Two good years for computer retailers

Last year was a good one for computer retailers.Sales of computer products through retail generated $675 million in revenue, an increase over 1993 estimated variously at from 70% to 93%.The growth is expected to continue in 1995, particularly in the home...

Last year was a good one for computer retailers.

Sales of computer products through retail generated $675 million in revenue, an increase over 1993 estimated variously at from 70% to 93%.

The growth is expected to continue in 1995, particularly in the home market, while new distribution trends begin to take shape.

Michael O’Neill, president of technology market research and consulting company IDC Canada, estimates that by mid-year, one in three Canadian homes will have a computer.

O’Neill says the market is so strong anyone retailing computers to home users will experience a couple of good years, but, after that, only good retailers will survive.

Only a limited number of Canadian cities – Toronto, Vancouver and Montreal – will be able to support category killers such as new u.s.-based entrant Computer City.

And, O’Neill says stores such as Future Shop that sell other electronics products besides computers are well-positioned to thrive beside them.

‘In the long run, they’ll be at least as strong as computer-specific stores because as pcs are being viewed more and more as a home appliance, they’re accepted as part of the appliance mix rather than a specialty item requiring a specialty retailer,’ he says.

O’Neill says emerging trends in software distribution will also contribute to the success of stores such as Future Shop.

‘There is a fundamental change coming in software distribution that is going to make it difficult for specialty stores to subsidize the lack of hardware margin with software margin, which is what is happening in retail today,’ he says.

O’Neill says application suppliers such as Microsoft, Lotus, Novell and Symantec will begin to put applications on cds sold with personal computers that give the user the option of dialling a 1-800 number, giving a credit card number and getting a code over the telephone that will allow them to gain access to software from the cd.

O’Neill expects hardware manufacturers such as ibm, Apple, Compaq, ast and Dell to make their money by selling space on the cds that accompany pcs to software developers.

That would allow them to keep their hardware margins low.

O’Neill says the second trend in software is electronic distribution over the Internet.

He says this will likely be the method chosen by smaller companies, which will easily be able to identify an affinity group over a network and then sell software to them.