMATCH V8 Professional.

Mr. Koenigsberg is based in Seattle and can be reached at 425-313-9114 or at bruce@bkaconsulting.com.

As everyone inside the business - aka those who attend RetailVision - know that Micro Center is one of the best kept secrets of the computer retail industry. All this 20-store chain seems to do is grow. Sometimes slow and deliberate and sometimes slower and more deliberate but as of late things have been heating up. Indeed with Rich Mershad as President of Micro Electronics and Tom Fritz serving as President of Micro Center, the Company seems to be gaining even more momentum. We recently caught up with their VP, Merchandising, Kevin Jones who offered a rare peek inside this fantastic retail operation.

Q. Hey Kevin, everything we hear is that Micro Center is on a nice roll heading into the holiday season. Can you give us a quick snapshot and some data points?

A. Our Business, in no uncertain terms, is incredible! Our organization is the most focused that I have seen in my time at Micro Center. All of the metrics that we measure are up year over year. You want some data points: Transactions are up 10%! ASPs are up 10%! Traffic is up 13%! New customer count is up 48%! Business as a whole is up OVER 25%! Best of all, our systems business (measured in units) is up by at least 50% in all areas, with notebooks leading the way - more than doubling year-over-year in recent months.

Q. And how's the rest of the organization performing? I know there have been lots of changes internally and externally?

A. Our Information Systems group is providing more measurable information, to all areas than ever available before. Our Operations Team has dropped our shrink to 1/3 of industry averages 2002 to 2003. Our Finance Group has secured the best Financing Options with up to 24 months No Interest and other Consumer incentives which will be seen in our future promotions. Our Sales Team is motivated and growing sales by closing more customers. Our Marketing effectiveness year over year is driving more customer traffic and capturing more mind share with our customers, and our Merchandising Group has driven the “Best of class” offers available at retail.

Q. How is your online operation shaping up?

A. MCOL or Micro Center Online is really an extension of our store, our primary focus is really our core retail customer. Giving those who are interested an alternate way to shop for products and services. Customers can either buy online or pick up in their local store.

Q. Wow, it really sounds like Micro Center is firing on all cylinders?

A. I know it sounds like hype but I can assure you that our business is heating up, customers are buying Computer Products and Services with a fervor like we have not seen in several years! I can guarantee if you ask ANY of our major Vendors about the growth rate seen recently at Micro Center, they will support my claims.

Thanks Kevin and best of luck this Holiday Season!

Thanks Keith. See you at RetailVision!

Now that the leaves are starting to turn and summer has officially given way to fall, the major handheld makers are getting ready to make product announcements that will impact holiday sales.

ARS expects to see announcements in October from industry heavyweights Palm, Toshiba, Dell, and Sony. Information regarding the upcoming fall launches from the major handheld makers was culled from publicly available sources. It is important to note that some of the product specifications may vary upon official product information. In addition, the level of detail that is available varies from product to product and manufacturer to manufacturer.

Palm -

Palm is expected to release three new handhelds: the Tungsten T3, Tungsten E, and Zire 21. In Palm’s professionally focused product line, Tungsten, the high-end T3, is expected to command a $399 price point and the low-end Tungsten E will be priced at $199. In Palm’s consumer focused line, the Zire 21 will replace the ultra-popular entry-level Zire.

According to handheld enthusiast site PalmInfoCenter, the Tungsten E will run Palm OS 5.2 on a 144MHz TI OMAP processor and will feature 32MB RAM. The device will feature a 320x320 pixel screen (higher resolution than the standard 240x320 on Pocket PCs) and will ship with DocumentsToGo 6.0, which enables native MS Office files support. As with most handhelds today, the E will feature an SD expansion slot and a rechargeable lithium-ion battery. The Tungsten E will be the first sub-$200 model in Palm’s business class lineup of Tungsten handhelds.

The Zire 21 features the same form factor as the original and will be offered at the same $99 price point. The Zire 21 features 8MB of RAM, a 4x improvement over the original Zire’s 2MB and a faster processor. The device is still a monochrome device with no SD expansion slot. Palm found the $99 Zire to be a tremendous success with first time buyers.

The Tungsten T3, according to BargainPDA.com, will feature the sliding mechanism familiar to users of the Tungsten T and T2. This feature adds the unique ability to switch between portrait (traditional handheld viewing mode) and landscape mode. In landscape mode the image on the screen will take up the virtual graffiti area, enabling a wider viewing area.

The Tungsten T3 will cost $399 and will run Intel’s 400MHz XScale processor. It features 64MB RAM, integrated Bluetooth wireless, SD expansion, and a 320 x480 transflective TFT display. The device measures 4.25” x 2.99” x 1.6” and weighs 5.4 ounces.

