A hundred million is a lot—the return of Mom & Pop

Posted: 03.24.08

Last quarter, the GPU industry reached a milestone—one hundred million chips were shipped. Mind you, that was the fourth quarter, which is seasonally high, and we may not see that level in this first quarter, that will end in a few weeks, but even if shipments do dip due to seasonality or recession fears, it will just be temporary as we continue our march for the second billion PC users.

The dynamics of price elasticity have proven themselves and now sub-five hundred dollar computers are commonplace with three-hundred dollar version on the way and already sighted in some corners of the world.

Ironically, we’re also seeing larger, more impressive, powerful, expensive and heavy laptops that are media centers and game machines being offered and in great demand—so the market is healthy, diverse, robust and, as always, exciting.

And with all that, we have seen a simultaneous contradiction in classic economics and sales. Whereas, it is to be expected that the sales channel consolidate and contract, compounded by the need for economy of scale and competition from online sales, we are also witnessing an expansion in smaller dealers, retailers, Mom & Pop shops, system integrators and VARs. It seems these folks didn’t get the memo that retail is dead and has been captured by the giants like Eau Claire, BestBuy, Surcouf Daumesnil, or Softmap. So, instead they opened up small shops, sometimes in their homes, and proceeded to offer products, fair prices, and most of all, service with knowledge about these ever more complex and impossible to repair yourself PCs—helped in their complexity ever so much by the mystery of Vista.

Mostly, the middle-sized stores have been squeezed out, beaten on price and selection by the giant Best Buys and the like, and beaten in the specialized knowledge and prompt service of the smaller specialized shops.

And so, without anyone declaring it (until I am now, that is) we have evolved into an interestingly bifurcated bricks-and-mortar situation for computer sales, overshadowed and sometimes overwhelmed by the spreading spider of online sales.

The online stores will compete on price and maybe selection, but never on delivery and certainly not on service, support, or customization.

The big shops like Best Buy are fighting back with their Geek Squad, which I have to say has proven to be quite effective for us. The prices are good, the service correct, and usually prompt, including house calls.

But one thing you get from a small shop is a first name and a relationship. The shop is also familiarwith your setup, needs, and if they’re any good, your personality.

The bifurcation of the sales channel has come about because of the sheer volume of shipments—the 100 million GPUs. Most of them went into new systems, and most of those new systems were Vista and most of the users were confused, frustrated, and in many cases completely stopped. I can’t tell you how many times, when finding out I’m in the computer industry people will ask me, do you know anyone who can help me with my computer? The implication being will you help me? The bottom line being, here’s a person that spent between $700 and $3,000 for a paperweight that lights up with a pretty landscape scene and doesn’t do much else.

This isn’t a dump on Vista diatribe; it’s an observation about an unexpected and certainly welcome new development in the computer industry, namely the return of the Mom & Pop shoppe, the small retailer—the channel. Now, some may say I’ve been asleep and not paying attention and that they never left. But I have been paying attention and I see the empty store fronts where shops used to be, and I’ve notice new ones popping up, that don’t really look that much like stores, more like offices.

So where I really wanted to go with this rambling monologue was to point out that the giant CeBIT is the international, or at least the European watering hole for these little Mom & Pop local retail shops as they try and connect with the big and not-so-big suppliers of computer gear.

That’s CeBIT and CES and most other shows’ new role, and if they get it right in time they’ll adjust their format to accommodate it. Ironic that Comdex was started for that reason, and now we’ve come full circle.

Now all you smarties out there—figure out how to connect the users with those small shops and you’ve found not just a pot of gold but a whole bunch of new friends.