InformationWeek

March 27, 2000

CompUSA Learns About Online Sales By Trial And Error

Illustration by Gary Baseman any companies are learning about online sales the old-fashioned way: by trial and error. CompUSA Inc., for example, spun out its online sales operation last year only to scrap the effort in January.

CompUSA owns and operates 217 computer retail stores. Cozone.com, its E-commerce division, was supposed to be its online competitive weapon. Instead, the Web site was costly to build, maintain, and market, and it added to CompUSA's already-poor fiscal performance over the last 18 months. Hit hard by shrinking margins in the PC industry and by competition from direct-to-consumer PC makers Dell Computer and Gateway, CompUSA posted a net loss of $45.7 million on revenue of $6.3 billion for 1999. Losses for the second quarter ended Dec. 25 amounted to $2 million on sales of $1.4 billion. Stephen Polley, the CEO of Cozone.com, quit in January.

What went wrong? Once customers found out they couldn't return their Cozone.com-purchased computers to local stores, they were turned off to the Web shopping experience, says CompUSA CIO Honorio Padron. The PC retailer now offers direct sales at its CompUSA.com site, making sure its online and offline operations are integrated so that customers can place orders on the Web and pick up, pay for, and return items at their nearest store.

CompUSA, which was purchased by Mexico's Grupo Sanborns this month, says it hopes the familiar brand-name Web site, combined with the local presence of its retail stores, will bring the company back to profitability. Equally important is earning back the confidence of retail stores that were disenfranchised by the direct-sales E-commerce initiative, a process Padron calls "reintermediation." Padron predicts many businesses will learn the lessons CompUSA did this year and will abandon their disintermediation strategies in favor of strengthening existing channels.

Return to main story, "The Big Squeeze."

Illustration by Gary Baseman

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