Compaq, direct

Taking a page out of rival Dell Computer Corp.’s playbook, $24.58 billion computer manufacturer Compaq announced in November that it will begin selling directly to users, rather than through catalogs and other resellers. Though not offering a catalog, the Houston-based company will sell through outbound telemarketing and its Website.

This isn’t Compaq’s first foray into direct marketing. In January 1998 it acquired $9 billion Digital Equipment Corp., and with it a telemarketing and field sales force of more than 500. And two years ago, Compaq tried to sell direct via an 800-number, but the company met with such resistance from resellers that it scrapped its plans. To stave off resistance this time around, Compaq is offering resellers incentives, such as commissions for referring customers to Compaq’s Website.

Not all resellers are against Compaq’s plan. “I actually think it will enhance our sales,” says Greg Zeman, president of $1.2 billion CDW Computer Centers, which claims to be Compaq’s largest reseller.

“CDW sells more than one brand,” Zeman says. “We’re able to configure a product with a Compaq box with a Phillips screen, for example. But a manufacturer like Compaq won’t do that for you. Hopefully, Compaq’s Website will create awareness among consumers to buy direct, so in that respect it helps us.”

But Phoenix-based Insight Enterprises, which also sells Compaq PCs in its catalogs, isn’t quite as optimistic. The $627 million mailer is taking a “wait and see approach,” says Valerie J. Paxton, vice president of corporate communications. “I think the benefit is more for the consumer.”

No doubt Compaq could stand to wrest market share from $11.9 billion Dell, which sells $4 million worth of computers through its Website each day. Then there’s $6.2 billion computer manufacturer Gateway, which sells $6 million worth of product daily through the Internet.

“Compaq’s decision to go direct is driven by the success of Dell and Gateway and the need for Compaq to become more cost-competitive,” says Kevin Knox, a research analyst for Stamford, CT-based market research firm GartnerGroup. “Going direct allows a company to get more detailed customer information, which is Dell’s major advantage.”

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