Germans try the key to high-street success
Escom is about to use its Rumbelows acquisition to transform the way we buy PCs. But is it ahead of consumer taste?
Sunday 07 May 1995
By the end of the year there will be no fewer than 300 Escoms, mostly in town but some incorporated in Office World superstores. The German company will have turned itself from a niche retailer into the biggest computer seller in the country. This week's launch, it says, is the largest ever in UK retail.
The appearance of Escom will bring a new dimension to the way we buy computers. Although many shops sell them as part of their range, specialist outlets are still rare. Before buying the Rumbelows chain from Thorn-EMI, Escom was probably the leader, with only 27 outlets.
It started life in 1987 as a retailer, and now has stores in 12 countries. In 1990, it started manufacturing and now has plants in Germany, the Netherlands, and at Irvine in Scotland - the biggest.
It set up shop in Britain in 1993, just in time to benefit from last year's boom in multimedia computer sales, and is currently selling 2,500 units a week. Bernard van Tienen, Escom's board member in charge of the UK, says the company decided to take the opportunity offered by the Rumbelows closure because it believed there was a shift from mail-order to retail. "People want to touch machines before buying them, and they want to take them away immediately," he says. Other companies clearly agree: Dixons now has 14 out-of-town PC World stores, against one two years ago. The group is also revamping its high-street shops, giving more space to computers. Smaller chains such as Tempo and Byte are also growing fast.
John Clare, Dixons' chief executive, says the shift from mail- order to retail is a natural part of a product's life cycle. "Cameras had a very strong mail-order component 20 years ago," he says. "Now that has gone."
But the big question is whether consumers are yet prepared to look at computers in the same way as they would a washing machine, or whether they are still too specialist. Mr van Tienen said: "By the end of the year they will be seen as retail items. Computers are now so user-friendly that every household is a potential customer."
He believes the penetration of personal computers will increase rapidly, matching the United States' 30 per cent of households within two years. The key has been multimedia: CD-Roms are now built in as standard in most PCs, allowing people to play games or run educational programs. Mr Clare says this is why sales have suddenly taken off. "Two years ago, people either used them as an extension of work, or they wondered what to do with them," he says. This year, retailers expect an explosion of modem sales, as more people buy equipment to get on to the Internet or other on-line services.
Richard Perks, a consultant at Verdict Research, says that Escom's underlying logic is right: "Retailers who aren't selling PCs are putting themselves at a major disadvantage." But he is concerned that the Germans may be moving too fast. "The computer is not yet a commodity," he says. "It is still a relatively young market." It may be a mistake to move so heavily into the high street, too. "My feeling is that it's going to be a market better suited to an out-of-town category killer," Mr Perks said.
Mr Clare, meanwhile, says he is relaxed about such a massive competitor appearing along the high street from Dixons. "It will help us to have another company endorsing the idea of buying a PC in a shop," he said.
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