Analysts covering the computer retail industry have been attributing the poor performance of retail computer stores to the new free PC movement. But direct marketing consultant Maxwell Sroge believes it’s the companies giving away the PCs that will face the biggest problems. Anybody who has been in the mail order business for any length of time knows that the companies which are giving away Free PC’s in return for future obligations from the recipients are walking into a virtual death trap called write-offs and credit losses, says Sroge. He remembers that in the early days of tape players, several companies gave away free players in return for future commitments to buy cassette tapes. But after receiving their free machines, so many people defaulted on their obligations that several companies filed for Chapter 11.
Because credit losses on new business can be as high as 25% of sales for retailers offering credit up front, most catalog businesses require payment up front. Book clubs and record clubs, which give away quantities of books and records in return for obligations to buy a given number of products in the future, know well the minefield into which the Free PC’ers are walking,” Sroge says. The Maxwell Sroge Co runs the web site www.catalog- news.com.
