For Some, The Channel Is Not Working - But Why?

One of the overwhelming themes observable at Comdex/Canada '97, aside from an apparently endless array of digital cameras and the emergence of DVD as The Next Big Thing, was the inescapable sensation that, for many, the channel has failed.

Five points to consider:

• Quality dealers often can't compete on price with megastores. Customers can buy products cheaper at a superstore.
• Customers don't trust many computer salespeople, and often for good reason.
• Channel-oriented tradeshows (and that's what Comdex is) are, for a growing number, not a worthwhile investment.
• Desperation ploys are becoming more common as growing numbers of dealers resort to unbundling software from scanners and value-added bundles designated "not for sale without hardware purchase." Increasingly, smaller dealers import academic editions of leading titles like office suites, graphics apps and utility packages. Others resort to: the grey market, reboxing, exchanging warranty cards and other dubious activities that often end up damaging customer relations as warranty and service issues backfire.
• While many vendors are still trying to make Web sites pay, a few have struck upon the right mix of form and function to see their Web-based sales efforts pay off.

At Comdex, disparate events such as no-shows of distribution giants Ingram and Merisel, and the absenteeism of IBM, Compaq and Apple, added irony to the presence of exhibitors such as Dell and Power Computing. Dell, of course, has done nearly all the right things. The company reportedly sells $100,000 worth of product per day via its Canadian Web site (not to mention the often-quoted US$1 million per day the U.S. parent is said to rake in on its site). And, aside from a string of quality-control problems that have dogged Power Computing, that company is apparently employing much the same strategy. That Web-centric/mail-order approach has allowed both to gain unique and high profile positions in their respective categories.

Consumers and corporate buyers didn't go to mail-order solutions first. Statistically, the average networked-computer purchaser is on his or her second to third upgrade cycle and, in many cases, they've seen both the small dealers and the megastores let them down. In addition to pricing issues, systemic problems such as reboxed demo models, missing cables, and other aspects of poor quality control are what drove many buyers from the small dealerships into the megastores in the first place. There, they found salespeople not only woefully undertrained on the dizzying array of technical information required to effectively serve a sophisticated computer systems purchaser, but the deals with the devil - the kickbacks, spiffs, commissions, limited-market product bundles and other behind-the-scenes product ploys of the dealers served to destroy a further degree of trust. In desperation, jaded users turn to the production-line process and preconfigured predictability of the Dells and Power Computings of the world.

One of the best booths at the show was one assembled by Toronto-based digital video specialists Vistek. The booth was festooned with literally thousands of products presented in a hands-on environment that allowed customers to compare, for example, the relative merits of digital cameras from several manufacturers in a side-by-side comparison. This is the way consumers shop; it makes the most sense as a sales strategy. Vistek offered product brochures and catalogs that were both attractive and extremely informative, and provided what seemed to be a glimpse of the true soul of the company. The technical experts were there, demonstrating (and selling) complete solutions in a highly focused and generally high-margin product category.

While it may be true that multimedia is what the computer world promotes when there's nothing else happening, it is enjoying considerable interest right now. Those who can put the right pieces together stand to reap the rewards.