Toshiba –

Toshiba, an innovator in the handheld space, will soon release two new devices based on the Windows Mobile 2003 for Pocket PC operating system. Both Amazon and J&R Computer World have leaked details of the models, due to be released next month, on their web sites. One of the models is an ultra-thin $299 device that will compete with HP’s iPaq H1945 and the other is the first PDA with a VGA (640x480 resolution) screen.

The most significant feature of the upcoming $549 e805 is its four-inch TFT screen. Most Pocket PC devices feature a 3.5-inch screen and Toshiba is a leader in offering customers larger screen sizes. In the past Toshiba offered a four-inch model, the Genio e550G; however, it was an exclusive to CompUSA.

The e805 will run Intel’s PXA263 XScale chip and features 128MB RAM, 32MB ROM and 32MB NAND Flash ROM. It features dual-expansion (CF and SD) and integrated Wi-Fi. The device is powered by a rechargeable 1300mAh lithium ion battery. It measures 5.31” x 3.03” x 0.66”.

The $299 e405 will run Windows Mobile 2003 for Pocket PCs on a 300MHz Intel PXA261 XScale chip and will feature 64MB RAM, 16MB ROM, and 32MB NAND memory. The device will have a SD expansion slot and a 980mAh rechargeable lithium-ion battery. It measures 4.9” x 3.0” x 0.4” and weighs 5.1 ounces.

If the specifications on the Retailer’s web site are correct, the e405 would be even thinner than the popular HP iPaq H1945. The H1945 from HP, which also carries a $299 price tag, features integrated Bluetooth. Detailed specifications are unavailable at this time, but if the Toshiba model does indeed feature Bluetooth, it will offer a formidable competitor to the $299 HP H1945.

HP -

PocketPC Italia, an Italian based handheld enthusiast site has leaked details on an upcoming new iPaq model, the 4350. The new model is due to be launched in the US next month and is significant in that it is the first HP Windows Mobile device to feature an integrated QWERTY keyboard. A picture is below.

The new device will feature an integrated keyboard, a first for HP in the Windows Mobile space. It will run Intel’s 400MHz XScale processor and features 64MB RAM (32MB ROM), 3.5-inch transflective TFT, SD/MMC expansion, and built-in Wi-Fi (802.11b) and Bluetooth. The battery is a removable 1560mAh lithium ion battery. The device weighs 5.8 ounces and measures 5.5” x 2.9” x 0.6”.

HP has also recently released its $199 (after rebate) 1935 which is essentially a stripped down version of the 1945. The primary difference between the H1935 and the H1945 is a slower processor (203MHz vs. 266MHz) and a lack of integrated wireless (H1940 has Bluetooth included). Another difference between the two models is the warranty. The H1940 offers a one-year limited warranty while the H1935 offers only a 90-day warranty.

Sony -

Sony will release the PEG-TJ25 and PEG-TJ35 next month, replacing the PEG-SJ22 and PEG-SJ33, respectively. The new TJ series, which has a simple but professional look and feel, features a jog-dial that now resides on the front of the device. To date, the jog-dial on Sony displays has been on the side of the device. The TJ35 will have 32MB RAM while the TJ25 will have 16MB RAM. This series is the first Sony Clie series to feature the Motorola i.MXL processor, which will run at 200MHz. The devices are 0.47” thick and will come in a variety of colors. Both these devices will run Palm OS 5 and carry a sub-$200 street price when introduced. ARS believes the PEG-TJ35 will compete directly with the Palm Tungsten E.

In addition to the TJ series, Sony has just started shipping its new $699 PEG-UX50, which features integrated Bluetooth, Wi-Fi and a QWERTY keyboard. Sony continues to ignore the traditional definitions of what a PDA is and the UX series features a unique “flip and twist” mechanism that enables the PDA to be converted from an ultra-miniature laptop to a traditional, tablet-style PDA. This is the first Sony handheld to feature integrated wireless.

Dell

Dell literally shook up the handheld world last June when word of its entry into the mobile device market leaked. Since the introduction of the Axim X5, customers have been waiting to see what device Dell would next release.

ARS wrote last June (see: ARS Handheld Spotlight - Dell to Enter Handheld Market? 06/20/03) that Dell entered the handheld space (and the printer space) initially to compete with HP and to offer its corporate clients “a complete solution.” There has always been a mindset that a notebook, desktop, monitor, PDA, printer and server purchased by an IT department will work better if all the components/peripherals have the same brand name. This mindset is clearly more misconception of IT buyers rather than fact, but it is important because many buyers have played upon and made decisions based upon this belief.

