Hyundai drives computer rebirth among discounters

Discount Store News, Oct 13, 1986 by May Ellen Kelly

Hyundai Drives Computer Rebirth among Discounters

Can you imagine getting behind the wheel of your low-priced Hyundai, driving to the local K mart and buying a low-priced Hyundai IBM-compatible PC?

This scenerio could come true.

Low-priced, IBM-compatible computers like the new Hyundai model seem to be sparking a rebirth of the home computer market in all kinds of retail outlets.

Caldor and Target have already gone chainwide with the recently introduced Hyundai Blue Chip PC, and other discounters have also voiced interest in getting into IBM compatibles.

Catalogers Best Products and Service Merchandise as well as one chain, The Federated Group, have said they are currently considering adding IBM-compatibles personal computers to their assortments.

While the mass merchandiser shows promise of becoming a primary retail outlet for the Hyundai Blue Chip and other IBM-compatible models, major traditional department stores might also take a stand.

The two key factors influencing what could be a turn-around in the computer market--which had bottomed out in the early 1980s--are: increased public exposure to computers and the advent of low-ticket, IBM-compatibles.

Hands-on experience in the workplace and schools has created an educated shopper. No longer does the computer customer need to rely upon instore service, which most discounters can't provide.

This is in contrast to what happened during the computer heyday of the late 1970s and early 1980s when manufacturers recommended buying a system but didn't tell consummers how it could benefit them.

"The industry had done an atrocious job of explaining computer applications," admitted Jon Winters, vice president of sales at Commodore.

Commodore is another vendor who will be entering the IBM-compatible market in 1987, introducing a unit retailing for $1,000 and a stepped-up version with more power and a dual-disk drive tagged at $1,300, excluding monitors.

The computer industry is in agreement that application must be the focus of the advertising which supports the new PC introductions.

"There's nothing magic about IBM compatibility in and of itself," according to industry analyst Ray Boggs with Venture Development Corp. "What's important is the business application and the support a computer needs to sell. This support includes selling the application rather than the product," he added.

What has, so far, set the Hyundai Blue Chip apart is that it's priced below all leading IBM compatibles and even below some non-compatibles. The system, equipped with 512,000 characters of internal memory and a floppy disk drive, sells for $699.

Together with a second floppy disk drive and monitor--creating a system comparable to the IBM PC-XT--the cost of the system totals about $900, which is less than half the cost of the IBM model.

The unit caught Caldor's attention and led them to test market the system in 16 Boston-area stores. It was reported that not only did the six stores, stocked with six systems apiece, achieve sell-through within a week, the discounter ended up with 154 rain checks. As of October 10, Caldor has gone chainwide with the Hyundai.

Target, which had conducted an 11-store test in Phoenix, Nashville and Milwaukee in early summer, went chainwide with the Hyundai during the last week of September.

While buyer Michael Shelhart with The Federated Group hasn't yet committed himself to the Hyundai system, he did say the results of Phoenix and Sacramento test markets were positive. The Sacramento store achieved sell-through of its six units within two days.

"I believe the key growth areas in personal computers right now are the IBM compatibles with prices like the Blue Chip by Hyundai. After this wave, the next key growth area will be in the higher-end models," Shelhart said.

Best Products, already offering Blue Chip brand peripherals for use with Commodore systems, might also add the new IBM-compatible unit.

"We're waiting to see who the major players are going to be and who can supply us within the time frame we require before we commit ourselves," said Buz Nachauls, associate buyer.

Mike Grande, operating vice president, electronics at Service Merchandise said he too is considering the Hyundai. While Grande said he probably won't add it for spring, he might test it regionally in markets were their only other IBM-compatible, the ITT Xtra, sells particularly well to see which brand the consumer prefers. Or he might carry the Blue Chip as a not-in-catalog (NIC) item.

The ITT Xtra was added to the mix at the beginning of September for $800, Grande said. He continues to offer two Commodore units, one for $178.87; the other for $296.84.

Most retailers and vendors agree that the home user or small businessman is developing into a primary customer in the PC market.

As with any product, especially those sold in discount stores, there is the constant risk that price competition will erode gross margins. IBM compatibles have so far maintained a roughly 25% gross margin, said retailers and vendors.