The consumer electronics arm of Amstrad Plc will bypass retailers and sell computers and facsimile machines direct to consumers, under Amstrad Business Direct headed by Lidsay McEwan, as part of a group reorganisation, as earlier forecast (CI No 2,539). Amstrad Business Direct, part of Amstrad Consumer Electronics, will initially employ an extra 30 staff, expanding to between 50 and 100 with an advertising budget of UKP5m, the first UKP1m to be spent before Christmas. Amstrad will use off-the-page advertising, direct response television, direct mail, a direct sales force and telephone marketing to target the Small Office Home Office market, customers that don’t need to touch and try products. Sugar believes that the new structure can also better solve problems facing the first time buyer. Amstrad will have telephone help desks between 8am and 9pm Monday to Friday with computer trained staff to help users through the computer maze and a within 48-hour service-on-site policy. However the main motivation for the switch has been the insufferable pressure placed on margins by retailers in the last three years that has produced all Amstrad’s recent losses. Retailers are expecting the manufacturer to deliver ‘just-in-time’, pay all the advertising, provide after service care for free while maintaining 30% margins for themselves. A saturated market and large inventories held by such manufacturers as IBM Corp have meant that some manufacturers are willing to undergo such strictures. Amstrad’s margins were being so badly squeezed that we weren’t making a margin and is now making the move. Amstrad’s audio, video recorder, video and satellite products will continue to be sold through third parties as will personal computers and facsimile machines in continental Europe. Sugar is also looking for profitability within this financial year ending June 30, albeit it will be moderate, he told a news conference. The markets liked the news and Amstrad’s share price added 1.5p to 30 pence.
