The decision by Compaq Computer Corp., Houston, to suspend the authorized reseller agreements with about a dozen Internet-only retailers will affect some companies more than others, according to operators in the niche.
The world's largest maker of personal computers has asked its two largest distributors, Ingram Micro and Tech Data Corp., not to provide PCs from its consumer-oriented Presario line to Internet-only resellers while Compaq rethinks its authorization policy.
Although the move will dry up the supply of Presario products for some Internet-based retailers, others will continue to sell the popular line from their warehouse inventory and from supplies procured from other distributors.
“We are going to continue to sell Compaq, we have no plans to stop selling Compaq, Compaq knows we are going to continue to do so, and we expect to be reauthorized in the very near future,” said Darryl Peck, president/CEO of Cyberian Outpost, Kent, CT, one of the Internet-based retailers who had its authorization suspended.
However, Peck said, some of the other Internet retailers might be more affected by Compaq's move.
“If the only way you fulfill product is to buy it from Ingram Micro and then drop-ship it directly to your customers, then I'd say, yeah, this impacts you a lot. You can no longer sell Compaq,” he said. “For Buy.com and lots of other companies that rely on Ingram as their sole fulfillment mechanism, sure, this is a bigger deal.”
Buy.com did not return phone calls seeking comment. Other Internet-only retailers whose authorization was suspended include Value America, PCSave and Shopping.com, the online department store that Compaq has agreed to acquire. Compaq declined to specify which other Internet-based resellers were included.
“It became apparent that we needed to develop new programs when the numbers of pure Internet retailers were increasing,” said Heddy Baker, a Compaq spokeswoman. The move, she said, “was prompted by the increasing number of calls we were getting from people that were interested in getting authorized.”
Compaq's agreements with resellers had been established to accommodate brick-and-mortar retailers, who incur costs that Internet-based sellers do not.
“[Store-based retailers] need to have presentation of the product, collateral, running demos on the sales screens, sales-personnel training — and the terms we work with were based on that traditional business model,” she said. “It just didn't seem to make sense to work with those strictly Internet retailers with programs that were designed for store retailers.”
A Compaq spokesman said sales through Internet resellers make up an “almost immaterial” percentage of Compaq's total revenues, although he declined to reveal what that percentage is. Compaq also is beefing up its own online sales efforts to reach consumers, and it recently announced the formation of a new division, Compaq.com, to coordinate the company's Internet-related businesses.
According to some reports, Compaq was concerned that Internet sellers were undercutting its retail partners by selling computers at rock-bottom prices.
Peck said Cyberian Outpost did not fall into that group because it sold products at minimum advertised prices, not wholesale prices.
“We have a very traditional model,” he said. “We provide support, and we're a service-oriented reseller.”
Although Peck said he would have preferred if Compaq had handled the situation differently, he said he is prepared to abide by Compaq's rules.
“What they did was say, 'Any company that does the major amount of business over the Internet, Boom!, we're going to can them, and then we're going to reauthorize them with terms and conditions that make sense for us.'”
Compaq said its goal is to launch a new program for Internet-based resellers within 90 days.