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November 3, 1991

COMPUTER SUPERSTORES IN UK, REST OF EUROPE, THREATEN DEALERS, MICRO MAG PUBLISHERS

By CBR Staff Writer

The personal computer warehouse concept, already a successful formula in the US, is about to take root in the UK. Croydon-based PC World opened its doors to the public at the weekend, and proprietor, Jan Murray, is planning to undercut traditional outlets by around 25%. The 26,000 square foot warehouse is a direct challenge to existing personal computer dealer and distribution channels, but also, it is an attempt to disprove the notion that Europeans are more conservative and will not buy computers in a discount environment. Other retailers are interested in the warehouse route, and analysts anticipate that large chains and high street retailers like WH Smith or Dixons Ltd plan to compete with PC World. According to the Wall Street Journal, the impact of warehouses will be far-reaching. Europeans are used to paying well over the odds for computers, often up to 50% more than their US counterparts. But, the combination of high profile advertising and discounts might undermine that resignation and provoke a sea-change in the way retailers do business. The marketplace is a turbulent one, with too many retailers competing for limited business, and some observers say a radical shake-up is long overdue. If that happens, and it seems inevitable, then manufacturers are set to reap the benefits. The superstore segment in the US is forecast to grow by 100% this year to $3,100m, and to double again in 1992. This means that they are attracting new customers in a time of worldwide slump. The leading chain in the US, CompUSA, acknowledges that it will enter the European marketplace before the end of next year, specifically the UK, France and Germany. Arche Technology, owned by the Taiwanese Kunnan Enterprises, has already established a 46-store PC Warehouse chain and the same approach is being adopted in the UK, Spain and Germany (CI No 1,784). Establishing a chain of warehouses will involve enormous investment, and Jan Murray has earmarked a further UKP1.2m for television and newspaper advertising, on top of the UKP750,000 he spends every year. PC World will carry about UKP1.5m inventory on its shelves, but the company need to achieve sales of UKP10m in its first year, although Murray plans for anything up to UKP35m. Bill McCracken, head of IBM’s personal computer business in Europe, believes that PC World won’t be the sole operator in the UK for very long since he is aware of at least two other interested parties. At the same time as warehouses are establishing a European presence, traditional dealers are facing a threat from mail order magazines. The one most likely to be influential is PC Direct, published by Ziff-Davis and about to launched in the UK. Ziff-Davis says that the title is aimed at the fastest growing segment of personal computer purchasers, the direct buyer. The purchase of computer equipment through direct marketing techniques has seen major growth in the US, and contrary to perceived wisdom, the buyers are corporate and medium-sized business customers. Tony Westbrook, editor of PC Direct, says buying direct requires a basis of knowledge and that is more often found in medium and large busin esses rather than in start-ups and home-buyers.

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