Shoppers at France’s Carrefour chain of hypermarkets have recently begun to see the retailer’s name on something other than their favourite cheese. In a testament to the growing importance of the French consumer personal computer market, retail giant Carrefour has this month put its own imprimatur on a line of Pentium-based personal computers. Since June 1993, when Carrefour opened computer equipment departments in a mere 12 of its 113 stores, it has been selling personal computers from IBM Corp, Hewlett-Packard Co, Compaq Computer Corp, Acer Group and Apple Computer Inc. It is not alone. A survey from Paris-based GfK Marketing Services says that between February and May, France’s largest consumer retailers saw their share of France’s indirect personal computer sales double in value, from 7% to 14%, and jump 50% in volume, from 15% to 21%. GfK surveyed stores that include Carrefour, Auchan, Casino and electronics specialists FNAC, Darty, Boulanger and Interdiscount. Given the ever-increasing commodity nature of the personal computer and the trend among large retail chains worldwide to put their names on everything from refrigerators to potting soil, Carrefour’s decision is not to private-label personal computers is not too surprising. It is, however, the first hypermarket to do so; Swiss-owned electronics specialist Interdiscount had already established its own exclusive personal computer brand, Microspot. But other hypermarkets may follow suit. The word in the hallways at Boulanger is that, in collaboration with Packard-Bell, it may also introduce its own series of Pentium or high-end 80486 systems in September to compete with Carrefour.
Hypermarkets
Hypermarkets have been dabbling in computers for a long time, with Commodore and Atari, and then they got more serious about it when they began selling IBM, Hewlett and Compaq, says Brian Pearce, personal computer market analyst at Dataquest in Paris. Now, their clientele has started really to develop, and to attract those buyers who may be on the fence, they are putting their own name on the machines so that those who would be prepared to buy Carrefour socks or tissues would also buy a Carrefour personal computer. The move certainly makes sense in the context of a universal expectation of continued growth in the consumer personal computer market, but could be considered risky in light of a weak demand for such high-end systems. Dataquest figures show that the private market in France, in which it does not count even individual, very small businesses, is forecast to grow approximately 16% this year in unit shipments. A Computergram survey of several consumer personal computer distributors in Paris, Lyon and Lille further confirms those figures. The majority of these retailers sell a certain percentage of personal computers to small businesses as well; thus, they certainly expect their revenue increases of the last couple of years to continue. Alain Lepoutre, product manager for Interdiscount, for example, expects an important sales increase in September, and a doubling of personal computer sales for the year, to about 50,000 units and total revenues, including peripherals and software, of $200m. Interdiscount also doubled sales revenues last year; Lepoutre says part of the reason is that Interdiscount is replacing the market vacuum left by the disappearance of Tandy. Dataquest’s Pearce notes that the Microspot is good value for the money. Stephane Bergaud, personal computer sales agent at FNAC Micro, says sales have been on a continuous climb since his arrival at the store two years ago. So far this year, he says, the seasonal second quarter drop in sales was small, which portends well for the year; vis-a-vis last year, the second quarter saw an increase in sales. Although IBM France expects consumer personal computer unit sales to show growth this year, it may be smaller than the approximately 30% growth recorded for the last couple of years, says Andre Yerles, director of IBM’s Agence Grande Diffusion retail arm.
By Marsha Johnston
My figures for June tell
me it will be smaller growth, he said, maybe around 20%. Despite the growth curve, not all consumer computer retailers are convinced of the wisdom of private labelling. Hypermarketer Auchan, which sells the Taiwanese-made Espas that is available in other stores, has no intention of launching a personal computer with its own name on it, says Christian Delsalle, director of Auchan’s home equipment buying centre. FNAC Micro’s Bergaud says France’s famous electronics and music specialist is not likely to follow Carrefour’s move because it prefers to stay with the security of known brands. It’s a trade we don’t know; manufacturing computers. It would be more logical for a manufacturer to open its own stores than for a chain of stores to start making computers, he says. Jean-Francois Robert, Carrefour’s director of personal computer sales, insists that the leap from private-labelling groceries to private-labelling personal computers was not so great. The concept, he notes, remains the same; when we put our label on something, we control everything from conception to final use. Whether putting one’s own label on a personal computer or a brie, it means determining what characterises the product the market desires and how to produce it, he says. Obtaining a prized, moist and creamy brie, for instance, requires ageing it for between five and seven weeks. Thus, says Robert, Carrefour determined that their private-label brie would be aged for eight weeks. To learn what the market wanted from a personal computer, the company called on its own resources, including its own information systems division. We have 200 stores in the world and we listened to what our customers wanted and to the computer companies on how to build and sell personal computers, Robert said. What we found is that clients have a new vision of micro-informatique. A personal computer, in our eyes, is a universal tool that allows the user to get as easily into the world of entertainment as the world of work. This assumes the best power and a performance, and the longest lifespan and evolutionary path we can provide. And it is here, in the type of computers it has chosen to sell, that Carrefour’s decision becomes surprising, and possibly risky. These are no several-hundred-dollar, Tinker-Toy personal computers. Rather, the three models of its Firstline series, based on Intel’s Pentium microprocessor and NEC Corp screens, sell for some $2,400, $3,500 and $4,100, not including 18.6% value-added tax. They come equipped with MS-DOS 6.2, Windows for workgroup, Lotus 1-2-3 v.4 and Ami Pro word processor. The high-end 90MHz model – the first two are 60MHz and 90MHz respectively – is outfitted for multimedia use, with a CD ROM reader, two speakers and various multimedia software. They are in 95 of Carrefour’s stores. Lepoutre, of Interdiscount, says the majority of his customers will continue buying 80486s until the Pentium drops into their budget range of between $1,130 and $1,500. He says Interdiscount expects to have a Microspot 60MHz Pentium model for about $1,880 in September. FNAC has only one Pentium model, a Packard Bell, which sells for some $3,400 and comes with only Windows. Bergaud, too, says his unit sales for the rest of the year will be 80% to 90% 80486s. We will sell more Pentiums only if lower-priced models arrive on the market, he said.
By guilt
IBM’s Yerles says the average purchase price for a home personal computer is about $1,000 and that we cannot manufacture at this level of price. At that level, the machine is either Taiwanese or at its end of life. Neither, he says, will IBM try to do anything to sink below that price, for reasons of profitability. Robert says Carrefour’s personal computers are manufactured, not just assembled, in Europe. Intel Corp refused all comment on whether it was responsible for more of the personal computers than just the processor; some reports have said that machines come directly from Intel’s factory in Ireland – which made some machines for Amstrad Plc. Others say the boxes may be coming from Packa
rd-Bell. It has taken the move seriously: all personal computer salespeople have had 20 days of training; the boxes are guaranteed for four years, and Carrefour is providing one year of after-sales telephone hotline service, seven days a week from 9am to 10pm, as well as on-site maintenance with a 48-hour delay. As yet, no strong reason exists for users to want such a Cadillac of a home computer. Says Dataquest’s Pearce, You have to be driven to personal computers by guilt, and there’s just not enough social pressure in general for that to be a major factor. For most part it’s an elite market; even at 10% to 15%, still an elite.
