“It used to be that it was all so simple then,
but now time has rewritten every line,
and if we had the chance to do it all again,
Tell me, would we? Could we?”
I am, of course, referring to the PC marketplace, where just a couple of months ago the lines were clearly drawn in the sand. On one side there were the channel vendors (Compaq, IBM and so forth), who used reseller networks to distribute their stock, while on the other there were the direct sellers, such as PC Direct and Dell in New Zealand and Dell and Gateway internationally.
Never the twain should meet.
Well, the twain may not be meeting, but (to completely mix my metaphors) the waters are certainly getting muddy.
Compaq’s Houston-based technology vice-president Bob Stearns, interviewed in this week’s Computerworld, said that “the issue is making sure that the customer feels that their contact is directly with the manufacturer. That has much more to do with how we deal with the sales process and how we support them afterwards.”
Stearns talks about Compaq’s willingness to consider sales by electronic commerce and “higher touch” contact with the customer. New Zealand marketing manager Tony Lambert says that this kind of direct contact is already happening in New Zealand with large corporate clients.
And then there is AST to consider. AST is a channel reseller that has hit hard times and recently relaunched its New Zealand operation as a beta site for the group, testing a new just-in-time model. AST will still deal through resellers but on a just-in-time basis from its Australian assembly plant at Silverwater.
AST New Zealand manager Peter Uffindell agrees that companies are demanding direct representation but “while there is a lot of direct contact, that shouldn’t be confused with direct selling. Companies like Compaq, IBM and ourselves are always fulfilling through the channel but you can’t always rely on the dealers out there to do all the promoting of your brand.”
On top of that there is a renewed concentration on increasing stock turn and controlling stock in the channel to bring the economics of the indirect model closer to that of the direct sellers.
Uffindell says that the channel tends not to hold significant stocks any more. “They’ve gone off that. The channel may hold some stock and we would certainly hold some. That way you can give next-day service as opposed to the Dell model which is just-in-time for 10 days. There isn’t the stuffing of the channel that there used to be.”
But while the channel vendors are in some areas trying to emulate the direct sellers, they continue to pour cold water on the direct model as a whole.
AST’s Australia and New Zealand manager, David Henderson, has said he believes Dell will experience support difficulties in the local market as its business matures, because its support service is based in Sydney. He believes support from a reseller channel is a better option.
And Compaq’s Stearns says that the model will eventually limit growth.
“There are,” he says, “only so many customers that want to deal with a manufacturer that way.”
“AST would seem to be quite focused on us,” says Dell’s New Zealand manager Ross Allen “The reality of the situation is they’re not doing anything different today from what they were doing yesterday. They want to dress it up as something that approximates what we are doing.”
Uffindell disputes this: “We’re not trying to do what Dell is doing. Dell is the direct model and we’re definitely staying with the dealer channel.”
Allen in turn disputes any suggestion of weakness in Dell’s support.
“Where you provide your support from is irrelevant providing you can deliver the support to your customer. We use the support centre concept and I’d challenge any organisation other than a direct operator to be able to measure the quality of what they are delivering to the customer, because using a reseller channel you just don’t have that access.
“The Dell model from day one has been based on that concept and we’ve grown from nothing in 1984 to number two against Compaq in the corporate and government sector.
“The facts of the matter don’t stack up. The growth and performance of the direct operators continues to outstrip the others.”
For the time being, at least, Dell will be happy to let the figures do the talking. It recently moved into IDC’s top five list of PC vendors worldwide for the third quarter of 1996 with year-on-year growth of around 50%.