High-end computers may find a home in discount stores

Discount Store News, Feb 4, 1985 by Larry Carlat

High-end Computers May Find a Home In Discount Stores

Higher-priced, more sophisticated and versatile personal computers may finally find a home at mass merchandisers.

With the unveiling of Atari's ST line of 16/32 bit computers at last month's Consumer Electronics Show, mass retailers including K mart, Toys "R' Us and Target, will, reportedly, for the first time, offer machines with high power and graphic capabilities --similar to more expensive computers by Apple and IBM--for about a third of the price.

Currently, Apple's popular Macintosh and IBM's PC series are exclusively carried by computer specialty stores although Apple's IIc model is being tested at Sears. For discounters, there are no indications of similar testing plans in the foreseeable future.

The emergence of a high-end, reasonably priced product is welcome news to some but problems remain to be solved before it actually happens. The personal computer industry is the subject of severe skepticism by both consumers and retailers. Nobody wants to be fooled again. In fact, many mass merchants and software manufacturers are currently engaged in something of a "Mexican stand-off' on Atari's proposed introductions.

Retailers, who still smart from burns by Timex, Texas Instruments, Sinclair and most recently, Coleco, are reluctant to make a significant inventory investment for the hardware before a sufficient amount of software is available for the new ST computers, which are incompatible with both Apple and IBM.

In turn, several software companies polled said they will not begin to pump out needed programs until they see mass retailers strongly supporting the hardware. There is still a glut of obsolete software in the marketplace, according to several software manufacturers. Atarisoft, however, a division of Atari, will have 30 programs available in the first quarter of 1985 for its ST machines.

But, many others feel if Atari can get its protected 2.5 million machines in the pipeline by this summer--so retailers can get an early read on it before laying down "the big paper' for next Christmas--its ST line will take off.

Furthermore, industry observers feel if Atari boss Jack Tramiel can sell the top 10 retail accounts in the nation, a successful strategy he used while at Commodore, everyone else will be forced to fall into place.

"The domino theory is his best bet. If K mart gets behind it, it'll force other major discounters to join the fray. If Target has it, chains like Bradlees and Zayre will be forced to add it. If Toys "R' Us has it, can Child World afford not to?' said an executive at a major discount chain.

Not Settled

Tramiel said he expects to sell the computers through 20,000 mass merchandiser outlets. Despite an initial show of retailer support at CES, however, several questions must be answered before chain buyers hail the ST line as a panacea for the volatile category.

The most significant is--Can Atari deliver?

"That's the $64,000 question or the 64-byte question,' said John Kendig, electronics buyer for cataloger W. Bell in Rockville, Md.

Kendig, as well as several other chain buyers, feels the success of the line revolves around the company's financial status. Simply, will Atari have the cash to produce up to its expectations?

A spokesman for Atari reaffirmed that the company is financially sound, thanks in part to $75 million of Tramiel money, but questions remain. Atari must still overcome the obstacle of its old video game-maker image and rebound from losses of more than $500 million in 1983. One discounter said: "Atari seems to have forgotten it made video games. We were hurt before; what assurances will they give us this time around?'

In addition, if the ST computers are to be successful at mass merchandisers, the company will have to spend a great deal on advertising. Although advertising plans were not announced as of presstime, the slogan "Power Without The Price,' which debuted at CES, appears to be the centerpiece.

Clearly, Atari's strategy is centered around price. Its new line--130 ST, 260 ST and 520 ST--ranges in price from $399 to $599 with model numbers referring to the amount of memory. The 130 ST has 128,000 characters of memory; the 520 ST, 528,000 characters.

Bundled with a disk drive and middle-line color monitor, the 130 ST, nicknamed "The Jackintosh,' after its creator, will retail for about $800 compared with $1,800 for Apple's Macintosh.

Even though the Atari strategy is aimed at undercutting business leaders Apple and IBM, other chain buyers, particularly discounters, are questioning the viability of selling personal computers.

In light of a "fortune in markdowns' taken by retailers over Christmas, many feel it is, indeed, too great an investment gamble on low-margin items like computers. They also cite problems in servicing a more sophisticated area and point to a possible consumer backlash.

"Our consumer is a lot smarter than we give him credit for. We're looking at second-generation customers now. They're not buying a fad, they know what they want and they have a better understanding. The customers have paid the price for knowledge and they're not about to do it again,' said John Dankwardt, buyer at Prange Way.