Home office sales soar as margins drop - home office equipment and supplies at discount stores

Discount Store News, August 6, 1990 by Pete Hisey

Home Office Sales Soar as Margins Drop

CHICAGO -- Retailers were singing "There's no business like home office business" at CES this year. Despite a slump in attendance this summer, the business products arena was bustling throughout most of the show, as more retailers try to find ways of entering the home office market or of expanding their product lines.

At least six vendors entered the booming fax market at CES, but can anyone make any money in this category anymore? Entry-level prices, at retail, could dip below $300 before the year is out, and that has pulled down the prices of more highly featured machines.

Vendors predictably expressed outrage at the shrinking margin picture, but that hasn't stopped more vendors from piling into the category. The number of brand names out there has easily topped the 90 mark, with more on the way.

Nevertheless, most vendors expect the category to explode in three or four years as fax machines invade the home. And they all want to be there, on retail shelves, when it does. So if that means short-term losses until cost-saving measures and real mass production bring costs down and reintroduce profits, so be it.

Meanwhile, the strategy now seems to be to push value-added products while taking care of the low end. Toshiba, for instance, introduced a new model that will store up to 12 full pages of text electronically in the case of a paper failure. Murata has introduced low-priced step-up models with most-wanted features like paper cutters, PC connections and voice/fax switches.

The PC market, too, is exploding, and margins are under incredible pressure there. But according to Emerson Computer's Dennis Candey, the consumer has now reached the point where he will buy computers off the shelf, and that has freed computer makers to find more cost-effective ways to market than in the past. "As prices were forced down, a lot of people got out" of the PC market, he said. That created opportunities for vendors experienced with the mass market, a market Emerson knows well.

The company, which entered this ultra-risky and ultra-trendy market only last June, has established itself due to its parent's connections--and a full line of high-quality products that can be assembled right out of the box, like audio equipment. In addition to filling in with high-powered 386 machines and high-resolution VGA graphic monitors, Emerson now provides four-month, on-site repairs with every product, as well as a "survival kit" that explains common problems with hardware and software for those too impatient to read the full manual. Also, the company provides Teacher in a Box, a DOS tutorial on tape.

Emerson will also ship its first laptop in September, a 286-compatible, 12 megabyte model with VGA display and graphic capability, set for a $3,000 list price.

Laptops seemed to be where the action was at this CES. Psion, which previewed its solid-state mobile computer in Las Vegas last January, returned with a DOS version here. Both will be available in early September at Sears, Lechmere and other selected outlets. The solid state version runs for 60 hours on AA batteries and weighs in at 6.5 pounds.

Smith Corona, which introduced an advanced entry-level personal word processor, the PWP 90, also showed a laptop word processor that will run for about 10 hours on its rechargeable batteries. The company's Fred Feuerhake noted that its success with personal word processors, which the company introduced in 1985, was fortuitous, as a brutal price war has broken out in electronic typewriters. "We're going to defend our share," he said, hoping that prices will stabilize later this year as competitors get out of the market.

Panasonic also debuted a laptop PWP, with full-sized keyboard and optional high-quality daisy wheel printer.

A growing area in the home office market is add-on computer peripherals, and one vendor, Western Digital, thinks it's a product category that is due to take off in the mass market. The company now provides three hard drives and two 16-bit VGA cards that allow established users to update their machines and improve graphic capabilities. According to the company, which is upgrading its packaging and providing an Indiana Jones computer game with purchase for a limited time, small business and home office users now feel competent enough to do their own hard drive installation.

Home office superstores have become a major outlet for this type of product, previously limited to VAR outlets.

PhoneMate entered the fax market this year, with two desktop models. The company also broke into the cordless telephone market with its Model 950. The company also debuted four new telephone answering machines, two with advanced features like an urgent message indicator. "With our expanded line, we are better equipped to meet the growing needs of personal and small business users in the 1990s," noted vice president of sales and marketing Larry Kloman.

Royal Business Products brought a prototype fax machine to the show, but after looking at the rapid price deterioration, decided to keep it locked up for at least another year, according to the company's Gary Schwarz.