Direct Sales Make Up Less of the PC Sales Pie

PC buying is shifting increasingly from direct sales to indirect sales, such as through resellers, and will continue to move in this direction in the coming years until only the largest firms will be dealing directly with OEMs.

That’s the conclusion of a report from Gartner. It found that the indirect channel — value-added resellers, consultants, stores and whatnot — accounted for 66.6 percent of worldwide PC shipments in 2004, grew to account for 74.3 percent of shipments in 2008, and will reach 80 percent by 2012.

The main reason is that the shrinking number of PC vendors only deal with the largest of customers directly, according to Tiffani Bova, research vice president with Gartner.

“In the last five years, many PC manufacturers have been much more prescriptive about which markets they were going to sell to directly versus co-selling with partners or which they leave for the channel,” she told InternetNews.com. “There has been a marked focus on direct resources. For the global Fortune 2000, their feeling is, we’ll sell direct. The rest we leave to the channel or [the Web].”

That’s not necessarily a bad thing. The retail channel remains strong and aggressive, even after the demise of CompUSA and Circuit City. Strong consumer and small office/home office (SOHO) market growth will keep the retail channel hopping and non-traditional merchants are going to get into the business, such as Wal-Mart (NYSE: WMT).

Much of the change is economic. It gets expensive to support more firms and smaller firms, especially with the price of computers plunging and profit margins with them. There are still markets that warrant direct sales because of the volumes they buy, said Bova.

HP (NYSE: HPQ) has been steadily migrating to more and more resellers and integrators. Dell (NASDAQ: DELL) has publicly embraced a reseller market, but as it turns out, outside the U.S., Dell had a good-sized reseller market. “Outside the U.S., they were doing $9 billion a year through a business they never admitted they had,” said Bova.

Acer has rocketed into third place in worldwide sales, but it is 100 percent channel-based. “They aren’t going after the market that requires them to be direct,” said Bova. Acer wants home users, consumers and SOHO.

It’s the mid-sized market, 100 PCs to under 1,000, that is being squeezed, but Bova said those customers might be better off with a reseller anyway.

“A lot of mid-market customers tell me ‘resellers understand my infrastructure, they know what I’m doing, what I have. You won’t get that on hp.com.’ They get that from a VAR who works for them on a regular basis,” she said.

In fact, resellers might give a better price. “Sometimes customers feel as if they may get a better price from the vendor directly by cutting out the middle man. In reality, some times manufacturers want customers to go to the indirect channel so they don’t make it more advantageous to do that,” she said.