Acer: Quiet Giant Wins Favor with the ChannelBy Jessica Davis | Posted 2006-12-12 Email Print
The company revamped its U.S. channel strategy three years ago, eliminating all direct sales, which pleased channel partners. But recent moves are raising red flags.
While Hewlett-Packard and Dell may garner the big attention, PC maker Acer has quietly become a channel favorite over the years with a strategy that has steadily gained the company VAR loyalty and market share.
The Taipei-based company ranks fourth among the top PC brands worldwide, after HP, Dell and Lenovo, according to October numbers from Gartner Dataquest.
In the third quarter of 2006 its market share had climbed to 5.9 percent compared with 4.7 percent during the same quarter in 2005, with unit growth year-over-year up 33.4 percent, more than any other PC maker in the top 5.
Company chairman and CEO J.T. Wang has set his eyes on reaching the No. 3 spot in 2007.
Part of the company's market-share growth has come from a revamped channel strategy in the United States, a change first initiated three years ago by Rudi Schmidleithner, who was appointed president of Acer Pan America operations in November 2003.
Schmidleithner had previously served as business unit manager of Acer notebook products in the Europe, Middle East and Africa (EMEA) region where the company is tied with Dell at No. 2, according to Gartner Dataquest.
Schmidleithner streamlined Acer's approach to pricing and the channel in the Americas. He eliminated a small direct Web sales initiative and the company's direct sales force.
He also implemented a simple low-pricing strategy, getting rid of back-end programs such as rebates that take up channel partner time and resources.
"We are 100 percent focused on indirect sales," said Rich Black, director of marketing for Acer. "Channel partners can go into these bid processes knowing that Acer won't come in behind them. Acer won't try to take the deal direct because we don't have a direct sales force."
And that's a strategy that has paid off for the company when it comes to winning VAR business. Three years ago Acer estimates that it worked with 1,500 VARS in an average month. These days that number is 9,000, a four-fold increase.
Black said Acer's revenue from the channel has grown in proportion to the growth in its number of VAR partners.
Acer introduced its new channel strategy at a critical time for the channel as VARs struggle to find a way to make money selling hardware while competing with vendors such as Dell selling directly to customers, a shift that put significant pressure on margins for VARs.
"It was hard to build a business, especially in the SMB space just on service," said Dan Schwab, vice president of marketing at D&H Distributing Co., a distributor in Harisburg, Pa.
"That's the moment when Acer came to market. They built a transactional model with an everyday low-price mentality. Acer became the first player to offer a value proposition to the small VAR in the SMB space."
At the same time many end-user companies were making the switch from desktops to notebooks, Acer's strongest product line.
"Acer fulfilled the role of offering low-priced to fair-priced notebooks that allowed for a fair margin," Schwab said.
And that approach has been embraced by VARs.
"We sell more Acer notebooks than notebooks of other brands," said Jim Brubaker, owner of JK Computing in Blairsville, Pa.
Brubaker noted that his company carries two other branded lines of notebooks and also sells custom notebooks. But he estimates that 80 to 85 percent of the notebooks he sells are Acer.
"Their price points are more attractive so you get more for your money. And the quality is great," he said.
Brubaker is also a fan of the Acer's support and service, which he said is better than any of the other support models JK Computing has used.
But while Jude Daigle of PA Computer Connection in Pittsburgh, Pa. also sang Acer's praises, he said some recent incidents made him question the company's ongoing commitment to the channel.
Daigle recently lost a bid to provide "a few hundred" Acer LCD screens to a local school district. The winning bid provided the same exact Acer screens for a little over $1 less than Daigle's company, he said.
That winning bid came from Dell.
And Daigle was also surprised recently to see an advertised sub $500 price for an Acer notebook at a Black Friday sale at a Pittsburgh-area Walmart.
"It wasn't just any retail store," said Daigle. "They put it out in Walmart and that kind of thing is pushing us in the channel more and more toward the whitebook arena."
Acer added Walmart to its list of retailers within the last six months, Black confirmed.
"We do try to recommend pricing to retailers, but we can't set it for them," said Black.
The addition of Walmart to Acer's list of retailers is part of the PC maker's larger effort to grow the retail channel.
"We've had engagements with more retailers, and our existing retailers have asked us for additional SKUs," Black said.
"Since we don't have a direct sales force or plans for oneand direct sales make up 50 percent of the marketwe are going to push any and all channels beyond that."