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CHANNEL MARKETING SAYS COMPUTER RETAILERS 'BIG LOSERS' IN NEW ROUND OF PC PRICE WARS

 CHANNEL MARKETING SAYS COMPUTER RETAILERS
 'BIG LOSERS' IN NEW ROUND OF PC PRICE WARS
 DALLAS, June 29 /PRNewswire/ -- During the past two weeks, prices on personal computers have declined by 20 to 40 percent. While consumers are ecstatic, retailers are trying to develop plans to double or triple sales to make up for the lost revenue.
 Although PC manufacturers will share in the pain of lower profits, computer retailers will bear the greatest burden at a time when their profits are already squeezed. For every computer a retailer sold prior to the slash in prices, they must now sell 1.43 systems to generate equivalent gross profit dollars. This assumes an average price decrease of 30 percent.
 Are consumer going to react quickly enough to increase their PC purchases by 43 percent? Historically, this has never happened even in the best of times; and the lack of confidence in today's economy indicates that buyers will not rush out to spend their money on computers. In fact, some large retailers have asked computer manufacturers to accept return of excess inventory. Although there has been spotted success in some markets, retailers generally acknowledge that June has been a slow month in sales of computers.
 Compaq and Dell, who are strong in corporate and government accounts, will reap some of the benefits of those who do buy. But Dell is selling its new line of Dimension computers directly to buyers over the telephone. None of these systems can be purchased through dealers. Compaq dealers, on the other hand, will enjoy increased business with new pricing and the introduction of Compaq's ProLinea line. Compaq's pricing, however, is still higher than many of its competitors.
 Channel Marketing Corp. anticipates that earnings of nearly all major computer retailers will fall along with systems prices. Distributors and franchisors such as Intelligent Electronics (IE) are particularly vulnerable. Companies such as IE, with its "cost plus 5 percent" buying model for franchisees, will have to increase their monthly computer sales by 43 percent to make up for the massive price cuts.
 In the end, consumers are the only winners. There is no time like the present to make a computer purchase. In a separate report entitled Distribution of PCs in the 90's, issued by Channel Marketing, it is estimated that unit sales of computer systems will increase by 25 percent over 1991 unit sales. The biggest factor cited was declining prices.
 Channel Marketing, based in Dallas, is a sales and marketing consulting firm that specializes in helping manufacturers increase sales by expanding channels of distribution for current products and assisting in bringing new products to market. Channel Marketing also works with large retailers in merchandising and selling products.
 -0- 6/29/92
 /CONTACT: David M. Goldstein of Channel Marketing, 214-239-3305, Ext. 214/ CO: Channel Marketing Corp. ST: Texas IN: CPR REA SU:


MC-BB -- DV008 -- 4874 06/29/92 16:23 EDT
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Publication:PR Newswire
Date:Jun 29, 1992
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