Compaq embraces franchise model

Compaq has announced the trial period for its controversial Compaq Connect direct stores is officially over and it's on the hunt to recruit up to 100 franchisee resellers nationwide.

The company also revealed it has signed up three high-profile retail groups this week: Bing Lee, JB HiFi and Betta Group. "It's a much-needed complementary strategy," said Compaq consumer division director Rob Balmer. The three groups will help fill the huge retail sales gap left after Harvey Norman threw Compaq off its shelves last year over its direct sales plans.

Balmer told ARN this morning the company will shut down six of its nine wholly owned stores to make way for the franchisee stores working under a model he described as something between the heavily controlled McDonald's version and loosely controlled "light franchisee" version.

The three remaining stores are in the Brisbane CBD, Richmond in Victoria, and Sydney's new Castle Hill store and will act as reference stores for evaluation by potential franchisee resellers.

According to Balmer, Compaq is not closing the six stores because of failure, but the desire to not force-fit resellers into a particular location. "To be successful, we need to have the right person in the right place," he said.

While conceding not all Compaq Connect stores met expectations, the trial provided it with valuable information about the nature of customer-facing retail and SMB operations. "We're now in a position to nail the SMB market," he said.

To date, Compaq has received expressions of interest from around 120 resellers interested in operating a Compaq Connect franchise. Balmer said this announcement means the company now has a means by which it can start building the operation.

Compaq now has a dedicated Compaq Connect division under its Consumer Division umbrella headed up by Keith Perkin, who assumes the title of group manager. Perkin is the former managing director of Dymocks bookstores and spent 25 years establishing the "Food Plus" stores within BP petrol stations.

Balmer dismissed ARN suggestions the channel is still feeling confused by a variety of go-to-market models, stating the SMB segment is large enough to accommodate a variety of businesses.

In particular, he believes the franchisee stores will not conflict with the efforts of its new aggregator and distribution partner Sweetwater, which is also out to build its base of SMB resellers.

"To say one size fits all in terms of channel programs is a big mistake," he said. "We're not about telling channels who they should and shouldn't sell to."

Balmer would not be drawn on exact sales figures or revenue projections for the Compaq Connect franchise operation, but stated he would like to command the same market share achieved by other Compaq business units.

Balmer said the new franchisees will also establish Compaq's configure to order (CTO) system at each location and will buy product and components direct from the company's assembly facility in Rydalmere, Sydney. He added the CTO strategy is a key element for success in the SMB market where fast fulfilment is essential.

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