Direct Selling: Gateway opens in new pasture: Dell's supremacy in the UK computer market is being challenged by a US rival

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The Independent Online
MAIL-ORDER selling of personal computers is now very big business. Pioneered in the mid 1980s by Dell and CompuAdd, businesses and individuals alike find it the cheapest way to get the brand-name computers they want.

As a result, the likes of Compaq, IBM and Apricot - which used to rely on dealers - have had to adapt their strategies. Now a new name is entering the UK market.

Gateway 2000 announced its presence last week by placing 15-page advertisements in computer magazines. Like Dell, the UK industry leader, it is selling its own-brand computers from a factory in Eire.

In the US, Gateway 2000 is bigger than Dell and claims to be the direct channel's biggest vendor. So the timing and manner of its arrival is curious: the market is maturing fast, margins are razor-thin, and it is eschewing newspaper advertising to concentrate on computer magazines.

Ted Waitt, the chief executive and co-founder, says his main strategy for beating Dell in the UK will be the same as in the US. 'We will sell at significantly below Dell's present prices - around 20 per cent cheaper,' he asserts. 'Plus better service, better support and the friendliest people.' He claims not to be worried by UK margins, saying the market is still not as competitive as it is in the US.

However, other aspects of the company's approach will definitely not be the same.

US advertising - produced entirely in-house, Mr Waitt proudly proclaims - relies heavily on the Waitt family's fourth-generation cattle ranch, where the company was founded in 1985. 'Computers from South Dakota?' is a strong theme, the caption set above a photograph of grazing cows. Catalogues and shipping boxes are similarly emblazoned with large black-and-white cow splodges. The message does lose something in translation, Mr Waitt concedes. Accordingly, the UK advertising has an Arthurian theme, with knights in armour drawing swords from blocks of stone that resemble computers.

Mr Waitt insists that he delayed the UK launch so long - Dell arrived in 1987 - because 'we didn't want to do it until we could get it right'.

The timing may be propitious. In August, Dell reported a second-quarter loss of dollars 75.7m ( pounds 50.1m). Additionally, in a clear response to Gateway 2000's arrival, Dell restructured its European operations two weeks ago, acknowledging that its sales and marketing operation had outgrown its original management support structure.

Fighting back, the advertisements placed by Gateway 2000 boast of the company's virtually debt-free balance sheet and its financial strength.

However, Dell remains by far the bigger of the two companies, with operations in 16 countries, double the sales and double the employees. Gateway 2000 may have arrived, but whether it can see off Dell is an open question.

(Photograph omitted)

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