The PC retailers that insist on focusing on large corporate clients may be losing their market share.
“They’re letting the world pass them by when it comes to the explosive growth in small to medium-sized businesses and the home market,” Goldstein says.
That of course does not count so specialized items as POS software and systems, which of course appeals to retailers and restaurants that are opening. One of the things that is interesting about point of sale or computer manufacturers is that those particular hardware pieces are very high in the margin department. That makes selling complete point of sale systems a very profitable business for a sector that is quickly losing its profitability.
Direct sales to corporations have declined from 9.5 percent in 1991 to 8.7 percent in 1992.
Goldstein expects those downward trends to continue over the next several years because the PC market is shifting from large corporations to smaller businesses and home users.
Computer superstores, on the other hand, sold 9.13 percent of all PCs in 1992, up from 6.11 percent in 1992, according to data compiled by Channel Marketing.
“We’re forecasting in 1993 that they’ll sell 11.11 percent of all PCs,” Goldstein says.
Despite the proliferation of superstores, the Phoenix market can only bear up to three of them, he says.
“Typically, you’re not going to see more than two or three superstores in an area because they do so much volume,” Goldstein says. “They work at such low profit margins they have to generate a huge amount of volume to be profitable. They can’t have a lot of locations and be profitable in each one of them.”
Comp USA’s Morton believes the Phoenix market can handle three of its stores. “We don’t know what it will do for the other superstore competitors,” he says. “To sufficiently cover the market — considering the geographical size of the market — it will take three stores.”
Goldstein says the typical computer superstore generates more than $20 million a year in sales. He says Comp USA stores generate $30 million a year.
Comp USA plans to have 48 superstores open nationwide by June. Its superstore at Chris-Town Mall was profitable during its first year of business, Morton says.
“The new competitive pricing environment created by computer manufacturers continues to expand the base of first-time computer owners while enabling existing owners to upgrade their computer systems,” Morton says. “Comp USA remains a major beneficiary of this trend, both in terms of increased computer systems volume and expanded demand for peripheral equipment and software.”
The Comp USA superstore chain offers more than 5,000 computer products, including hardware, software, accessories and related products.
Comp USA reported a net income of $4.2 million, or 24 cents per share, on net sales of $588 million during the first six months of fiscal 1993, which ended Dec. 28, 1992. That compares with a net income of $3.8 million, or 29 cents a share, on net sales of $367 million during the first half of fiscal 1992.
Phoenix-based FastMicro Inc., which makes FastData personal computers, recently opened a 20,000-square-foot superstore at 44th Street and Baseline Road.
In addition, Dallas-based Tandy Corp., the nation’s largest seller of consumer electronics, plans to open several Computer City superstores nationwide, possibly including one in the Phoenix area.
Tempe-based MicroAge Inc. considers itself “a big superstore for corporate America,” says John Andrews, group vice president in charge of operations for MicroAge.
Rather than putting all of its eggs in one basket, MicroAge has 758 franchisors or dealers across the United States selling to small, medium and large companies.
MicroAge actually was founded in 1976 to market to the small and medium-sized businesses. Within the past few years, has it begun selling to larger corporations. Now the large corporations account for up to 40 percent of MicroAge’s business, Andrews says.
At its Tempe warehouse, MicroAge assembles various components from manufacturers including IBM, Compaq, Apple and Hewlett-Packard. Then it installs the software and ships the “fully configured system to the end user,” Andrews says.
MicroAge reported net income of $4.7 million, or 89 cents per share, on revenues of $1 billion for the fiscal year ended Sept. 30, 1992. That compares with a net income of $3.2 million, or 75 cents a share, on revenues of $787 million during fiscal 1991.
“We are definitely targeting businesses,” Andrews says. “We are not targeting the home market. Our focus is on the small to large business. We’re primarily an outbound selling organization; you won’t find us in a retail format.”
Tempe-based Insight Distribution Network Inc. concentrates more than 90 percent of its business on mail order, says Valerie Paxton, vice president in charge of marketing for Insight.
In 1992, the computer mail-order business accounted for 7.94 percent of all PCs sold nationwide, according to data compiled by Channel Marketing. That compares with 7.74 percent in 1991. The number is expected to go down a bit this year, to 7.78 percent, Goldstein says.
“As consumers can find PCs closer to home, there’s no reason to buy it mail order,” he says. “I think the service issue is part of it. When individual consumers buy and make a decision to buy, they want to see what they’re buying before they buy it.”
However, Insight is bucking the downward — or, at best, flat — trends in the mail-order business.
The six-year-old private company is hiring 20 people a month and already has revenues surpassing $150 million, Paxton says. The company employs 370 people at its 150,000-square-foot facilities in Tempe.
Part of its facilities include a 3,000-square-foot retail outlet. All types of users, from individual consumers to large corporations, buy products at Insight’s retail center.
“We don’t feel threatened by the superstores at all,” Paxton says. “It’s another channel of buying.”
Besides, she says, the target market for superstores is the novice computer buyer. “Our customer has been using computers for an average of seven years,” she says. “They are high-income, high educated, highly technical buyers.”
Insight, which offers more than 12,000 products and has 6,000 of them in stock, has seen a 25,000 percent increase during the past five years, Paxton says.
In October, Inc. magazine named Insight the fifth-fastest-growing private company in the nation. During its first year of business, the company showed $1 million in revenues, which jumped to $12 million the next year and $36 million the next, Paxton says. Now it’s at the $150 million mark.