Computer dealers are hand-holding for profits; they emphasize service to offset lackluster sales.

With the advent of mass merchandisers like CompUSA and Price Club, traditional computer dealers are staying alive by providing service.

"The customer doesn't want a box, they want a solution," said Warren S. Reid, managing director of WSR Consulting Group in Encino. "All I hear when I go into offices is people cursing about their computers."

Traditional computer dealers can't make money off the sale of computers because the prices have come down so low, and they can't make money off the volume of computers being sold because most people have bought a computer and new sales are sluggish, so dealers are offering business solutions, say industry observers.

Traditional computer dealers like Sun Computers, ComputerLand and Inacomp Computer Centers are now competing in what Reid calls the market for "holding my hand."

They pick the hardware and software for a client, help the client set up the program, provide on-site training and, in many cases, they offer 24-hour, seven-day on-site service. They also provide seminars on new technology for certain industries like real estate, law and health care. Most of these dealers are also part of a large network of dealers and they provide a nationwide 800 number for customers for service calls.

In fact, there's not much difference among the types of services the dealers provide. It's just a matter of who does it better and many dealers will argue it's the regional operations that will excel because they can offer more customized service.

Executives from InfoSystems Computer Centers in Torrance, which broke off from ComputerLand, the Pleasanton, Calif.-based reseller in June, accused huge companies like ComputerLand of having a cookie-cutter approach to service.

"When you are extremely large, you can't be all things to all people," said Zeb Bhatti, a senior vice president at InfoSystems. "Solutions need to be unique enough to fit each customer's need."

Ellis Posner, the director of ComputerLand's Southern California and Northwest operations, said that the giant company has made big inroads in service. In June 1991, ComputerLand bought NYNEX Business Centers, a 77-store chain in 30 states with a centralized location in Atlanta run by the Bell Co., said Posner.

ComputerLand closed the retail stores but opened ComputerLand University, a large training center and it inherited a help desk, which it now has staffed with 200 employees. The operators answer calls pertaining to hardware, software, custom applications and networks, said Posner.

In July 1992, ComputerLand acquired the customer service division of TRW Inc., which added 13,000 service customers and $110 million in service revenues, according to company literature.

It's these inroads in service that Posner said will help ComputerLand regain market share in L.A. County.

Competition for service has really heated up in the last year because computer dealers are dealing with a shrinking market and industry experts say that service in many cases boasts gross margins of 50 percent.

While computer resellers such as Businessland have gone out of business, it's the superstore that is taking the spotlight. And industry analysts say computer superstores will be boosting market share for years to come.

Merrin Information Services, a Palo Alto consulting firm, predicts that computer superstores will have a 23 percent share of the market by 1995 versus 13 percent today.

Outbound dealers -- computer stores that sell directly to Fortune 1000 corporations -- are expected to have 20 percent share of the market, down from 27 percent today, according to Merrin. And classic computer dealers, the archetypical storefront computer retailers, are expected to have 10 percent of the market, down from 15.5 percent today.

What's more, Apple Computer Inc. announced it is going to launch a catalog operation and will start selling certain lines through mass merchandisers. By next year, Apple is expected to be selling its Performa line, similar to the Macintosh Classic line, at 2,000 mass-merchandiser locations across the country, according to an Apple aide.

Computer dealers say these changes have had a radical impact on the industry and there are really only two ways to go in today's market: high-end and low-end.

"The only way we survived is that we got out of retail," said Rich Wilson, vice president of Intelligent Systems Group, a Van Nuys-based computer dealer.

The company, formerly H.W. Electronics, changed its name two years ago to be part of a nationwide group of 65 dealers known for its high-end services, said Wilson. All the dealers buy their products from Englewood, Colo.-based Intelligent Electronics Inc. and the staffs are trained in IBM, Apple, Compaq and other high-end products. Customers have a nationwide 800 number for both hardware and software problems, said Wilson.

Wilson said in the early 1980s his firm had 10 retail outlets; now it has one and only serves Fortune 1000 companies.

Five years ago, Omaha, Neb.-based Inacomp Computer Centers had 14 retail centers in Southern California; now it has five, said Peter Lytle, president of the company's California region.

As a sign of its dedication to service, Lytle said Inacomp conducts an extensive customer satisfaction survey every month and technicians and service people are compensated based on the survey results. He said Inacomp also participates in IBM's customer satisfaction survey every six months.

Inacomp technicians are trained in people skills like showing empathy for a client, said Lytle.

"We fix the customer, not just the computer," he said.

Lytle said technicians are trained to be aware of a customer's frustration, to explain the service steps, and to "highlight the positive," meaning they are told to compliment the customer for describing the error.

Ellis Goff, senior vice president and general manager of Sun Computers Inc. in Carson, said the market for services has increased because of the advent of the mass merchant.

"You don't go into Silo and expect training and customization," he said. "We're now seeing traffic from people who have a system in place but need services."

The service niche has brought increasing growth to Sun Computers, said Goff. He said profit margins are up and revenues increased 35 percent from fiscal year 1991 to 1992.

Defying an industry trend, Sun Computer maintains 14 retail outlets on the West Coast; 12 are in Southern California and two are in Washington state.

He said that despite the anti-retailing trend among computer dealers, consumers are drawn to Sun's retail outlets because of the support services.