Dell’s entry last summer was clearly aimed at HP and Dell successfully managing to be a major force in driving the price of the Pocket PC (Microsoft based) devices down to a more consumer friendly level. Since Dell’s introduction of the Axim X5, HP has released the ultra-thin Bluetooth enabled $299 H19XX series. ARS believes the upcoming Axim X3 is Dell’s competitive answer to HP’s H1945.

PDA Club is reporting the new X3 will be available in a Basic and Advanced model, much like the X5 is today. The devices will run Intel’s PXA263 processor (400MHz for the advanced and 300MHz for the basic) and will feature 64MB RAM, SD/MMC expansion (SDIO compatible), and a 3.5-inch 240x320 transflective screen. The new device measures 4.6” x 3.0” x 0.6” and weighs 5.3 ounces and the two devices run a 950mAh rechargeable battery.

The advanced model will have integrated 802.11b wireless. ARS believes Dell will offer the X3 advanced in the $249-$299 neighborhood to steal market share from HP’s H1940/1945 Bluetooth series, which carries a $299 price tag. The basic version of the X3 will fall somewhere between the $149-$199 priceband.

Upcoming Fall Model Summary –

Final Thoughts -

Over the past year, Toshiba, Dell, and HP drove down the price of feature-rich Windows-based devices to the point where the market potential for devices priced above $600 is now very limited. Today, Palm-based and Windows-based handhelds offer the consumer excellent price/performance, or as it is more commonly known, “more bang for the buck.”

• Dell will make an impact this fall as it releases its new model with a refreshed form factor. Dell's challenge is a retail presence limited to in-mall kiosks. In addition, users expressed frustration when the original Axim X5 was released and shipment dates sometimes exceeded two weeks from the date of purchase. The Dell brand name, competitive feature set, and low pricing are three reasons that ARS believes it will continue to grow in the handheld space.
• HP is Dell’s biggest competitor and has seen outstanding results since its Windows Mobile 2003 product launch earlier this summer. It now has solid product offerings at the $199, $299, and $399 price points.
• Palm’s fall lineup looks solid and the company will see good volumes with the $99 Zire 21. The $199 Tungsten E offers excellent screen resolution and will compete effectively with the Dell Axim X3 and the HP iPaq 1935.
• Toshiba’s refresh of its form factor is long overdue and initial product specifications indicate the fall lineup will inject new life in the company's handheld sales. The product lineup would be better served by also releasing a new $199 model.
• As in the past, Sony continues to produce innovative multimedia-rich devices; however, the company places too high a price tag on those innovations compared to its competition. Sony would be well served by expanding its product lineup to include a $99 model to compete with Palm’s Zire 21.

Look to see devices in the $199-$299 price range as the most active segment for handheld buyers this holiday shopping season.

ADVERTISEMENT

Looking to reach the top Decision Makers in the Retail Channel? There is only one place you can stay top of mind: ChannelMedia.

See the opportunities at www.channel-media.com/mediakit.

RESEARCH

ARS Research - Will Dell and Samsung Get Hitched?
By Betsy Huntingdon
Printers Industry Analyst

Could Dell be courting another printer manufacturer to supply Dell-branded products? In recent months, Dell has been floating rumors that it is planning to launch a low-end color laser to round out its portfolio. Its monochrome lineup, the P1500, S2500, and M5200N are re-badged Lexmark E323, T420d (without the duplexing), and the T630N, respectively. However, Lexmark has not produced a low-end color laser since the Hitachi driven c720 was launched in March 2001. The c720 is not a viable choice for Dell because of its very large footprint and clunky operation.

So, where could Dell get a brand new, small, sexy, color laser to be the latest addition to the Dell family? After the nasty breakup last year, HP certainly won’t flirt with Dell, and while Oki Data and Minolta-QMS already have a history of OEMing their products (Oki to Xerox and Minolta-QMS to Epson overseas with the 2300DL), Dell may want the new kid on the block for a unique competitive offering. Consumers might not bother to order a Dell-branded product that they just saw on the shelf at CompUSA as an Oki or Minolta-QMS. The Lexmark products Dell currently re-brands do not appear in retail.

How about Samsung? Samsung has been aggressively releasing innovative products and it has a reputation for well- designed, economical electronics. With its recent OEM agreement with HP for inkjet cartridges, Samsung is demonstrating that it wants to broaden its printer lineup and global reach. Moreover, Samsung could be just as enamored with Dell – and willing to give a good price – as a way to introduce its product in an established distribution channel. And, most importantly, it is the latest printer Vendor to announce an upcoming low-end color laser printer.

