News

Acer gets the message

Alex Scroxton

By Paul Kunert

 

1 August 2008

 

Five years ago when selling through the channel was less than fashionable, Acer kept faith with its indirect only sales model. Rivals watched the Taiwanese giant's subsequent rise to prominence with a mixture of envy and admiration, but the journey has not always been easy for UK partners.

 

The sales model Acer operates in the UK is more extreme than anywhere else in Europe, reflecting the hyper-competitive nature of the market. But the days of reckless channel stuffing are numbered as distributors want to see a more sustainable strategy.

 

It is fair to say that relations between Acer and its distributors have often been strained - it has worked with more in five years than most vendors do in twice that time - as the sales expectations and inventory profile caused concerns.

 

The situation reached boiling point in May this year, when Acer had five months' worth of kit clogging up distributors' warehouses, forcing it to take corrective action and write down £4m off the price to clear it.

 

Stock profiles are returning to normal levels - six weeks - and strong re-order activity has kicked off, says the vendor. It finally appears the message from partners has got through.

 

Not only are David Drummond, head of Acer's UK operation, and his team focusing more on sales out than sales in, but a change in structure should also prevent the channel stuffing that has typified this year to date. 

 

The notoriously lean operation has set up dedicated distribution and sales out teams that will have responsibility for balancing the stock entering the channel in relation to the size of each product category.

 

There has, however, been method in Acer's madness, the vendor has become the world's biggest notebook player and only last quarter grew 72 per cent in the UK, where it retained the third highest market share according to IDC data.

 

But that has come at a cost. Rivals have accused Acer of destroying average sales prices (ASPs) to maintain demand. Context data showed that from July 2007 to June 2008, Acer UK ASPs have fallen from £426 to £334, while the market average fell from £538 to £422.

 

The question many rivals and partners in the channel will be asking is can this older and hopefully wiser Acer move beyond price to stimulate demand in a tougher economic climate?

 

One of the challenges Acer faces is that it holds a particular slot in the market, and it will need to work out how to move up the food chain. That is one of the issues it will be confronting with the branding it puts in place for Gateway and Packard Bell.

 

Half a decade ago, when the industry was talking up the strengths of the direct model, Acer's rise with partners surprised many. Channel stuffing in the UK has perhaps tarnished its reputation in the trade, yet those sentiments will be confined to -history if the company aligns the UK model with Europe.

 

See also:

 

Acer moves to clear old kit and improve UK supply chain


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