The Samsung CLP-500 was shown at the DigitALL Inspiration 2003 product showcase in New York the week of September 15th despite being still under development. It is slated for release by the end of the year. Pricing has not been decided but, in order to compete against or even to undercut the $699 Minolta-QMS 2300W ($599 at Costco), Samsung will likely shoot for the $599-$799 range. If Dell decides to brand this printer, it will certainly be sold as the price leader for the low-end color laser market. If Dell brands the CLP-500 and sells it for $599 or less, it will compete most favorably against the $699 HP CLJ1500L (after $100 mail-in rebate), the $699 Minolta-QMS 2300W, and the $799 Oki Data 5100n, unless these manufacturers implement additional rebates or price drops.

How will the Samsung CLP-500 compete performance-wise against the existing machines? It can definitely hold its own. The CLP-500 will have four configurations for added flexibility. Two will be host-based and two will be PDL. It will have standard duplexing on all versions – the other three manufacturers’ products do not – and networking on the PDL models – only the Oki has networking standard. The mono print speed is 21ppm and the color is 5ppm – both the HP and the Minolta-QMS are 16/4ppm, while the LED based Oki has the definite advantage at 20/12ppm. The costs per page are very similar to the other low-end color laser products: 2.1 cents mono and 11.3 cents color. It has a built-in LCD status monitor and it runs at a quiet 48 decibels.

The CLP-500 is a logical choice for Dell’s new color laser. It is nicely featured, well-designed, economical in both purchase price and operating costs, and Samsung could use a strong partner in the U.S. Dell’s direct distribution model will keep Samsung off the crowded retail shelves. Additionally, the Samsung press release stated that the CLP-500 is designed to accommodate the growing demand for color lasers in the SOHO segment – a key Dell market. ARS is waiting for its invitation to the wedding.

ADVERTISEMENT

Grab the attention of the top CHANNEL Decision Makers NOW! Put a contextual ad message in ChannelMedia where you know it will get read and for a fraction of the price of an ad in a trade publication!

See the opportunities at www.channel-media.com/mediakit.

COMMUNITY Changing Channels Are we becoming Japan? – Part 2 By ChannelMedia Columnist Steve Cross

Sponsored by:

An earlier column talked about the difficulty of launching new companies into the channel here in North America, comparing our reality to Japan, where a “front-end” distributor prepares the product for market, and a “box-mover” distributor gets it on the shelf and manages it operationally. The column drew a lot of comments, and most people seemed to agree with my assessment. Let’s revisit it and see if we were all on the right track together.

The sudden growth of republishers for software caught a lot of people napping, but let’s look at what a great idea this is. First, the republishers maintain an operations staff for billing, collections, tracking, and the traditional build and ship. A republisher also has a marketing staff for box creation, sales literature, P.O.P. and P.O.S. displays, basic PR, etc. Because most of the republishers started out as software companies, Elibrium was MY Software, Learning Company was originally all those ED titles, Activision comes from games, they all have sales staffs.

For a new software company there are other benefits, too. Penetrating the channel takes contacts, context, time, staff, and SKUs. No reseller wants to establish a relationship with another new little company with 1 or 2 SKUs. It costs the reseller money to bring them in, set them up, maintain contact, order, pay, return, etc. And those costs are magnified by the low margins at distribution, making it less likely for distribution to pick up the company. Inability to initiate a distributor relationship squeezes the new company into the realm of resellers who can/will buy direct from the manufacturer. However, republishing has an antidote to this, they already have the relationships in place, along with a set of SKUs they can apply to these new products and companies.

There are also a few hybrid firms that act like reps and also have distribution agreements and SKUs, but they lack the operational side (building and shipping), and the marketing staff. Mostly sales agencies with distribution agreements, they are a nice match for a company that would like to build its own infrastructure internally.

What I’m looking for is an analog to the old IBM accessory line; where you bring them a peripheral and they package it, label it with the IBM stuff, and rack job it into every Retailer anywhere. Too bad that went away. The new reality of the channel makes the cost of entry prohibitive to the small peripheral manufacturer. First they have to raise money for R&D, then money for tooling for the plastic (unless it goes in a pre-configured off the shelf box), then they have to pre-pay for their first production run (all before they see any orders). Add all that up, and it’s a mess of money.

Contact Steve Cross at steve@crosschannel.com, 702-492-7472.

Editor's Note: Steve is a channel consultant who offers services from one-day brainstorming sessions to complete channel strategy plans. He has helped numerous companies to increase revenue and enhance their channel success.